If you are one of the many taxpayers who filed an extension and still haven’t filed your taxes, now is the time to get them done and out of the way.  The following are some tips to help. 

Commonly Missed Deductions:

-State-tax refunds for AMT taxpayers

If your refund is less than your disallowed Alternative Minimum Tax (AMT), your state refund won’t be taxed.

-Environment Friendly Home Credit

Did you install energy efficient windows, a solar powered water heater, geothermal heat pumps, or low-energy roofing? If so, you might qualify for a 30% credit on your 2011 taxes, or a maximum of $500. Being environmentally conscious will help you save money.

-Car Insurance

Did you know you can deduct your car insurance on your federal taxes? You can deduct the cost of oil, tires, your license, and your insurance premiums if you use your vehicle for business. If you decide to only deduct your mileage, you cannot deduct the other expenses. You may choose one or the other, but not both.

-Health Insurance

You can also deduct your health insurance premiums on your federal taxes. You can even deduct 100% of your premiums if you’re self-employed, which includes premiums for your spouse and dependents. Your health insurance itself, however, is not deductible.

-The American Opportunity Credit

If you pay college tuition, you can take the American Opportunity Credit. You can take a credit of up to $2500. This credit has been extended through 2012 and is there for taxpayers whose adjusted gross income is less than $80,000.

Common Audit Triggers:

-Large Mortgage Interest Deductions

If your deductions are over $50,000, it generally sends a red flag to the IRS. You are allowed to deduct interest on you mortgage for a loan less than $1 million, which makes the interest around $50,000 or 5% of your mortgage. But by doing so, you may send a red flag for an audit.

-Rental Real Estate Losses

Taxpayers who claim to be real estate professionals due to rental income losses and attempt to deduct the losses on their income will trigger an IRS audit. You can only claim yourself as a real estate professional if you have at least 750 work hours, so if you are claiming this profession, the IRS will turn their heads to look. With the housing market in the situation it’s in, most taxpayers are losing a lot of money on their rental properties, however, they can’t qualify as real estate professionals, so they can’t take the tax deduction that comes with it.

-Home-buyer tax credit

Congress passed three stimulus bills in 2008. Initially, the stimulus bill caused some fraudulent activity. Today, Congress requires more intensive documents in order to qualify for the tax credit.

Common Human Errors:

-Overstating Charitable Work

If you went to a charity dinner where the cost was $500 per plate, you can’t deduct the entire $500. This is also true of charitable activity. The charity must tell you about this rule, so it’s a good idea to read through the correspondence you receive from them.

-Omitting Payments On Interest

Most taxpayers forget about the interest they pay during the year. Banks and other financial institutions aren’t required to give you a 1099 for for anything under $10. Even small amounts of interest are considered taxable income and you must report them on your taxes. If you don’t, the IRS will notice.

-Mortgage Deductions

Many taxpayers calculate their mortgage “points” incorrectly for their deductions. On first mortgages, the fees are deductible. Refinance points have to be amortized, and can then be deducted throughout the loan.

It’s recommended that you hire a tax professional when you are filing your taxes, especially if you have many deductions and credits. Be organized and keep all of your receipts and other financial documents safe and close.

Daniel Stoica Accounting Professional

How to File Your Taxes at No Cost via IRS Free File Program

This is an awesome resource made available to frugal Do It Yourself taxpayers.

Start early, check it out and you still have time to consult with a tax professional if you want to.

IRS Tax Tip 2011-11 – January 17, 2011

Everyone can prepare and e-file their federal tax returns for free through the IRS Free File Program. Free File is offered through a public-private partnership between the Internal Revenue Service and brand-name tax software companies. Free File can help you do your taxes fast; it’s safe and it doesn’t cost anything.

Free File offers two options: easy-to-use software or online fillable forms.

Free File software is for taxpayers who earn $58,000 or less

Nearly 100 million Americans – that’s 70 percent of the nation’s taxpayers – can use the free brand-name software and secure e-filing offered by private-sector companies. Several software products also are in Spanish. Each company sets its eligibility requirements, generally based on income, age or state residency. However, if your adjusted gross income was $58,000 or less in 2010, you will find at least one tax software product to use.

Here’s how it works: You must access Free File through the IRS website. At http://www.irs.gov/freefile, you can use an online tool which allows you to give a little information about yourself and the tool will guide you to the software for which you are eligible. Or, you can review the complete list of companies and their offerings and make a selection.

Once you select a software product, you will be directed away from the IRS website to that company’s website. There, the software generally will offer a step-by-step guide through the tax preparation process.

Free File does all the hard work. You don’t need to be a tax expert; the software will help find tax breaks, such as the Earned Income Tax Credit, that you may be due. The software asks the questions; you supply the answers. It will find the right tax forms and do the math. Free File has a high satisfaction rate among its users, 98% recommend it to others. Combine e-file and direct deposit and you get your refund in as few as 10 days.

A word about security: all Free File companies use the latest is secure technology. The safety of taxpayer information is everyone’s priority. Thirty million taxpayers have used Free File since 2003, safely and securely.

Some companies provide state tax return software – sometimes for free and sometimes for a fee. Some states also have a relationship with the Free File Alliance and those states are listed on the companies’ websites.

Free File Fillable Forms Is Another Free Option

For people who make more than $58,000 or who are comfortable preparing their own tax return, there is Free File Fillable Forms. It also must be accessed through http://www.irs.gov/freefile. There is no software assistance with Free File Fillable Forms. It does basic math calculations. It does not support state income tax returns. It is perfect for the true do-it-yourself taxpayer who has preferred paper tax returns in the past. It also has free e-filing.