If you installed solar equipment or recently insulated your home, you may qualify for two tax credits- the Non-business Energy Property Credit and the Residential Energy Efficient Property Credit. Not all energy-efficient improvements qualify, so make sure that you have the manufacturer’s tax credit certification statement. This statement can usually be found on the manufacturer’s website or with the product packaging.

1. The Non-business Energy Property Credit: If you installed energy-efficient improvements in your home, you may qualify for this credit. The 2011 credit is 10 percent of the cost of qualified energy-efficient improvements, up to $500. Qualifying improvements include adding insulation, energy-efficient exterior windows and doors and certain roofs. The cost of installing these items does not count. You can also claim a credit including installation costs, for certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass fuel. The credit has a lifetime limit of $500, of which only $200 may be used for windows. Please note that if you’ve claimed more than $500 of non-business energy property credits since 2005, you can not claim the credit for 2011. Qualifying improvements must have been placed into service in your principal residence located in the United States before January 1, 2012.

2. Residential Energy Efficient Property Credit: If you installed qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines, you may qualify for this credit, which runs through 2016. The credit is 30% of the cost of qualified property. There is no cap on the amount of credit available, except for fuel cell property. You may generally include labor costs when figuring the credit and you can carry forward any unused portions of this credit. Qualifying equipment must have been installed on or in connection with your home located in the United States; geothermal heat pumps qualify only when installed on or in connection with your main home located in the United States.

If you’re eligible, you can claim both of these credits on Form 5695, Residential Energy Credits when you file your 2011 federal income tax return. Also, note these are tax credits and not deductions, so they will generally reduce the amount of tax owed dollar for dollar. Finally, you may claim these credits regardless of whether you itemize deductions on IRS Schedule A.

You can find Form 5695 at IRS.gov or order it by calling 1-800-TAX-FORM (800-829-3676).

Daniel Stoica Accounting Professional

Yesterday, Congress passed a portion of President Obama’s jobs plan that provides tax credits for companies who hire veterans.  Two bills, call the Wounded Warriors Tax Credit and the Returning Heroes Tax Credit, contain the following benefits:

• Give up to a $2,400 credit to companies that hire vets who have been unemployed for more than four weeks
• Give tax credits of up to $5,600 for employers hiring veterans who have been searching for work for at least six months
• Give tax credits of up to $9,600 for companies that hire disabled veterans who have job hunting for more than six months
• Give benefits to aging veterans for continued education
• Give troops the ability to apply for jobs before their military service is over

The bill will be moving on to the House of Representatives next week.  It is expected to pass without any problems.

According to the Labor Department, 12.1 percent of Iraq and Afghanistan veterans were unemployed in October, 2011.  This unemployment rate is 3 points higher than the overall national rate.

Daniel Stoica Accounting Professional

You can save on your taxes with several different tax credits. If you owe the IRS, you can figure how much you owe, then deduct the amount of your credits before you pay your taxes. If there is a balance after your credits, you will still have taxes to pay, but not as much. However, if the credit is more than you owe, you could end up with a refund.

There are two types of tax credits that will help with the cost of higher education. They are the American Opportunity Relief and the Lifetime Learning Relief.

American Opportunity Relief

This is an expanded version of the Hope Education Assistance Tax Relief that was put in place before this particular credit. It was expanded by the 2009 stimulus bill that was designed to help the economy get back on track. The American Opportunity Tax Relief is in the amount of $2500.00 and you can take the claim on the first four years of college or university for all costs. It is also 40% refundable, meaning, $1000.00 can be refunded to the taxpayer. All amounts above the $1000.00 will be transferred and used to offset any future tax liabilities. In order to qualify for this credit, the taxpayer must earn no more than $90,000.00 per year, or $180,000.00 for joint returns. The Hope Tax Relief was not refundable, so this new credit is an improvement on this older credit. The cap on the Hope Tax Relief Credit was $1800.00 and the maximum amount that could be earned was lower.

The American Opportunity Tax Relief is only a temporary credit which ends in December of 2012. Anyone wishing to take this credit must do so before the end of 2010. Unless Congress approves an extension, which is not likely, taxpayers must take action as soon as possible. The Hope Tax Relief will also end in 2012.

Lifetime Learning Relief

The Lifetime Learning Tax Relief is good for the taxpayer’s life. It can be used beyond the four years of education, so if you are looking into graduate school, this tax credit can be claimed. It includes undergraduate, graduate and post-graduate fees along with other career training and studies. The Lifetime Learning Tax Relief has less limitations than the American Opportunity Credit. The credits are more complex and the rules to qualify are a little more strict.

 Daniel Stoica Accounting Professional

The IRS is asking taxpayers to protect themselves against individuals who claim to be from the Internal Revenue Service and try to get them to file false claims for tax credits and/or rebates.

There has recently been an increase in tax scams which involve taxpayers who don’t normally have to file a return. They are scammed into believing that they need to file a tax return to get credits, refunds or rebates. These scammers have been targeting individuals in the South and the Midwest.

Most tax preparers are honest, but there are some who try fraudulent tactics to get more money from individuals. These people are deceitful and attempt to get taxpayers to pay for their advice on filing false claims. They charge outrageous amounts of money to prepare returns that the IRS will prepare for free or by the IRS’s Volunteer Income Tax Assistance program. In some cases, identity theft is involved. 

