If your not lucky enough to be included in Presidential Candidate Mitt Romney’s 47% of people that DO NOT pay taxes, January 1st isn’t just the beginning of a New Year but the beginning of Tax season. After the festivities and liquor have worn off, most of us turn our focus to tax time and that refund check. I’m sure more than a few people have mentally spent that windfall several different times and ways before we even file our tax returns. But how do you know if your getting your max refund? 

If you pay someone to prepare your tax return, the IRS urges you to choose that preparer wisely. Taxpayers, not the Tax Preparers, are legally responsible for what’s on their tax return even if it is prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare your tax return. Most return preparers are professional, honest and provide excellent service to their clients.

This year, TAX GENIUS and the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their Preparer Tax Identification Numbers (PTINs). For years I paid someone to prepare my taxes and he never signed them or filed them electronically. He was the family tax preparer. This individual did my mothers, my uncles, my sisters, my brothers and even some cousins returns. We literally put his kids through college off the fees he charged us.

To make sure you receive the best service, Here are a few points to keep in mind when someone else prepares your return:

· Check the person’s qualifications. New regulations require all paid tax return preparers to have a Preparer Tax Identification Number (PTIN). In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. The IRS is also phasing in a new test requirement to make sure those who are not an enrolled agent, CPA, or attorney have met minimal competency requirements. Those subject to the test will become a Registered Tax Return Preparer once they pass it.

· Check the preparer’s history. Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.

· Find out about their service fees. Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers. Also, always make sure any refund due is sent to you or deposited into an account in your name. Under no circumstances should all or part of your refund be directly deposited into a preparer’s bank account.

· Some preparers LEGALLY offer to deduct their fees from your return. Ask what bank they are using to facilitate this, there are only a handful authorized by the IRS to perform this function. An easy Google search will give you a list of the banks.

· Ask if they offer electronic filing. Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return. More than 1 billion individual tax returns have been safely and securely processed since the debut of electronic filing in 1990. Make sure your preparer offers IRS e-file.

· Make sure the tax preparer is accessible. Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.

· Provide all records and receipts needed to prepare your return. Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.

· Never sign a blank return. Avoid tax preparers that ask you to sign a blank tax form.

· Review the entire return before signing it. Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.

· Make sure the preparer signs the form and includes his or her preparer tax identification number (PTIN). A paid preparer must sign the return and include his or her PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.

· Make sure the preparer is insured. A paid preparer worth their salt should be insured against mistakes. Ask if they carry E & O insurance (Errors & Omissions). This will help you to recover fines and fees the IRS assess you because the preparer made mistakes in preparing your taxes. It DOES NOT cover any errors and omissions you create.  If they charge you an additional fee for coverage think twice about letting them do your taxes.

· Ask if they will represent you during an Audit. This is the ultimate test of a Tax Preparers worth. While it is not mandatory to represent you or help you during an audit if they stand behind their work this will be an extra peace of mind in helping to choose a preparer. This service will almost always come with an additional fee.

· Lastly, The IRS can help many taxpayers prepare their own returns without the assistance of a paid preparer. Before seeking a paid preparer, taxpayers might consider how much information is available directly from the IRS through the IRS Web site. But who has time to read Legal Mumbo Jumbo and figure out what goes on Line 1, let alone Line 57? So if your like most tax filers, print my tips and head to your nearest Tax preparers office.

We are gladly able to help you file your taxes. Come visit us at Tax Genius or we can come visit you and help prepare your taxes in the comfort of your home. Visit our facebook page Tax Genius for more information. We will be posting lots of information in the upcoming weeks. We also have a 30% discount coupon if you “like” our page. See you soon.

Years ago, As I discovered there was life outside of New York City, I set a goal to visit as many countries as possible before my transcendence into the next phase of existence. That particular goal has been a 20 year journey with me attempting to visit 2 countries I have never traveled to before. There are presently 196 countries in the world and I have visited roughly around 70 of them. So I have averaged about 3 a year, a 50% increase of my goal.

But this is not what I am here to talk about, that was merely an example of how I set and continue to accomplish that particular goal. The goal I set for 2013 was to start my own business and be successful at it. My background is in Technology and Insurance, go figure. I am currently employed by a major insurance firm.  My current list of clients are all small businesses and their number one employee concern is retirement planning. It boggles me how so many people don’t worry about this until they are literally at retirement age. Roughly about 30 clients in the past 2 years ceased to exist because of the economic downturn, some have been in business for 40 years or more. I have quite literally had to console people, who abruptly learned they would be unemployed, and they realized that all they had was social security and a mountain of bills.

After witnessing this happen to many of my clients, I decided to start my own Brokerage Firm. The goal is to have about 100 Businesses and 2000 individuals as clients within a 5 year time frame. The firm will be specializing in Health & Accident, Property & Causality, Life & Supplemental and eventually Retirement planning. Right now though just to get the word out and the company off the ground we are doing Tax Returns for our clients and their employees. My business partner and I both have extensive knowledge in preparing returns. We specialize in Estates & Trusts, Corporations and complicated personal returns in the Quad State area of New York, New Jersey, Connecticut and Pennsylvania. This is a natural fit for us because we already advise clients on setting up their Section 125 plans and their tax liabilities. After we install a section 125 in a company, their tax liability decreases by about 7.5% of their overall payroll. It is Tax Season and a natural starting point for us.

