In order to get all of the tax deductions and credits to which you are entitled, you have to do more than just drop off an envelope with your tax information at the office where your taxes are prepared. You must take an active role in the preparation of your taxes and in taking advantage of the tax benefits, especially credits that are available to you.
For example, if you have a 401K plan, you could have deposited up to $16,500 into that 401K in 2009. If you didn’t deposit the maximum, yet you complain about not getting the lowest tax liability on your income taxes, you do a disservice to the person filing your income taxes. After all, it isn’t their fault that you didn’t do all that you could to lower your tax liability.
You should be aware of some of your tax benefits this year, such as the following:
There is a first time homebuyer tax credit. It is important to know that the Internal Revenue Service defines a first time homebuyer as someone who has not owned a principal residence for three years before the purchase of the new home. The tax credit can be u for up to $8000.
There’s a lot of conversation regarding “Make Work Pay.” Some taxpayers are under the misconception that they will receive a check in the mail, like the stimulus. In actuality the “Make Work Pay” tax credit is a reduction in your tax rate that you should be able to see as an increase in your take home pay. Contact the payroll department where you work and find out if you need to change your withholding to reflect the credit.
If you make an energy conserving improvement to your home in 2009, you can get a tax credit. You can take advantage of the Energy Conservation Credit and receive up to a $1500 tax credit. However, you must apply that credit to your 2009 and 2010 taxes. So it is only good for $750 each of those years.
These are examples of some of the tax breaks and credits of which you should be aware before even talking to the person hired to file your income tax return. If you are not aware of some of these breaks, you cannot use them to save money on your taxes.
When you take your tax information to your tax expert, it will already be too late to take advantage of some of these tax breaks. You will have effectively lost out on the opportunity to lower your tax liability by not acting on some of these opportunities before December 31, 2009. Such a mistake on your part can hardly be blamed upon the person preparing your taxes.