The IRS suggests that taxpayers be on the look-out for:

-False claims for refunds or rebates for Social Security benefits.

-1080 Form fraud that claims funds can be transferred from the Social Security Administration to the IRS.

-Unknown tax services that claim to be part of local churches.

-Poorly made flyers and brochures claiming credits and refunds without proof of eligibility.

-Claims of money with no required documentation.

-Claims of no document tax returns with the promise of a refund.

-Promising money from expired Economic Recovery Credit Program or Recovery Rebate Credits.

-Claims of receiving the Earned Income Tax Credit with incorrect self-employment income.

Social Security refunds and rebates have been used by these scammers. There are some taxpayers who qualify for these rebates or refunds, but the preparer uses fictitious information on the tax return, resulting in a fraudulent return.

Flyers and brochures have been floating around many churches,  claiming a taxpayer can receive free money from the IRS with little or no documentation. These scammers have been targeting church congregations and ruining their reputations and credibility. The scammers are able to keep getting away with it by their victims telling friends and family that it is legitimate because they haven’t been contacted by the IRS about it yet.

These scammers generally target low-income taxpayers and the elderly.

They convince their victims that this refund or rebate is legitimate and charge them large sums of money for their “services”. But, in the end, the victim finds out that their claim has been rejected or, if they are lucky enough to get a refund, it isn’t even enough to cover the cost the scammer has charged them. By that time, the scammer is long gone with their money.

The IRS is warning taxpayers and people who assist with preparing taxes, to stay aware of what is going on. If it sounds too good to be true, it probably is.

If you have questions about the tax credits and wonder if you actually qualify, or if you feel you have been a victim of one of these tax scams, visit www.irs.gov or call the IRS at 1-800-829-1040. You can even visit your local IRS Taxpayer Assistance Center or contact a tax professional. 

Daniel Stoica Accounting Professional

Tax Credits and Benefits for Disabled Taxpayers

These tax tips are of particular interest to people with disabilities and those who care for people with disabilities.

IRS Tax Tip 2011-24, February 03, 2011
Taxpayers with disabilities and parents of children with disabilities may qualify for a number of IRS tax credits and benefits.

Here are seven tax credits and other benefits which are available if you or someone else listed on your federal tax return is disabled.

1. Standard Deduction Taxpayers who are legally blind may be entitled to a higher standard deduction on their tax return.
2. Gross Income Certain disability-related payments, Veterans Administration disability benefits, and Supplemental Security Income are excluded from gross income.
3. Impairment-Related Work Expenses Employees who have a physical or mental disability limiting their employment may be able to claim business expenses in connection with their workplace. The expenses must be necessary for the taxpayer to work.
4. Credit for the Elderly or Disabled This credit is generally available to certain taxpayers who are 65 and older as well as to certain disabled taxpayers who are younger than 65 and are retired on permanent and total disability.
5. Medical Expenses If you itemize your deductions using Form 1040, Schedule A, you may be able to deduct medical expenses.See IRS Publication 502, Medical and Dental Expenses.
6. Earned Income Tax Credit EITC is available to disabled taxpayers as well as to the parents of a child with a disability.If you retired on disability, taxable benefits you receive under your employer’s disability retirement plan are considered earned income until you reach minimum retirement age. The EITC is a tax credit that not only reduces a taxpayer’s tax liability but may also result in a refund. Many working individuals with a disability who have no qualifying children, but are older than 25 and younger than 65 do — in fact — qualify for EITC. Additionally, if the taxpayer’s child is disabled, the age limitation for the EITC is waived. The EITC has no effect on certain public benefits. Any refund you receive because of the EITC will not be considered income when determining whether you are eligible for benefit programs such as Supplemental Security Income and Medicaid.
7. Child or Dependent Care Credit Taxpayers who pay someone to care for their dependent or spouse so they can work or look for work may be entitled to claim this credit.There is no age limit if the taxpayer’s spouse or dependent is unable to care for themselves.

Two Tax Credits to Help Pay Higher Education Costs

IRS Tax Tip 2010-12 January 18, 2011

There are two federal tax credits available to help you offset the costs of higher education for yourself or your dependents.  These are the American Opportunity Credit and the Lifetime Learning Credit.

To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, the student cannot file for the credit.

For each student, you can choose to claim only one of the credits in a single tax year. You cannot claim the American Opportunity Credit to pay for part of your daughter’s tuition charges and then claim the Lifetime Learning Credit for $2,000 more of her school costs.

However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.

Here are some key facts the IRS wants you to know about these valuable education credits:

1. The American Opportunity Credit

• The credit can be up to $2,500 per eligible student.
• It is available for the first four years of post-secondary education.
• Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
• The student must be pursuing an undergraduate degree or other recognized educational credential.
• The student must be enrolled at least half time for at least one academic period.
• Qualified expenses include tuition and fees, coursed related books supplies and equipment.
• The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return.

2. Lifetime Learning Credit

• The credit can be up to $2,000 per eligible student.
• It is available for all years of post-secondary education and for courses to acquire or improve job skills.
• The maximum credited is limited to the amount of tax you must pay on your return.
• The student does not need to be pursuing a degree or other recognized education credential.
• Qualified expenses include tuition and fees, course related books, supplies and equipment.
• The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.

You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

For more information about these credits see IRS Publication 970, Tax Benefits for Education available at http://www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).