Want more Tax Genius goodness? Come visit our facebook page Tax Genius for more information and to schedule an appointment. Follow me on twitter (@mercxue), hang out with me on Facebook, pin something to my Pinterest board or check out my blog Alternate Reality.

We will be posting lots of information in the upcoming weeks. We also have a 30% discount coupon if you “like” our page. See you soon.

10 common tax-filing mistakes to avoid

Thanks to tax preparation software, more of us are making fewer mistakes on our annual tax returns. But still, just one slip in entering information on your computer could end up costing you, either in the form of a larger tax bill or a smaller refund.

And even if a mistake — either on your computer or paper forms — doesn’t cost you cash, it could delay the receipt of any refund you’re expecting.

To get exactly what you should from the Internal Revenue Service, as quickly as possible, look out for these tax-filing pitfalls. A few are new, thanks to recent law changes. Others are perennial problems taxpayers face each filing season. With a little care, you can avoid them all.

1. Pay your Roth conversion taxes

A lot of taxpayers have taken advantage of the tax law change that now allows anyone, regardless of income, to convert a traditional individual retirement account to a Roth IRA. But if you made such a change in 2010 when this conversion was first allowed, you have a tax task to take care of on your 2012 return. A special provision allowed individuals who moved their money into a Roth IRA in 2010 to spread the taxes due on converted amounts equally over the 2011 and 2012 tax years. The first half of those conversion taxes was due with your 2011 tax return. Make sure you pay the rest of the taxes with your 2012 return.

2. Homebuyer tax credit complications

Since its creation, the first-time homebuyer credit went through significant changes. It started as a $7,500 interest-free loan from Uncle Sam, changed into a true tax credit of up to $8,000 for a first-time buyer and added a $6,500 tax credit for a previous homeowner moving up to another house.

All the revisions to eligible buyer guidelines, purchase time frames, income thresholds, home price restrictions and payback requirements are a tax-filing minefield. If you’re not careful, a mistake here could end up costing you the credit or at least slowing down the processing of your return.

If you’re paying back the original $7,500 tax credit, the IRS has made the repayment process a bit simpler by eliminating in many cases the requirement that taxpayers file Form 5405. Now some individuals who are repaying the credit can just write the repayment amount they are including with their taxes directly on Form 1040.

3. Math miscalculations

The most common error on tax returns, year after year, is bad math. Mistakes in arithmetic or in transferring figures from one schedule to another will get you an immediate correction notice. Math mistakes also can reduce your tax refund or result in you owing more tax than you thought.

Using a tax software program to file your return can help reduce math errors. The built-in calculators do the work for you, adding, subtracting and inserting numbers on additional forms as needed. But you still have to make sure your initial numbers are correct. Entering $3,500 when the real figure is $5,300 makes a lot of tax difference. Getting the numbers right is crucial because you can be sure the IRS will be double-checking numerical entries against its copies of your tax statements (W-2, 1099s and the like). When IRS examiners find a discrepancy, they’ll definitely let you know and, in many cases, will correct your mistake and refigure your taxes for you. Don’t give them the chance. Make sure your math entries are right.

4. Direct deposit dangers

Taxpayers can have a refund directly deposited into multiple bank accounts. This option is a great way to save your refund money, but the more numbers you enter on a tax form, the more chances you have to enter them incorrectly. And a wrong account or routing number could cause you to lose your refund entirely.

You can divide your refund into three accounts by filing Form 8888 along with your individual return. It’s not a difficult document to complete, but if you put in wrong account numbers, your refund could end up in someone else’s account or be sent back to the IRS. Either way, you might not be able to retrieve your refund because there is no IRS procedure for replacing lost electronically transferred funds.

Incorrect account numbers aren’t just a problem when a refund is split multiple ways. Even if your refund is going to just one account, make very sure you enter your account and bank routing numbers correctly.

5. Additional income, additional filing work

Did you have a side job this year? If so, as a contractor you probably received a Form 1099-MISC detailing the extra earnings.

What about savings and investment accounts? For these, you should have received Form 1099-INT and Form 1099 DIV statements.

In each 1099 instance, the IRS knows precisely how much extra money, either as wages or unearned investment income, you made as soon as you did, thanks to the copies of your 1099 forms that went to the tax agency.

If you forget to include any of these earnings on your return, the IRS examiners will let you know you owe taxes on it, too. And depending on when your oversight is discovered, you also could owe penalties and interest on the unreported earnings.

6. Filing status errors

Make sure you choose the correct filing status for your situation. You have five options, and each could make a difference in your ultimate tax bill.

If this is the first tax-filing season you’ve been divorced and you now are a single parent, head-of-household probably will be more beneficial. And you’re still married, but you and your spouse are thinking about filing separate tax returns? That works in some cases, but not all.

Make sure you know what each tax-filing status entails, and choose the one that best fits your personal and tax situation.

7. Social Security number oversights

Because the IRS stopped putting taxpayer Social Security numbers on tax package labels in response to privacy concerns, some taxpayers forget to write in their identification numbers. Your tax ID number is crucial because there are so many transactions — income statements, savings account interest, retirement plan contributions — keyed to this number.

The nine-digit sequence also is vital to claim several tax credits, such as the child tax and additional child tax credits as well as ones for educational expenses and dependent care costs.

And make sure the names associated with the Social Security numbers match Social Security Administration records. A difference here also will cause the IRS to kick out or slow down your return.

