Tuesday Tax Tips 2/26/13

Per Federal Tax Law a person must file a federal income tax return if his/her income is above $6,000.00 if single or 12,000.00 if filing a married filing joint tax return.  For State of Indiana, if income is more than $2,000.00 you must file a State tax return.

If your income is under the $6,000.00 or $12,000 threshold you still should file a federal tax return if

1.    Federal Income Tax Withheld: from your paycheck, retirement check or Social Security Check.

2.    Earned Income Tax Credit:  You may qualify for EITC if you have W2 wage or self-employment income less than $50,000.00  EITC is a refundable tax credit; which means you could qualify for a tax refund. EITC can be nearly $6,000.00

3.    Additional Child Tax Credit:  This refundable credit may be available to you if you have at least one qualifying child.  A qualify child is your son, daughter, niece, nephew age 16 and younger on 31 Dec.

4.     American Opportunity Credit: The maximum credit per student is $2,500 and is available for the first four years of postsecondary education.
Turbo Tax vs. A Licensed Tax Professional, An Enrolled Agent or CPA
Tax court case Brenda Bartlett vs. Commissioner.  Brenda used Turbo tax to compete her tax return; she had withdrawn funds from her retirement account and felt that she had input the correct information into Turbo Tax.  The IRS fined her $8,734 plus tax of $43,668.00 for under reporting her income.  She used the defense that she was relying on professional software Turbo Tax.  Her argument did not hold up in tax court and she ended up owing the IRS over $52,000.00 plus state income tax over $15,000.00.

A company called PC Novis conducted a study a couple years ago and found out individuals who used store bought software programs actually paid more for their Tax return preparation due to hidden fees; paid more than what it would cost to go to licensed tax professional, an Enrolled Agent - America's Tax Expert.
Turbo Tax is a computer program it does not intelligent design to pick out credits or deductions that you may be eligible for.  You personally have to have personal knowledge of these credits and deductions.  Last year IRS determined that average individual refund could have been $800.00 higher if they had taken all credit and deductions allowed.

So Don't Be like Brenda owing IRS thousands of dollars because you rely on software, they just cannot replace the knowledge, advice, and tax planning of a America Tax Experts, Enrolled Agent.

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