Making Work Pay credit

This is another credit that you need to think about before you file your online tax return. This is also not that widely known and often missed partially or wholly. Since the procedure is relatively new, many people do not know how to do this right and hence miss the opportunity of saving their money.

You need to take care and not miss it so that when you efile 1040ez you are sure that you did not miss any deductions and credits and hence saved all the money that you could from the Internal Revenue Service. Now to talk about this credit, you’ve probably been enjoying the fruits of this credit via reduced payroll tax withholding since spring. But to lock in your savings — by reducing your tax bill by $400 if you’re single or $800 if you’re married and file a joint return — you’ll need to claim the credit on your tax return. You’ll use the brand-new Schedule M to do so.

The credit is equal to 6.2% of your earned income, capped at $400 or $800. For single filers, it starts phasing out at $75,000 of adjusted gross income and dries up at $95,000. The phase-out zone for couples is $150,000 to $190,000. So make sure that you follow the correct procedure and the correct forms here and not lose your hard earned dollars. Credits are in a way more important than deductions because they can save your money dollar for dollar.

Casualty-Loss deduction for non itemozers

If you are about to e-file 1040 ez then you better listen to this first. If you live in an area that has been declared a disaster area by the president and you avail just the standard deduction then this information is valuable to you. Take a look at any losses you incurred due to any disaster before  you file your online tax return. Many people miss it as it is not that widely known just like many oter deductions. The government sympathises  with you because of any losses that you may have incurred due to these natural disasters, and will provide you relief in the form of this deduction.

For 2010, taxpayers who claim the standard deduction can add casualty losses to their standard deduction amounts — if the loss occurred in a presidential designated disaster area. Also, this deduction is not subject to the usual reduction equal to 10% of your adjusted gross income. If you suffered such a loss, be sure to let Uncle Sam help you by lowering your online tax return bill.

As with the property tax deduction for non itemizers, you’ll need to file a Schedule L with your return to pump up your standard deduction to include the loss.  So do pay attention to this deduction and take its advantage to save your money that you have earned with hard work. Such deductions are often missed by many taxpayers and then they regret later because thay could have saved more money.

U.S. Tax court

You can take the IRS to court if you do not agree with them when you file your online tax return. Most taxpayers choose the U.S. Tax Court as their forum to litigate tax issues. Established in 1923, it’s made up of 19 judges who travel around the country and hear cases on a regular basis. It handles only tax litigation, and the judges are tax experts. The major advantage of electing this forum is that it is the only court that will decide your case before you pay the tax. All other options require you to pay the disputed amount upfront. If you can’t pay, you won’t be able to get into any of the other courts, as those are intended as refund disputes. If your argument is based on technical analysis, this is the courtroom for you. You want a judge who understands the minutiae of the law.

If your argument is based on fairness or equity, you don’t want to be in the Tax Court. You should file your petition in U.S. District Court, discussed below. In district court, a jury of your peers decides the verdict. Remember, Tax Court cases are decided exclusively by judges; there are no Tax Court juries.

Although you may represent yourself at the Tax Court, it is best to have an attorney specializing in taxation to handle the case. There is a fairly simple process for cases with disputed amount being less than $50,000 but then if you loose, you cannot appeal to another court. For regular cases this is possible though. The fee for all cases is just $60. So you can keep this in mind when you efile 1040 this time.

Reduce your exposure if you want to keep the IRS out of your hair

Well, are you afraid that you might face an audit from the Internal Revenue Service when you file your online tax return this year.

This is a fear that almost all of us feel when we efile 1040 and there is nothing abnormal about it. But you should not also be at complete ease if you do not want to risk an audit. “The fact is,” former IRS Commissioner Charles O. Rossotti once said, “people who make more than $100,000 pay more than 60% of the taxes, and we need to focus there.”

If you’re making more than $100,000 a year, your risk of an audit is higher. That means it’s even more important to keep adequate records to substantiate your deductions.

It also reinforces the benefits of income allocation. That’s where you view your family as a single economic unit, obviating the issue of who actually generated the income. You can then, within the law, allocate income from a higher bracketed family member to a lower bracketed one, and save the difference in tax dollars. Putting investments in a child’s name makes the income generated from those investments taxable to the child, rather than to the higher bracketed parent. Be aware of the “kiddie-tax” rules on investments and the issues relating to how to structure the investments so that they’re taxed to the child. So follow this simple advice and I am sure that you will be able to greatly reduce your risk.