StrategyOne Tax Tips

Common Tax Credits
Filing for an Extension
Itemizing Your Deductions
Taxpayers Checklist
The Top Taxpayer Mistakes

Common Tax Credits

Even better than a tax deduction is a tax credit. A tax credit reduces the amount of taxes you owe dollar-for-dollar. For example, a tax credit of $1,000 cuts your tax bill by the same amount.

With a deduction, the tax savings are only a fraction of the amount. For example, if you are in the 25% income tax bracket and have a $1,000 deduction, your tax savings is $250.

Here are some of the major categories of tax credits:

Earned Income Credit. The earned income credit is aimed at reducing the tax burden on lower-income taxpayers. If you file for the earned income credit, you must submit Schedule EIC.

Saver's Tax Credit. This tax credit provides an extra incentive to fund a retirement plan.

Child-Related Credits. The four major child-related tax credits are the tax credit for child and dependent care expenses, the child tax credit, the adoption credit and the additional child tax credit.

Education Credits. The main tax credits for higher education are the Hope and lifetime learning credits.

The Hope Credit can be used for your first two years of college.

The Lifetime Learning Credit applies to tuition costs for undergraduates, graduates and those improving job skills through a training program.

Other tax credits that are widely used include credits for elderly or disabled persons, mortgage interest credit and a credit for refurbishing low-income housing.

Call StrategyOne today to see if you qualify for these or other Credits.

Filing for an Extension

The tax-filing deadline is April 15, 2010. Which means you have until April 15 to file a return for the calendar year that ended December 31, 2009.

If you failed to meet the April 15, 2010 deadline, you can obtain an extension by filing Form 4868. The extension grants you six additional months, to October 15, 2010 to file your return.

Without a valid extension, a delinquent return is subject to a 5% per month penalty on any unpaid balance. The combined penalties for late-filing and late-payment can be as much as 47.5% of the unpaid tax.

If you don't file your return by Oct 15, 2010, both the late-filing and late-payment penalties apply. Interest on the unpaid balance and accrued penalty will continue to be charged until the balance due is paid.

DELINQUENT RETURNS If you’ve neglected to file a personal or business return, don’t think the problem will just go away, it won’t! Don’t kid yourself, they know who you are. The best possible course of action is to come forth on a voluntary basis by filing your delinquent tax returns. If you do, the government will be more lenient with its enforcement action against you.

Note: The problem can get far more serious for those who haven't filed for several years and who owe large amounts of money. Those people may get hit with criminal charges.

Call StrategyOne today for help on filing an extension.

Itemizing Your Deductions

If the amount of your allowable deductions is greater than your standard deduction, the IRS encourages you to itemize your deductions.

Major categories for itemizing deductions include:

Home mortgage interest expense. You may deduct mortgage interest you paid on your residential mortgage.

Real estate taxes. Property taxes that you pay on your home may also be deducted.

Medical and dental expenses. You may deduct qualified medical and dental expenses.

Contributions to charitable organizations. The IRS allows you to deduct contributions of money or property to a qualified organization for its use.

Miscellaneous expenses. Miscellaneous expenses are generally unreimbursed expenses that are related to your performance of a job such as travel, lodging and meals.