8. Complete charitable contributions

Did you give to charitable groups last year? All types of donations, from cash to cars, could be valuable tax deductions, so make sure you count them all when you file. Be sure to follow the donation tax rules, the most important being that you give to a qualified organization — that is, one that has tax-exempt status with the IRS. Also be careful when calculating any gifts of clothing and household items. Tax law now requires that these donations be in good or better condition or the deduction is disallowed.

9. Signature required

Sign and date your return. The IRS won’t process it if it’s missing a John Hancock, and that means on e-filed returns, too. Taxpayers filing electronically must sign the return electronically using a personal identification number, or PIN. To verify your identity, you’ll have to provide the PIN you used last year or your adjusted gross income from your previous year’s tax return.

Your tax software should walk you through the e-signature process, but if you’re still mailing your return, don’t be in such a hurry that you stuff your 1040 in the preaddressed IRS envelope without signing it. And if it’s a joint filing, you and your spouse must sign.

10. Missing the deadline

Don’t miss the impending April 15 tax deadline. If you owe the IRS and that’s the reason you’re thinking of not filing, that’s a bad idea. If you don’t file a return, you’ll face even stiffer penalties. So send in the paperwork, pay what you can and talk with the IRS or your tax professional about the next steps.

Come visit us at Tax Genius or Visit our facebook page Tax Genius for more information and to schedule an appointment. We will be posting lots of information in the upcoming weeks. We also have a 30% discount coupon if you “like” our page. See you soon.

A lot of taxpayers don’t know they can save thousands of dollars with these tax breaks. Did you forget about any of these deductions and credits?

Charitable noncash contributions

Charity, as I hope everyone remembers, begins with a tax deduction. Now, let’s say you emptied your closets and gave everything to Goodwill or a similar charity. The value of your donated items — clothes, furniture, whatever — is deductible. Get a written receipt. With noncash charitable contributions, the rule is simple: No receipt means no deduction if you get audited. Clothes and household goods must be in good or better condition to get the deduction.

If you’ve already dumped your old clothes in a Salvation Army box and walked away without a receipt, take the deduction anyway. You’ve legitimately made the contribution. You just may not be able to prove it in an audit. Starting with 2007 returns, the law has required a receipt or some sort of written confirmation for all charitable donations. Feel lucky? Play the audit lottery. You’re still an honest person.

If you can, reconstruct as much as you can the list of items you donated and then figure out their market value. The easiest way is to go to a thrift store and check prices there. The Salvation Army also has value guides for donated items on its regional websites. And, of course, when you make your next donation, get that receipt.

Points on refinancing

With interest rates remaining so low over the past few years, lots of homes have been refinanced, sometimes more than once. Any points you pay to refinance your home can be deducted on a monthly basis over the life of the new loan. So if you refinanced your mortgage on June 1, 2011, for a 20-year term, seven out of 240 months will have passed before Dec. 31, 2011. If you paid $2,400 in points, you can write off $70 ($10 a month for seven months) for 2011. You can write off $120 for 2012 and each year thereafter until the points have been deducted in full. The amount may not be huge, but every little bit helps. If you’re looking to refinance, check today’s best refinance rates.

Old points on refinancing

This is one deduction lots of people miss. All unamortized points on an old refinancing are deducted in the year of a new refinancing. So let’s say you refinanced on June 1, 2010, and paid $2,400 in points. You refinanced again on June 1, 2011. You can deduct all the remaining points on the 2010 loan on your 2011 return. That’s $2,280 plus the $50 you could deduct for January through May 2011. Likewise, if you refinance the 2011 loan in 2012 (provided interest rates stay low and a lender still likes you), you will be able to write off the remaining balance on your 2012 return.

Health insurance premiums

Any health insurance premiums you pay, including some long-term-care premiums based on your age and Medicare premiums you pay, are potentially deductible. But you have to add these to your medical expense pot. Medical expenses have to exceed 7.5% of your adjusted gross income before they give you any tax benefit. If you’re self-employed and not covered by an employer-paid plan, though, you can deduct 100% your health insurance premiums (to the extent of your net income) "above the line." Above the line means the expense is included in adjusted gross income and doesn’t get lumped in with itemized deductions. Not only do you not have to exceed the 7.5% floor, you don’t even have to itemize.

The Small Business Jobs Act of 2010 changed the rules again. Now self-employed individuals can also deduct their health insurance premiums in computing their Social Security tax obligation.

Educator expenses

If you’re a qualified educator, you can get an above-the-line deduction of as much as $250 for materials you bought in 2012. That includes books, supplies and even computer equipment. You qualify if you’re a kindergarten through grade 12 teacher, aide, instructor or principal. The best part? Since it’s an above-the-line deduction, you don’t have to itemize to get it.

Higher education expenses

If your adjusted gross income isn’t more than $65,000 ($130,000 on a joint return), you get an above-the-line deduction of as much as $4,000 for any higher-education expenses you paid. Congress has extended this 2009 tax break through 2011.

See if you qualify for the American Opportunity Tax Credit for the first four years of undergraduate work or the Lifetime Learning Credit, which includes postgraduate courses. The American Opportunity Credit is worth as much as $2,500 per student in 2011. The Lifetime Learning Credit is worth as much as $2,000 per return. Compare the credit with the deduction, and go with the one that gives you the bigger benefit. And if you don’t qualify for either credit, you may still be able to deduct up to $4,000 in education expenses.

You can’t take both the credit and the deduction, though.

