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What You Need To Know about Earned Income Tax Credits

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Posted by Tax Advocate on May 21st, 2012

The Earned Income Tax Credit (EITC) is a great way for low and moderate income families and individuals to recoup some of their federal income tax owed. You don’t need to have your employer sign you up for the EITC. There is an app on the IRS website to help determine your eligibility for the tax credit and the amount of credit you can receive from claiming the EITC.

EITC – Earned Income Tax Credit Eligibility

To determine eligibility for the EITC, you should use the official IRS Earned Income Tax Credit app at http://apps.irs.gov/app/eitc2011/. This app helps determine if your children are considered qualified for tax purposes and also helps determine the amount of the tax credit you will receive. To use the app, you will need the following information:
  • The social security numbers for all family members.
  • Your filing status: single, married filing jointly, qualifying widower with dependent child or head of household.
  • The amount of income you earned during the tax year.
In 2011, the average Earned Income Tax Credit was $2,240. This credit is fully refundable, meaning you can receive the amount as a refund if you do not owe any federal taxes. Please note that those who are eligible for the EITC are also often eligible for income tax preparation assistance from the Volunteer Income Tax Assistance Program of the IRS. Those earning less a certain amount (usually $50,000 or less) can have their taxes prepared by volunteers free of charge.

Other Tax Credits

Tax credits like the EITC can take the bite out of paying your taxes since each credit gets deducted from the final tax amount that you owe. There may be many tax credits available to you depending upon your situation. Here are some common tax credits to help lessen your tax burden even more:
  • Energy Tax Credits (like you would get for purchasing an electric car).
  • A first-time home buyer’s tax credit.
  • Educational tax credits.
  • Child tax credits.

Categories Family Taxes

The Different Types of Taxes

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Posted by Tax Advocate on May 18th, 2012

Taxes as far as the government is concerned are what makes the world go around. Without taxes, the government would cease to exist. Here are the three main areas where the United States federal government as well as each individual state gets their taxes from.

The different types of taxes.

  • Consumption taxes or sales taxes are set as a percentage of the purchase price by the government and are levied against goods and services. Taxes can effect consumption and even dissuade people from purchasing a product or engaging in a heavily taxed activity. These “vice” taxes are levied on things like tobacco, alcohol and gambling.
  • Income taxes are taxes paid by people who make any kind of income. In general, people who make more money will pay more in income taxes. People are able to offset their income by using tax deductions and tax credits to lower their taxable income. People who sell property, stocks or other assets are also subject to a capital gains tax. People who are under a certain threshold do not have to pay income taxes because of their poverty level.
  • Property taxes is a tax levied on property that a person owns such as a home. If someone owns commercial real estate or even undeveloped land, this is also subject to taxation. These taxes go to the local city and county where the property resides and help finance the local government.

Categories Types of Taxes

How to Lower Your Property Taxes

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Posted by Tax Advocate on May 17th, 2012

Property taxes are unique in that there are steps you can take to actually lower them. The property tax amount is based on the value of your land (and any improvements you have made to your property) multiplied by your local property tax rate. Some groups (like the elderly or disabled) are eligible directly for property tax exemptions, but the rest of us will have to work on lowering the estimated value of our property. Here are some steps you can take to have your house value reassessed, which is an especially good idea if you feel your house has decreased in value recently.

Get your House Value Assessed.

From 2006 to 2010, house values have decreased approximately 10% while property taxes have increased by approximately 8%. One of the reasons for this disparity is that houses are not getting reassessed for their value. Once you get your tax bill, you have 60 days in which to submit paperwork to petition for a reassessment of your property value. Here’s how to get a proper estimate on your house’s value for the purpose of lowering your property taxes.
  • Check websites like Zillow.com to see if comparable properties in your neighborhood are decreasing in value. You can also hire a realtor to look at recent sales prices of similar homes in your area (similar both in design and square footage). If the realtor is able to find multiple properties that have sold for a lower price in the past year than your most recently assessed value, that would really help bolster your case that your property is overvalued.
  • Hire an independent appraiser listed with an accrediting organization for the profession. The two most prominent organizations for appraisers are the American Society of Appraisers and the National Association of Independent Fee Appraisers. Hiring an appraiser will cost a few hundred dollars.
  • Meet with the assessor and present them a list of facts about the residence. List your house’s square footage, the acreage size of the lot, the age of the house, and whether any renovations were done on the property (any time you file a permit to do renovations, your local municipality will increase the assessed value of your house).
  • Present a list of “negatives” to your assessor to help influence the assessment. If there is neighborhood blight or nearby construction, these can all be construed as factors that limit the desirability and value of a particular residence.

