Raising children can be very hard on parents, and the bad economy conditions are making it even more difficult. A good tax tip for parents is to know that your children may help you qualify for some tax benefits.

Here are top tax tips that parents should consider when filing this year’s tax returns:

1. Dependents
   In most cases, a child can be claimed as a dependent in the year they were born. For more information and other tax tips pertaining to dependents see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
2. Child Tax Credit
   You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be get tax help in the form of an Additional Child Tax Credit.
3. Child and Dependent Care Credit
   Another great tax tip is that if you pay someone to care for your child (under age 13) while you work or look for work, you may be able to claim the Child and Dependent Care credit.
4. Earned Income Tax Credit
   The EITC is a benefit for certain people who work and have earned income from wages, self-employment or farming. 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.
5. Adoption Credit
   You may get some tax help by taking a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included. For more information, see the instructions for IRS Form 8839, Qualified Adoption Expenses.
6. Children with Earned Income
   If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.
7. Children with Investment Income
   Under certain circumstances, a child’s investment income may be taxed at the parent’s tax rate. For more income tax help see IRS Publication 929, Tax Rules for Children and Dependents.
8. Higher Education Credits
   Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more tax tips see IRS Publication 970, Tax Benefits for Education.
9. Student loan Interest
   You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions. For more information see IRS Publication 970.
10. Self-employed health insurance deduction
    If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent. For more tax facts and tax tips see the IRS website.

Not all of the tax tips listed will increase your tax return but it will assure that you’re following IRS tax rules and regulations.

For more tax help, facts and information visit the IRS website

source: irs.gov

If you were a working taxpayer in 2010, you may be eligible for the Making Work Pay Tax Credit. This credit is based on the income you earned in 2010 and is claimed on your tax return when you file your 2011 taxes.

A great tax tip is to know the facts about the Making Work Pay Tax Credit to ensure you receive the entire amount for which you are entitled.

1. The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
2. Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010.
3. Taxpayers who file Form 1040 or 1040A will use Schedule M to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money because of the credit.
4. Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.
5. You cannot take the credit if your modified adjusted gross income is $95,000 for individuals or $190,000 if married filing jointly or more, you can be claimed as a dependent on someone else return, you do not have a valid social security number or you are a nonresident alien.

Visit the IRS website for more information about the Making Work Pay Credit and other tax tips

Source: irs.gov

Our leaders in Washington are working hard on a tax relief compromise that will extend the Bush-era tax cut packages enacted in 2001 and 2003.

A summary of the Obama-GOP tax deal, released by the Senate, is now pending on the Senate floor. The tax cut compromise summary, obtained from the Senate Democrats website, calls for temporary tax relief in the following areas:

• Temporary Extension of Tax Relief
• Temporary Individual Alternative Minimum Tax (AMT) relief
• Temporary Estate Tax Relief
• Temporary Extension of Investment Incentives
• Temporary Extension of Unemployment Insurance
• Temporary Payroll Tax Holiday
• Temporary Extension of Certain Expiring Provisions

Here is the summary of the Obama-GOP tax cuts compromise:

Tax Cuts Compromise Package Summary
December 9, 2010

I. Temporary Extension of Tax Relief

Two major bills enacting tax cuts for individuals expire at the end of 2010: the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA); and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). The following package extends these provisions from EGTRRA and JGTRRA for an additional two years, through 2012, and will provide important tax relief to American taxpayers. The following package also extends a number of provisions enacted as part of EGTRRA that were modified in the American Recovery and Reinvestment Act.

More on The Obama–GOP Tax Relief Compromise