Energy Savings Home Improvement Credit

Credits are good because they are a dollar-for-dollar reduction in tax. This had been a 30% credit for skylights, outside doors, windows, pigmented roofs, high-efficiency furnaces, water heaters and central air-conditioning units installed in your primary residence in 2009 and 2010. This credit for most improvements had been capped at $1,500, but that was $1,500 off the cost of the improvements — and you saved energy as well. For 2011, the credit was cut to 10%, up to $500 (reduced by any credit claimed since 2006), with a cap of $50 to $300 on fans, furnaces, water heaters, heat pumps and central air-conditioning, and a $200 cap on windows.

Homeowners who install alternative energy equipment, such as solar water heaters, geothermal heat pumps and wind turbines, can take a credit of 30% of the total cost, with no cap through 2016.

Investment and tax expenses

Many of us forget tax-planning and investment expenses because they fall under miscellaneous itemized expenses. Further, the total must exceed 2% of your adjusted gross income before you get any tax benefit.

Expenses to track include your employee business expenses, tax preparation fees and even the portion of your legal or accounting fees relating to tax planning. For example, in a divorce, the legal time spent relating to the tax aspects of alimony and child support would qualify. So too would the tax aspects of estate planning.

Many people shortchange themselves on the deduction of investment expenses. They remember the safety deposit box fees. But how about the annual fee paid your broker and any IRA fees you pay directly? You may remember the cost of your investment publications on subscriptions — such as Forbes, Fortune and Barron’s — but how about the investment newspapers you buy off the newsstands? You keep track of your long-distance phone calls to your broker and investment adviser, but how about the mileage to go see them?

Casualty deductions – Anybody remember Hurricane Sandy?

2011 brought forest and range fires aplenty, as well as floods and huge snowstorms. If the president declared where you live to be a disaster area, you could claim your loss on either your 2011 or 2010 return. File Form 1040X now for 2010 to get relief before April 2012, unless your marginal tax rates have gone up.

Retirement tax credit

The retirement tax credit is designed to give moderate- and low-income taxpayers an incentive to save for retirement. If you make a contribution to your retirement account, that money isn’t taxed currently. So it’s like you get a deduction off your income. In addition, you get a credit of as much as 50% of the first $2,000 invested. That’s as much as a $1,000 reduction in your tax.

You get the $1,000 tax reduction as well as the $2,000 reduction in your income. That’s a nice rate of return on a $2,000 investment. Moreover, if you qualify, you can deduct as much as $5,000 ($6,000 if you’re 50 or older) in contributions to an IRA.

The tax credit disappears as your adjusted gross income increases. But singles with adjusted gross incomes up to $28,250 and joint filers with AGIs up to $56,500 qualify. The limit is $42,375 for heads of households.

Contributions to 401k’s, 403b’s, Simplified Employee Pension plans, traditional and even Roth IRAs qualify. See MSN Money’s Retirement section for more on planning.

Want more Tax Genius goodness? Come visit our facebook page Tax Genius for more information and to schedule an appointment. Follow me on twitter (@mercxue), hang out with me on Facebook, pin something to my Pinterest board or check out my blog Alternate Reality.

We will be posting lots of information in the upcoming weeks. We also have a 30% discount coupon if you “like” our page. See you soon.

For a complete list of credits, see the IRS website.

With the fiscal cliff narrowly avoided, are you prepared for the upcoming tax season? Like most Americans the recent changes to the tax code signed into law at the last minute will have a major impact on our lives. With tax season here, it is important to make sure that you are getting credit for all your credits when filing your tax return. Experienced tax preparers will be able to advise you on a more personal level but why not be knowledgeable on the subject? 

There are two main ways to help increase your tax refund and not find yourself having to write a check to the IRS. The easiest way is to maximize your deductions – but not everyone has kids or a house or job related expenses or retirement accounts. Wow, that’s a lot of “OR’s”. The other way and the subject I am about to discuss in this post is how to increase your return via “credits”.

It’s a good thing most of us only have to file taxes once a year. With all of the confusing terms, complex language, and mind-numbing math, it’s as if the people who write the tax code just wanted to bore us and trick us into a mistake or two. Even the helpful parts – like when you’d get money back – are tough to deal with. Let’s not even forget the fact that this year the IRS delayed accepting tax returns until January 30, 2013.

It is very easy to mix up two key terms: tax deductions and tax credits. Both serve the same purpose, which is to reduce your tax burden based on certain categories of income or expenses, but they work in different ways.

Below is a description of each, and an outline of how deductions and credits are different.

Tax Deductions

In its simplest form, an income tax deduction is a reduction in taxable income. Tax deductions are probably familiar to you because they cut your taxes in broad categories like: Medical expenses, State and local income taxes, Property taxes, Mortgage interest or Charitable contributions.

Most people love tax deductions because they usually involve expenses you have to take on anyway, like your mortgage and property taxes. The tax benefit seems like a great way to recover money you had to spend, but in the end, not everyone gets to take advantage of these deductions. You have to itemize your return – and not everyone can do that.

The standard tax deduction – what the IRS gives you even if you don’t itemize – is $5,700 if you’re filing as single and $11,400 for a married couple filing jointly. Unless your deductions exceed that amount, you won’t be able to itemize. Usually, people who don’t have a mortgage can’t itemize, and thus can’t take advantage of all of the available deductions. That’s where tax credits come in.