Meeting the County Assessor

Within 60 days of receiving your tax bill, you’ll either have to meet with your local municipality’s assessor or send in your review paperwork in the mail (different jurisdictions handle it differently). Whether you come in person or mail it in, be sure to include all the data you have corroborating your case for a property reassessment (independent assessor’s valuation, recent sales prices of nearby homes) along with your name, your house address and your property’s parcel number.

How Often are Property Taxes Lowered by the County?

Industry estimates are that about 40% of property appeals are successful as far as lowering the assessed value of the property. WSYX (ABC 6) in Ohio did a recent study of those who appealed their housing values to the Franklin County, Ohio Board of Revisions:

Here are the results as reported in the video above:

  • About ½ of appeals were successful.
  • About ¼ of appeals resulted in no change in the assessed value of property.
  • About ¼ of appeals actually resulted in a higher assessed value for the property.

Categories Real Estate Taxes

How to Claim Children on Your Taxes

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Posted by Tax Advocate on May 16th, 2012

Sometimes raising children can be a real pain, but all that changes come tax season. That’s because children are a great source of tax write-offs. Not only might you be eligible for child tax credits, but you can also take in earned income tax credit if your salary is within the IRS limits. Here’s how to make sure your children are actually eligible for child tax credit purposes.

Preliminary Assessment for Child Tax Credit Eligibility

  • If you are a single-parent, then the other parent might also claim the child on their tax return. If so, you will not be able to claim the child on your own tax return. Whoever the child lived with the most during the year determines which of the two parents should be able to classify the child as a dependent on their own tax return.
  • make sure each child has their own Social Security card. If you have a newborn child born within the past year, make sure that you get a Social Security number for them so that they are kosher for tax purposes.

Eligible Children for Tax Purposes

To claim any children on your taxes, they should meet the following eligibility requirements:
  • Age – Children must be under the age of 19 if they are not full time students. If the child is in school for at least five months out of the year, then you may claim a child as a dependent up to the age of 24.
  • Dependent – Any children claimed on your tax return must be dependent upon you. That means that they must live with you for more than six months out of the year, and that you are the main provider for that child.
  • Relation – Any child who is either born to you, a legal foster child to you, or an adopted child by you is qualified. Additionally, brothers, sisters, as well as step-brothers and step-sisters are also eligible to be claimed as dependents if they meet the age requirements.

Categories Family Taxes

How to Become a Professional Tax Preparer

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Posted by Tax Advocate on April 18th, 2012

By becoming a tax preparer, you’ll get to enjoy owning your own home-based business while providing a much-needed service. Those who are good at math and accounting would do well in a career as an accredited tax preparer. Establishing tax preparation professionals can branch out into business tax preparation as well as estate planning. The most important consideration before starting down this career path is to decide on what kind of specialized training you want to receive.

Tax Preparation Trainingtax preparer How to Become a Professional Tax Preparer

There are two ways to go about obtaining your tax preparer training: a traditional college or through an industry school. It’s not necessary to get a four year accounting degree just to become an accredited tax preparer. You can also take classes at a local community college that will eventually lead up to an associate’s degree. Community colleges are generally less expensive than traditional four-year colleges, but make sure whichever college you choose is nationally accredited.
An alternative career preparation path is to take tax training from an industry school. There are two well-regarded schools in the tax industry that provide tax preparation training:

  • H&R Block
  • Jackson Hewitt

The benefits of signing up for these industry-specific training programs are many. These schools have flexible schedules and allow their students to obtain certification within 3 to 4 months. These schools will teach you how to prepare both federal and state tax returns as well as help you with job placement. The college credits you earn can help you towards qualifying to take the Accredited Tax Preparer test.

To actually practice as a certified tax preparer, you will need to take and pass an accreditation test. The test for tax preparers is administered by the Accreditation Council for Accountancy and Taxation. This test is over three hours long and covers the mechanics of filling out a tax return, how to provide documenting paperwork when filing a tax return, how to read tax tables as well as ethical standards to be upheld in the profession. The test is offered twice a year: in early summer and again at the end of the year.

Continuing Education for Tax Preparers

Tax preparers need to take continuation courses cents tax laws are always changing. Every three years, the person employed in this profession needs to take 90 hours of continuing education. In addition to learning about new tax laws, students need to study how tax software is evolving and how they can implement it within their professional services. Currently, the most popular software packages for tax preparers are the following:

  • TaxAct
  • Intuit
  • TaxWorks
Here’s a video showing you an example of what taking tax preparation classes online is like.

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How to Become a Professional Tax Preparer
Categories Tax Careers
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