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IRS Tax News

The Twelve End-of-Year Tips

Planning Now May Give You the Gift of Time and Money Saved Next Year

Get Your Records Together  With the current tax year "winding down," the Internal Revenue Service is encouraging taxpayers to gather and organize their tax records now to reduce stress at tax time.  As your tax documents (W-2's, 1099s, etc) arrive, file them together so you won't have to search everywhere when you begin to file your tax return.   Generally, tax records should be kept for three years, but some documents, for example, records relating to a home purchase or sale, stock transactions, IRAs and business or rental property, should be kept longer.  For more information see IRS Publication 552, Recordkeeping for Individuals.

Get Information about your Federal income tax withholding and the Making Work Pay Credit. The IRS encourages all taxpayers to periodically check their withholding in order to ensure they are meeting their requirements.  Due to the Making Work Pay credit, extra emphasis is being given for taxpayers who fall into any of the following groups to review their tax withholding and ensure enough tax is being withheld.

  • Married couples with two incomes

  • Individuals with multiple jobs

  • Dependents

  • Pensioners

  • Social Security recipients who also work

  • Workers without valid Social Security numbers

In 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for eligible working individuals and up to $800 for eligible married taxpayers filing joint returns. 

If you find you need to adjust your withholding, submit a revised Form W-4, Employee's Withholding Allowance Certificate to your employer. An IRS withholding calculator is available at www.irs.gov.

Get information about the First-Time Homebuyer Credit and Long-Time Resident Credit Eligible first-time homebuyers who purchase a home on or before Apr. 30, 2010 or enter into a binding contract by April 30, 2010 and settle on the purchase on or before by June 30, 2010 may be able to claim up to an $8,000 tax credit.  Additionally, a new law also provides a "long-time resident" credit of up to $6,500 for taxpayers who do not qualify as "first-time homebuyers." To qualify for the $6,500 credit, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence. More information is available at www.irs.gov.

Get Credit for Making Your Home More Energy Efficient You may be able to claim a "nonbusiness energy property credit" of 30% of the cost of certain energy-efficient property or improvements you placed in service in 2009. This property can include high-efficiency heat pumps, air conditioners, and water heaters. It also may include energy-efficient windows, doors, insulation materials, and certain roofs. The credit has been expanded to include certain asphalt roofs and stoves that burn biomass fuel. The total amount of credit you can claim in 2009 and 2010 is limited to $1,500.

Get a Vehicle Sales Tax Deduction Taxpayers who buy certain new vehicles in 2009 can deduct the state and local sales taxes they paid or other taxes and fees they paid in states with no sales tax. The deduction is limited to fees or taxes paid on up to $49,500 of the purchase prices of a qualified new car, light truck, motor home or motorcycle. The amount of the deduction is phased out for taxpayers shoes modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers. The deduction is available even if you do not itemize deductions.

Get Info on Unemployment Compensation The first $2,400 of unemployment benefits an individual receives in 2009 are tax free. This provision applies only to benefits received in 2009. If you are receiving unemployment compensation, see Topic 418 on IRS.gov.  Unemployment compensation is normally taxable and you have the option to have federal income tax withheld using Form W-4V.

Get a Tax Break for Education Expenses The Hope Credit has been expanded for 2009 and 2010 and is available to a broader range of taxpayers, including many with higher incomes and those who owe no tax.  It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.

Get the Most Out of Your Retirement Accounts Are you maximizing your contributions to your retirement accounts? This year, you can contribute up to $5,000 in an IRA, as well as another $16,500 to a 401(k) employee plan. If you're 50 or older, those numbers go up to $6,000 and $22,000, respectively.  

Get Documentation for Your Cash Contributions to Charities To deduct any charitable donation of money, a taxpayer must have a bank record or a written communication from the qualifying charity showing the name of the charity and the date and amount of the contribution. A bank record includes canceled checks, bank or credit union statements and credit card statements.

Get Information About the Earned Income Tax Credit Are you wondering if you might benefit from the Earned Income Tax Credit, which is available to low and moderate income workers?  Use the EITC Assistant on IRS.gov which helps determine eligibility for the credit. The program will also assist you in determining your correct filing status, determining whether your child meets the tests for a qualifying child, and estimating the amount of credit that you may receive.

Taxpayers who earn less than $49,000 in 2009 may be eligible for a refundable tax credit of up to about $5,600.

Get Ready to E-File E-file is the safe, accurate way for taxpayers to quickly complete their taxes and make certain to take advantage of credits and deductions that may apply.  Not only that, but taxpayers can get a refund in as little as 10 days by choosing direct deposit.  This option even allows split disbursement where deposits can be made into as many as three separate accounts including checking, savings and other investments.

"More than 70 percent of taxpayers in Massachusetts can file electronically online at no cost by using Free File.  For more information, simply go to IRS.gov and click on the e-file logo," Riley said.

Get genuine IRS info from IRS.gov  The one and only official source for IRS information is - http://www.irs.gov.  Don't be fooled by scam artists who attempt to create look-alikes.

The IRS does not send out unsolicited email messages.  Email messages claiming to be from the IRS are probably phishing scams.  Recipients of such emails are urged not to open attachments, click on links, reply with personal information, or complete any other activity that could compromise their computer's security and lead to identity theft or worse.

"Remember, if the IRS needs to contact you, we'll probably do it the good, old-fashioned way by sending you a letter via the U.S. Postal Service.  Taxpayers have the right to confirm that any correspondence they receive claiming to be from the IRS is legitimate - just give us a call at 1-800-829-1040," Riley said. For more information visit www.irs.gov.