Tax Credits

While tax deductions work by lowering taxable income, tax credits are a direct reduction of the tax due. After you figure out your taxable income and subtract your deductions, you calculate your tax due. You still have a chance to reduce that amount, often significantly, by taking advantage of any allowable tax credits.

The major tax credits usually get plenty of press, and a little controversy too, so you’ve probably heard of some of the big ones, like: Earned income credit (EIC), “Make Work Pay” credit, Lifetime learning credit, Saver’s tax credit, and Green energy tax credits.

The list goes on, and at Tax Genius we can help you sift through it to find which ones are relevant to you. Despite the wealth of options, tax credits are relatively simple, and the good news is that you can take them whether you itemize or not. But they’re still part of the tax code, so there are confusing rules and exceptions to all of them. The main distinction for tax credits is whether they are refundable or non-refundable.

Refundable Tax Credits

Refundable tax credits are the ones that are easiest to embrace, because they have fewer restrictions and limitations. You can benefit from a refundable tax credit even if you have no tax liability and no withholding. There are several credits in this category, including the earned income credit (EIC) and the adoption expense credit. The EIC, which is available to low income filers, can provide you with a refund of several thousand dollars.

Another common refundable credit that you may able to take is the Making Work Pay tax credit. This credit can save you as much as $400, or $800 if you’re married filing jointly and both you and your spouse have earned income. For example, assume the following:

• Your filing status is single
• You earned $15,000 from your job in 2010
• Your tax liability, before figuring allowable credits, is $300
• Your tax owed, therefore, is $300

Before you figure out credits, you’re looking at $300 you’ll owe to the IRS in April. But, when you figure in $400 from the Making Work Pay credit, now they owe you $100! A refundable tax credit is almost like finding money.

Non-Refundable Tax Credits & Exceptions

Non-refundable tax credits can also make a big difference. In fact, they can reduce your tax liability all the way down to nothing. But they have a major limitation: The amount of your credits can’t exceed the amount of tax you owe. In short, you’re not going to be able to use them to get a refund.

If you think about that example of the Making Work Pay credit above, if the situation were exactly the same except that the credit were non-refundable, you’d only be able to get the $300 to bring your tax liability to $0. You wouldn’t owe anything, but you wouldn’t get a $100 refund like you did in the above example.

Some familiar non-refundable tax credits are: the Child credit, Foreign tax credit, and Child and dependent care tax credit.

Exceptions Can Help.
While exceptions often mean bad news, in the case of the child credit, the exception can actually boost your refund. Though the child credit – $1,000 per dependent child under the age of 17 – is non-refundable, you can usually shift the non-refundable portion of the credit over to the additional child credit, which is refundable.

In this example, imagine:

• Your filing status is married filing jointly, with two dependent children under age 17
• You earned $40,000 in 2012, all from your jobs
• Your tax liability, before figuring allowable credits, is $1,500
• Your two children allow for a child credit of $2,000 ($1,000 each)
• But the child credit is limited to your tax liability because it’s non-refundable, in this case $1,500
• Normally, you’d have to forfeit the remaining $500 and would not receive a $500 refund

But the exception to the rule allows you to slide the forfeited $500 over to the additional child credit, which means you just have to do some math to get yourself a big refund. The additional child credit lets you claim the lesser of two amounts: the amount you might have to forfeit (in this case $500) or 15% of your earned income in excess of $3,000.

That’s where the tax code gets complicated again, so take a look at the calculation: 15% of your earned income in excess of $3,000 is $5,550 ($40,000 – $3,000 = $37,000; $37,000 * 15% = $5,550). Since $500 is the lesser of the two amounts, that’s the one you’re allowed to take. Thus, instead of forfeiting the credit, you now have an extra $500 refund.

Note: The examples above are general, and may not apply in your specific situation. Always check with your tax adviser or IRS guidelines to be sure that you qualify for any deduction or credit, as there are usually income parameters or other limits that may reduce or even eliminate your eligibility.

Final Word

Despite the limitations of some types of deductions and credits, you’re not facing an either/or situation. You can take advantage of all types, and that’s good news. Of course, as you can see from the calculations, finding your way to tax relief can be complicated. Good online tax preparation software can make the job much smoother, especially when disallowances and carry-forwards kick in.

Even if you use tax software, however, you need to know what the deductions and credits are, when they apply, and when you may not be able to take them. What tax deductions and tax credits have been the most beneficial, or the most troublesome, for you?

More Credits:

Earned Income Tax Credit Materials
The EITC is a tax credit for certain people who work and have an earned income under certain thresholds. A tax credit usually means more money in the pocket of those who qualify. Income and family size determine the amount of the EITC.

Advanced Earned Income Tax Credit (EITC) Materials - Legislation signed into law August 10, 2010, repeals the Advanced Earned Income Tax Credit. Recipients will not receive Advance EITC on their paychecks after December 31, 2010.

Health Coverage Tax Credit (HCTC)
The Health Coverage Tax Credit (HCTC) is a program that can help pay for nearly two-thirds of eligible individuals’ health plan premiums. This website can help you figure out whether you are eligible for the HCTC and help you through the registration process. Please follow all instructions carefully so you and your family can receive the full benefit of this program.

Child Tax Credit
This credit is for people who have a qualifying child. It can be claimed in addition to the credit for child and dependent care expenses (see below). For more information on the Child Tax Credit, see Publication 972, Child Tax Credit.

Child and Dependent Care Credit
This is for expenses paid for the care of children under age 13, or for a disabled spouse or dependent, to enable the taxpayer to work. There is a limit to the amount of qualifying expenses. The credit is a percentage of those qualifying expenses. For more information, see Publication 503, Child and Dependent Care Expenses.