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Taxpayer's Checklist

Taxpayer's checklist for Tax Year 2010

Information you need	Where to get the data
PERSONAL DATA
Social Security numbers (including spouse and children).	If your dont already have this infomation, please contact your Social Security Office.
Your child care provider's tax I.D. or Social Security number	Your child car provider.
EMPLOYMENT & INCOME DATA
W-2 forms for this year	These come from your employer.
Pensions and annuities	Data should come from the financial institution, insurance company selling the annuity or pension fund.
Social Security Railroad Retirement Benefits	You will need Form RRB 1099 or Form RRB 1042S for non-resident alien recipients of Railroad Retirement benefits.
Alimony received	Tax information should come from your ex-spouse or his representative. Your former spouse will want your Social Security number to be able to deduct any alimony payments.
Jury duty pay.	Data should come from the court clerk.
Gambling and lottery winnings	This data should come from the casino or lottery authority. Form W-2G.
Prizes and awards	Data should come from the award givers. Form 1099-MISC.
Scholarships and fellowships	Data should come from the administrators of these programs. Form 1099-MISC.
State and local income tax refunds	Data should come from the taxing authorities.
HOMEOWNER/RENTER DATA
Mortgage interest	Your lender will send you this data on Form 1098.
Sale of your home or other real estate: Form 1099-S	Your lender or closing agent should send you Form 1099-S.
Second mortgage interest paid	Your lender will send you this data on Form 1098.
Real estate taxes paid	Your county clerk or lender should send you this data.
Rent paid during tax year	You need to generate this data.
Moving expenses	If your expenses are reimbursed by an employer, the employer will furnish you with data on the moving costs they paid for.
FINANCIAL ASSETS
Interest income statements	Financial institutions will provide this data on Form 1099-INT & Form 1099-OID.
Dividend income statements	This will come on Form 1099-DIV from the company paying the dividends.
Proceeds from broker transactions	Your brokers should furnish this data on Form 1099-B.
Tax refunds & unemployment compensation	The issuing agencies should send this information on Form 1099G.
Miscellaneous income including contract or freelance work or rent	This should come from whoever distributes the income on Form 1099-MISC.
Retirement plan distribution	Whoever sends out your pension checks should send you this data on Form 1099-R.
FINANCIAL LIABILITIES
Auto loans and leases. Including account numbers and car value -- if the vehicle is used for business.	You can get this data from the lender or leasing company.
Student loan interest paid	The lender should furnish this data on Form 1098-E.
Early withdrawal penalties on CDs and other time deposits.	Financial institutions should provide this data.
DEDUCTIBLE EXPENSES
Gifts to charity Receipts for any single donations of $250 or more.	This should come from the charity.
Unreimbursed expenses for volunteer work	You will need to keep your own records for this.
Unreimbursed expenses related to your job. Travel expenses, entertainment, uniforms, union dues, subscriptions.	You will need to maintain this data.
Investment expenses	Your broker will furnish some data. Travel, phone and other related expenses are your responsibility to track.
Job-hunting expenses	You will need to keep and maintain this data.
Education expenses	You will need to keep this data. But if you qualify for Hope or Lifetime credits or other college deductions, the college involved will send you the data on the qualifying expenses you've paid.
Child care expenses	You will need to keep this data.
Medical Savings Accounts	The institution handling the account will be able to generate any data.
Adoption expenses	You will need to track this data and be able to document these expenses.
Alimony paid	You or the authority dispersing funds will need to keep this data. To deduct this expense, you will need the recipient's Social Security number.
Sales tax expenses	If you expect to claim a sales tax deduction on your 2005 tax return, you will need receipts for expenses. Or you can fill out a worksheet that IRS provides to help estimate sales tax expenses.
Tax return preparation expenses and fees	Your preparer can furnish this data to you.
SELF-EMPLOYMENT DATA
K-1s on all partnerships.	The partnership management should generate this data.
Receipts or documentation for business-related expenses	This is data you should keep and track.
Farm income	You or an accountant should tack this information. You will need to prepare Schedule F.
DEDUCTION DOCUMENTS
Federal, state and local estimated tax paid for current year. Including estimated tax vouchers, cancelled checks & other payment records.	You must keep copies of this data and track it.
IRA, Keogh & other retirement plan contributions.	You can get this information from your financial institutions.
Medical expenses	You must track this data.
CASUALTY OR THEFT LOSSES
Other miscellaneous deductions	You will need to file Form 4684.

Call StrategyOne today if you have any questions.

Top Taxpayer Mistakes

Here's the lineup of the biggest mistakes taxpayers make. And what to do to avoid them.

1. Bad math
According to the Internal Revenue Service, errors in addition and subtraction are the No. 1 mistake taxpayers make. All returns are examined for mathematical errors. Mistakes in arithmetic result in an immediate correction notice. If the error leads to a tax deficiency, you will automatically receive a bill for that amount.

2. Forgetting about interest and dividends
Interest and dividend payments are reported to the IRS by banks, brokerage houses and other financial institutions, and they are cross-checked in about 96% of the cases. As a result of this cross-checking, the IRS sends out notices for taxes and interest on overdue taxes for income that was not reported.

3. Losing track of receipts
You either have proof of your deductions, or you lose them. Always keep your receipts and checks if you want to deduct them. Deductible receipts and checks should be kept for three years.

4. Forgetting to donate unwanted items to charity
Give your old clothes, furniture, appliances and other items away to your favorite charity. The wholesale value of those contributions is allowable as a charitable deduction. Make sure that you get a receipt. No receipt, no deduction.

Remember, you can deduct 14 cents a mile for any charitable work, including the trips to bring the old clothes to the charity.

Call StrategyOne today for help on avoiding these common mistakes.