You may be eligible for a few money making tax credits this tax year. A tax credit is a dollar-for-dollar reduction of taxes owed. It is even possible that you may receive a tax refund instead of owing taxes because some tax credit are refundable.

Here are four tax credits you should consider before filing your Federal Income Tax Return this year:

1. The Earned Income Tax Credit is a refundable credit for certain people who work and have earned income from wages, self-employment or farming. Income, age and the number of qualifying children determine the amount of the credit. EITC reduces the amount of tax you owe and may also give you a refund. For more information see IRS Publication 596, Earned Income Credit.
2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work. For more information, see IRS Publication 503, Child and Dependent Care Expenses.
3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child. This credit can be claimed in addition to the credit for child and dependent care expenses. For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.
4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

There are other money making tax credits available this tax year.  So before filing your income tax, check for credits you may be eligible for.

You can get more information about tax credits by visiting the IRS website or by calling 800-TAX-FORM (800-829-3676).

source: irs.gov

With Congress back in session, Democratic and Republican congressional leaders will have to deal with the very important issues of the bush tax cuts and expiring tax credits.

Senator Dick Durbin of Illinois, the senate’s No. 2 Democrat, said negotiations over extending the Bush-era tax cuts also will include prolonging emergency unemployment benefits and other tax credits.

“I want to put a couple other things on the table,” Durbin said today on NBC’s “Meet the Press.” “We do have unemployment running out,” he said, and “I also want to make sure the earned-income tax credit, the childcare tax credit, and the ‘Making Work Pay’ tax credit are part” of the discussion.

The Bush tax cuts, passed in 2001 and 2003 are set to expire on Dec. 31, 2010. President Obama will meet with Congress on Nov 30 to discuss the agenda.

Besides discussion on extending the tax cuts, Congress must decide what to do about unemployment benefits set to expire at the end of the month. The Labor Department estimates that more than 2 million Americans will lose unemployment benefits if Congress does not act.

Arizona Senator Jon Kyl, the chamber’s second-ranking Republican, said there is “an opportunity for us to sit down and negotiate a resolution to this that’s good for the economy.” Kyl also repeated a key sticking point for Republicans: “We don’t believe taxes should be increased on anyone.”

The President has argued the country can’t afford indefinitely extending tax cuts for the wealthiest Americans, defined by the president as individuals making more than $200,000 and couples earning more than $250,000.

Obama on the Bush Tax Cuts

“I believe it is a mistake for us to borrow $700 billion to make tax cuts permanent for millionaires and billionaires,” Obama told reporters Nov. 14. “It won’t significantly boost the economy and it’s hugely expensive, so we can’t afford it.”

Republicans, who won a majority of House seats in the Nov. 2 elections and narrowed the Democratic margin in the Senate, are pushing to permanently extend all the current tax rates. While Obama has said he wants to permanently extend just the tax cuts on earnings up to $200,000 for individuals or $250,000 for households — about 97 percent of all taxpayers, according to the Internal Revenue Service — he has indicated he’s open to negotiations on achieving that goal.

“We should be focusing on what it takes to move this economy forward,” Durbin said. “We should not be worried about the discomfort of the wealthy.”

Expiring Legislation

Unless Congress acts, marginal rates will increase for all income-tax payers. Tax credits benefiting families will be cut in half. The so-called married penalty that forces some couples to pay more than if they were single will be reinstated. Rates will rise on most dividends and capital gains, and a levy on estates valued over $1 million will be resurrected.

“What’s likely to happen is there will be an extension of the tax cuts for everybody for a period of time,” Senator Byron Dorgan of North Dakota, a Democrat who is retiring, said in an interview today on CNN’s “State of the Union” program.

Extending only the current rates for individuals earning less than $200,000 and couples making under $250,000 would add more than $3 trillion to the national debt over the next decade. Sustaining tax cuts for those with higher incomes would add an additional $700 billion to the debt over the next decade, Treasury Secretary Timothy Geithner has said.

An across-the-board extension of all Bush-era tax policies would cost the government about $5 trillion in foregone revenue and interest cost on the debt, the Congressional Research Service estimated last month.

With the Republicans taking control of the House in January, President Obama may have no choice but to negotiate and give in to resolve these issues.

Source: businessweek.com

Are you still waiting for last year’s Federal Income Tax refund check? If so, you may be one of over 110,000 taxpayers who didn’t receive their tax refund check due to mailing adress errors. The good news? The IRS is looking to return $164.4 million of these undelivered tax refund checks.

“We want to make sure taxpayers get the money owed to them,” said IRS Commissioner Doug
Shulman. “If you think you are missing a refund, the sooner you update your address information, the quicker you can get your money.”

A taxpayer only needs to update his or her address once for the IRS to send out all checks
due. Undelivered refund checks average $1,471 this year, compared to $1,148 last year. Some
taxpayers are due more than one check.

The average dollar amount for returned refunds rose by just over 28 percent this year,
possibly due to recent changes in tax law which introduced new credits or expanded existing
credits, such as the Earned Income Tax Credit.

If a refund check is returned to the IRS as undelivered, taxpayers can generally update their addresses with the “ Where’s My Refund?” tool on IRS.gov. The tool also enables taxpayers to check the status of their refunds. A taxpayer must submit his or her Social Security number, filing status and amount of refund shown on their 2009 return. The tool will provide the status of their refund and, in some cases, instructions on how to resolve delivery problems.

Taxpayers checking on a refund over the phone will receive instructions on how to update their addresses. Taxpayers can access a telephone version of “Where’s My Refund?” by calling
1-800-829-1954.

While only a small percentage of checks mailed out by the IRS are returned as undelivered, taxpayers can put an end to lost, stolen or undelivered checks by choosing direct deposit when they file either paper or electronic returns. Taxpayers can receive refunds directly into their bank, split a tax refund into two or three financial accounts or even buy a savings bond.

The IRS also recommends that taxpayers file their tax returns electronically, because e-file eliminates the risk of lost paper returns. E-file also reduces errors on tax returns and speeds up refunds. E-file combined with direct deposit is the best option for taxpayers; it’s easy, fast and safe.

The public should be aware that the IRS does not contact taxpayers by e-mail to alert them
of pending refunds and that such messages are common identity theft scams. The agency urges taxpayers not to release any personal information, reply, open any attachments or click on any links to avoid malicious code that will infect their computers. The best way for an individual to verify if she or he has a pending refund is going directly to IRS.gov and using the “ Where’s My Refund?” tool.

source: irs.gov