Education Credits
There are two credits available, the American Opportunity Credit and the Lifetime Learning Credit, for people who pay higher education costs. The American Opportunity Credit is for the payment of the first four years of tuition and related expenses for an eligible student for whom the taxpayer claims an exemption on the tax return. The Lifetime Learning Credit is available for all post-secondary education for an unlimited number of years. A taxpayer cannot claim both credits for the same student in one year. For more information, see Publication 970, Tax Benefits for Education.

Retirement Savings Contribution Credit
Eligible individuals may be able to claim a credit for a percentage of their qualified retirement savings contributions, such as contributions to a traditional or Roth IRA or salary reduction contributions to a SEP or SIMPLE plan. To be eligible, you must be at least age 18 at the end of the year and not a student or an individual for whom someone else claims a dependency exemption. Also, your adjusted gross income must be below a certain amount. For more information, see Chapter Four in Publication 590, Individual Retirement Arrangements (IRAs).

Come visit us at Tax Genius or Visit our facebook page Tax Genius for more information and to schedule an appointment. We will be posting lots of information in the upcoming weeks. We also have a 30% discount coupon if you “like” our page. See you soon.

Some text excerpts from Money Crashers

Tax season is upon us and many of us are gathering our documents, dusting off that storage box of receipts or maybe on the verge of a panic attack. Tax Season shouldn’t be looked at with anxiety, with the proper planning it could be a financial blessing. Let’s discuss a few ways to help you accomplish this.

Tax Planning

The goal of tax planning is to arrange your financial affairs so as to minimize your taxes. There are four basic ways to reduce your taxes, and each basic method might have several variations. You can reduce your income, increase your deductions, take advantage of tax credits, and increase your withholding. When you sit down with your preparer ask them how you might be able to plan your tax liability more effectively. This is really important to do if you are planning on experiencing a life changing event such as marriage, child birth, new job or divorce.

Reducing Income

Adjusted Gross Income (AGI) is a key element in determining your taxes. Lots of other things depend on your AGI (or modifications to your AGI) — such as your tax rate and various tax credits. AGI even impacts your financial life outside of taxes: banks, mortgage lenders, and college financial aid programs all routinely ask for your adjusted gross income. This is a key measure of your finances.

Because your adjusted gross income is so important, you may want to begin your tax planning here. What goes into your adjusted gross income? AGI is your income from all sources minus any adjustments to your income. The higher your total income is, the higher your adjusted gross income. As you can guess, the more money you make, the more taxes you will pay. Conversely, the less money you make, the less tax you will pay. The number one way to reduce taxes is to reduce your income. And the best way to reduce your income is to contribute money to a 401(k) or similar retirement plan at work. Your contribution reduces your wages, and lowers your tax bill.

You can also reduce your Adjusted Gross Income through various adjustments to income. Adjustments are deductions, but you don’t have to itemize them on the Schedule A. Instead, you take them on page 1 of your 1040 and they reduce your Adjusted Gross Income. Adjustments include contributions to a traditional IRA, student loan interest paid, alimony paid, and classroom related expenses. A full list of adjustments is found on Form 1040, page 1, lines 23 through 34. The best way to boost your adjustments is to contribute to a traditional IRA.

As you can see, two of the best ways to reduce your taxes is to save for retirement, either through a 401(k) at work or through a traditional IRA plan. Contributions to these retirement plans will lower your taxable income, and lower your taxes.

Increase Your Tax Deductions

Taxable income is another key element in your overall tax situation. Taxable income is what’s left over after you have reduced your AGI by your deductions and exemptions. Almost everyone can take a standard deduction, and some people are able to itemize their deductions. Have you ever wondered how Warren Buffet, one of the the richest men in the world, effectively pays a lower percentage of income in taxes than his secretary? It’s because of his itemized deductions.

Itemized deductions include expenses for health care, state and local taxes, personal property taxes (such as car registration fees), mortgage interest, gifts to charity, job-related expenses, tax preparation fees, and investment-related expenses. One key tax planning strategy is to keep track of your itemized expenses throughout the year using a spreadsheet or personal finance program. You can then quickly compare your itemized expenses with your standard deduction. You should always take the higher of your standard deduction or your itemized deduction.

Your standard deduction and personal exemptions depends on your filing status and how many dependents you have. You can increase your standard deduction and personal exemptions by getting married or having more dependents, to a limit.

The best strategies for reducing your taxable income are to itemize your deductions, and the three biggest deductions are mortgage interest, state taxes, and gifts to charity.

Take Advantage of Tax Credits

Once we’ve tweaked our taxable income, we are ready to focus our attention on various tax credits. Tax credits reduce your tax. There are tax credits for college expenses, for saving for retirement, and for adopting children.

The best tax credits are for adoption and college expenses. Not everyone is in a position to adopt a child, but everyone could take some college classes. There are two education-related tax credits. The Hope Credit is for students in their first two years of college. The Lifetime Learning Credit is for anyone taking college classes. The classes do not have to be related to your career.

You may also want to avoid additional taxes. If at all possible, avoid early withdrawals from an IRA or 401(k) retirement plan. The amount you withdraw will become part of your taxable income, and on top of that there will be additional taxes to pay on the early withdrawal.

