It's that time of year again, time to tackle your dreaded tax return. If you are self-employed, as many homeschoolers are, it's likely you have put off preparing your taxes, delaying the inevitable. As a tax consultant for some 25-odd years, I'd like to offer some friendly and hopefully helpful advice to get you pointed in the right direction.
I know several individuals who simply haven't bothered to file for several years, for various reasons. For you, I'd like to point out the fact that just because you don't owe the IRS money, doesn't mean you don't have money coming back, even if you did not pay a dime in taxes. Let me explain...
Depending on your individual tax circumstances, you may be entitled to a refund. For those who are self-employed, do yourself a favor and keep track of your income and expenses. If you earn less than:
You could be entitled to a refund, even if you are self-employed and have not made estimated tax payments. You are required to pay self-employment taxes (SE Tax) if you are self-employed, however, in many cases, the SE taxes you owe are more than offset by your Earned Income Credit (EIC), entitling you to a handsome refund check.
If you have not filed a return in several years, it's not too late. The IRS will still honor returns filed for the three previous tax years, which means that until April 15th you can still file for a refund on your 2008 or 2009 Income Tax Return, in addition to filing for 2010, without penalty (unless you owe the IRS money).
I know many today are doing their own taxes with Turbo tax or H&R Block At Home software, available or so it seems, on every corner during this time of year. Those programs are more than adequate for a single person with one job, for a family who does not own their own home and has only W-2 income or others who have a very straight-forward tax return, taking the standard deductions.
However, if you are not experienced with the tax code and lingo to some degree, you could be losing hundreds, if not thousands of dollars in tax credits or refunds, which could more than make up for the cost of paying an experienced preparer, which if you itemize, is tax-deductable (subject to the 2% floor on miscellaneous deductions).
There is an abundance of available informational sources you may tap into, to assist you in locating ideas on how to reduce your tax burden. There are literally thousands of websites, most offer valuable tax savings tips at no charge. Several national magazinesoffer monthly tips on tax savings resources. Your local library or bookstore will have hundreds of books on how to save on your taxes. All you need to make use of these resources is a great deal of time and some serious motivation.
The problem is how many people want to spend the hours it takes to properly review their own tax situation? Today's tax programs make it easy as 1-2-3, or so it may seem, but how do you know what all that tax jargon means? Are you subject to the "Alternative Minimum Tax"? What exactly does "Earned Income Credit" mean and how does it work? The rules can get complicated. Getting over the language barrier can be a formidable task.
I spend a solid two-weeks preparing our tax return, going over every deduction and reviewing the present years tax changes. How many people have that kind of time to spend trying to legally beat the tax collector at his own game? It's one thing to spend a few hours with a consultant once or twice a year, but it's something else to make it into a personal crusade or a part-time job.
For the weekend warriors, who are up to the challenge, I've prepared a short list of often missed deductions. For those who are sure they are paying too much in taxes and are interested in hiring someone to make sure the job is done right, be sure to read "A Tax Program or a Tax Professional"?
If you moved more than 50 miles in 2010 and took a new job, you may be able to claim moving expenses and with gas prices the way they are today, it could net you a tidy sum. While you can't deduct meals during your move, you can deduct your moving expenses, including: a truck, storage, actual costs or mileage for fuel expenses, oil, etc... Something else you may not know is that even if you don't need the credit this year because of having a lower income than normal, these credits can actually roll-over to next years return. For more details on deducting moving expenses, download IRS Publication 521
If you were out of a job last year, as so many Americans are, did you keep track of all those résumés you mailed? You can deduct amounts you spend for typing, printing, and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation.
Did you keep track of your mileage? Many taxpayers don't realize that those are legitimate income tax deductions.
You can deduct certain expenses while looking for a new job in your present occupation, even if you do not get a new job. However, you cannot deduct these expenses if:
If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. You can deduct the travel expenses if the trip is primarily to look for a new job.
The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Even if you cannot deduct the travel expenses, you can deduct the expenses of looking for a new job in your present occupation while in the area. The standard mileage rate for 2010 is 16.5 cents per mile for moving purposes. See IRS Publication 463 for more information on travel and car expenses.
Generally, we remember when we donate on a cash basis to a charitable organization but what about all those non-cash contributions? You can deduct the fair-market value of items donated to qualifying charities. It's always best to get a receipt, you still have to assess a value yourself but simply having a receipt in hand will help insure you remember to take the deduction on your return.
When using your credit card to make contributions to charity, remember that the deduction is allowed in the year that you made the charge, not when you actually pay the bill. Also, you may write off certain out-of-pocket expenses related to charitable activities, including mileage. Appraisal fees paid to value property donated to charities may be taken as a miscellaneous deduction subject to the 2% floor on miscellaneous deductions.
If you have a question regarding the material covered in this article or an issue you'd like me to address, send your comments and questions to: Annette M. Hall
Updated April 1, 2011