One of the best and most abused tax credits is the Earned Income Credit (EIC). Unlike other tax credits, the EIC is credited to your account as a payment. And that means the EIC often results in a tax refund even if the total tax has been reduced to zero. You may be eligible to claim the earned income credit if you earn less than a certain amount.

Increase Your Withholding

Finally, You can avoid owing at the end of the year by increasing your withholding. More money will be taken out of your paycheck throughout the year, but you will get bigger refund when you file your taxes. This is important if you are finding yourself typically owing at the end of the year. No one wants to right a check to the IRS.

Come visit us at Tax Genius or Visit our facebook page Tax Genius for more information and to schedule an appointment. We will be posting lots of information in the upcoming weeks. We also have a 30% discount coupon if you “like” our page. See you soon.

WASHINGTON, DC – DECEMBER 19: Speaker of the House U.S. Rep. John Boehner (R-OH) arrives to answer questions during a brief news conference on the payroll tax vote outside his office at the U.S. Capitol December 19, 2011 in Washington, DC. (Image credit: Getty Images via @daylife)

Well, color me surprised. The House voted on the budget after all, and they voted up or down, rather than amending the Senate bill. The House voted “Yea” and they did so quite convincingly (257 YEA to 167 NAY).

Here’s what the bill does:

Income tax

• The tax cuts were extended – permanently – for all but those at the top. For this purpose, the top means $400,000 for individual filers and $450,000 for married couples. The top tax rate will increase to 39.6% from 35%.
• The Pease and PEP (personal exemption phaseout) restrictions on limitations were also extended. The applicable thresholds for the caps are $250,000 for individual filers and $300,000 for married couples.
• Capital gains tax rates and dividend tax rates stay low for most taxpayers. Taxes on capital gains and dividends will increase to 20% for taxpayers at the top.
• The alternative minimum tax (AMT) will be permanently adjusted for inflation. This is in red for a reason. Congress hasn’t fixed this in more than 40 years. Each year, they put a “patch” on it instead of actually doing anything to fix it. This, for me, is the biggest surprise in the bill.
• Also extended for five years (not permanently) are number of individual tax credits including the child tax credit, the controversial earned income tax credit (EITC), and the American Opportunity Tax credit (the souped up version of the Hope Credit).
• On the deduction side, a couple of above the line deductions were extended, including the deduction for school teachers expenses and the tuition and fees deduction. On the itemized deduction side, the option to deduct state and local sales taxes in place of state and local income taxes was extended for a year.
• Surprising many (govtrack.us gave it a 1% chance of passing as a separate bill), the parity between the exclusion from income for employer-provided mass transit and parking benefits was extended. Without the extension, parking benefits would be disproportionately higher than those for mass transit.
• On the charitable side, while the Pease limitations were kept (mostly) at bay, the opportunity to make tax-free distributions to charitable organizations was extended. This is good news for retirees who want to donate their IRAs – and charities who want their money.

Payroll tax

• Payroll taxes are going up. As expected, the payroll tax holiday is allowed to expire. The employee portion of Social Security contributions will return to 6.2%.

Estate tax

• The federal estate tax exemption remains at $5.12 million (indexed for inflation). The top tax rate will be 40%, higher than the current rate of 35% but lower than what would have happened under the lapse.

Sequester

• The sequesters (automatic cuts) have officially been pushed off for two months.

Other stuff

• Long-term unemployment benefits are extend for one year.
• The so-called “doc fix” is also in play for one year. That means that the planned cuts – 27% – in Medicare reimbursements for physicians will be pushed off until 2014.
• A law allowing the IRS to communicate with prisons (yes, this is a big problem when it comes to fraud) was made permanent.
• The farm bill was also extended; no $7 gallon jugs of milk in 2013.

I don’t think the business tax provisions were terribly significant but some of the extensions deserve a nod. I do think the political capital involved in this one will have long-reaching effects… Look for that commentary in another post (otherwise, this one will never end).

The bill has yet to be enrolled (a fancy way of saying the two versions of the bills from the House and Senate have to match as one document) but you can read the Senate version here.

Want more Tax Genius goodness? Come visit our facebook page Tax Genius for more information and to schedule an appointment. Follow me on twitter (@mercxue), hang out with me on Facebook, pin something to my Pinterest board or check out my blog Alternate Reality.

We will be posting lots of information in the upcoming weeks. We also have a 30% discount coupon if you “like” our page. See you soon.

You’ll notice some changes on the blog. I got bored with the old layout and content distribution and decided to give it a much needed face-lift. I hope you all enjoy. The changes to the Blog actually took place on March 1, 2012, but after my month of Black History posts I was not able to blog again until now. It was a busy year that took me away from what I loved to do. With that being said here is –

What’s Different:

1. Custom Domain. I Had to. How else would I stand out from all the other word press sites.
2. The theme. I had to, AGAIN. The other one was perfect as a transitional frame, but there needed to be a more youthful and energetic palate. The new theme is called “Headlines” and after mulling over all the different choices, I felt this was the best look. 
3. Pages. I has them. I revamped the about page. Added a few other pages which will feature my writings in a simpler format to read. I got some feedback from readers that said it was hard to find past articles. I should have been posting under these added pages a long time ago, but with my sporadic posting and consistent disappearance acts it didn’t seem like the right time.
4. Finally, the Various Delights page where I will post the short stories from now on as opposed to the homepage, which should help make the content appear to be a bit less haphazard.
5. Widgets. I added ones specifically for easier navigation to favorite articles. Still updating the text in a few, so you’ll see that shortly.

This was how I wanted to do things months ago after I had reached my milestone 500 subscribers and decided to start posting on a daily basis. Seeing as my present circumstances are what they are I’ve got time again to focus on writing and updating the blog. I’m excited to finally get to work on the most important part, which is the content. I have decided to post twice a week for the time being as well as offer a list post once a month. This may change over time and know that I appreciate your patience and willingness to help.

Expect to see bigger and better changes in the near future. It’s not entirely finished, but I’ll be sure to make mention of any major improvements so you can check it out and give feedback if you so choose.

Take care and I’ll see you shortly!

NEWARK, NEW JERSEY – One of the most recent and fascinating Black History memoirs published in 2012 tells the little-known six-month adventure of an African-American cowboy who rode horseback from Manhattan to California.

That gripping journey by Miles Dean, filled with stops to recognize sites that were milestones in African-American culture, is shared in detail by author Lisa K. Winkler in On The Trail of the Ancestors: A Black Cowboy’s Ride Across America (ISBN 978-1468123920, 2012, Create Space, 148 pages, $12.95 available on Amazon).

Miles Dean rode his horse more than 5,000 miles across the country to celebrate the contributions of African Americans to U.S. history. A Black Cowboy’s Ride Across America will resonate with horse people, armchair travelers, educators, parents and young people who are connected with the African-American community.

Winkler met Miles Dean while teaching inner city youth in Newark and became so enthralled by his account of riding horseback across America that she agreed to write the book. Shortly after meeting Miles Dean, Winkler wrote an article on black jockeys for the Smithsonian Institute and has since interviewed several black history scholars.

“When I first met Miles Dean, I was hooked,” recalls Winkler. “His passion for his subject and determination to accomplish something that few would undertake awed me. I am the daughter of liberal parents who marched in Washington, D.C. for civil rights and was enthralled by the stories Miles told and his encounters with black history while riding across America.”

Among the little known jewels of black history included in A Black Cowboy’s Ride Across America are these accounts:

· African-Americans who served as US marshals, upholding the law protecting settlers by chasing bank robbers, cattle thieves and other bandits.

· Black cowboys who, for the first half of the 20th century, were barred from competing against white cowboys in the prize events at rodeos and were banned from appearing in motion pictures, both ways in which cowboys supplemented their ranch wages.

· Philadelphia’s Washington Square, once called “Congo Square,” was the site of several slave auctions that separated Africans from loved ones, sending them into servitude.

· As the nation’s capital from 1790 to 1800 Philadelphia hosted George Washington’s presidency. A known slaveholder, Washington brought his slaves to Philadelphia, circumventing the law that granted slaves freedom after a six-month residency by moving them back to Virginia.

· The jockey who rode Man o’ War, who won 20 of 21 races in the early 1920s, was the black jockey Burns Murphy, son of a former slave. Murphy claimed three Kentucky Derby victories and won 44 percent of all the races he rode, a record still unmatched.

· The participation of blacks in racing dates back to colonial times, when the British brought their love of horseracing to the New World. Founding Fathers George Washington and Thomas Jefferson frequented the track, and when President Andrew Jackson moved into the White House in 1829, he brought his horses and his black jockeys with him.

· The first performer on the Grand Ole Opry was DeFord Bailey, an African American country music star from the 1920s. A grandson of slaves, Bailey learned to play the harmonica while convalescing after polio. He premiered on radio, recorded many albums, and toured with other country stars throughout the South and the West.

Marian Smith Holmes, an associate editor for the Smithsonian Magazine, has described these accounts as “precious nuggets of our American past that bear telling to people of all ages and races.”

“It was tremendous to see how much pride my middle school students took in learning about the many valuable contributions that African-American cowboys and jockeys made to our country’s formation,” stresses Charity Haygood, principal of Brick Avon Avenue Academy in Newark. “I loved that our students had Miles Dean who not only taught history but actually had the guts and real personal drive to make history living! He truly had his horse, ‘walk his talk!”

Molefi Kete Asante, author of 100 Greatest African Americans, had this to say about Winkler’s book: “Lisa Winkler has written an inspiring book; she has engaged us at the level of concrete contributions of African Americans to the history of the United States. Miles Dean’s own participation in that history is inescapably awesome. I salute this work and encourage everyone to read this powerful book.”

After returning from his journey, Miles Dean is now enjoying an extended stay in South America but will be returning in time to stage an African-American parade in Newark to celebrate Memorial Day weekend.

About the Author
A former journalist, Lisa K. Winkler has an extensive career as an educator working with inner city youth. Born in New Haven, Connecticut, Winkler lived in London from 1982-87 before moving to New Jersey where she now resides. She earned her BA degree from Vassar College in 1978 and an MA in Education in 1992 from New Jersey City University. Winkler was a middle school language arts teacher for more than 10 years who has just completed a five-year grant position under No Child Left Behind in Newark, New Jersey. She has written several magazine articles, essays for book anthologies, several study guides for Penguin Books, and still writes for Education Update, an education newspaper based in New York City. Winkler is a frequent speaker at conferences, seminars and workshops.

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Media Contact: For a review copy of A Black Cowboy’s Ride Across America, or to schedule an interview with Lisa Winkler, please contact Scott Lorenz, President of Westwind Communications, 734-667-2090, Cell: 248-705-2214 or scottlorenz@westwindcos.com or http://www.book-marketing-expert.com