STUDIO CITY (CBSLA.com) — Tax season is here!
Robert Ovalle, the senior area manager for Jackson Hewitt, visited the KCAL9 studios Wednesday to give viewers some tax tips.
Choose the right professional tax preparer
• Engage now — The IRS will start to accept 2012 tax returns on January 30. Assuming that you will need some time to find a tax preparer who best meets your needs, start your search as soon as possible. It is important to ensure that your tax preparer is well-versed in all of the recent tax law changes and tax codes. The sooner you find the right tax preparer, the sooner you can start the filing process and ultimately get your refund, if you are owed one
• Check the preparer’s background —Make sure to go with someone who is qualified and credible, so check your tax preparer’s history. You can conduct your own research through various sources such as the Better Business Bureau and state boards of accountancy for certified public accountants. You can also ask friends, family or co-workers for references to get a first-hand account of their experiences
• Ask for qualifications — Current regulations require that all paid tax preparers have an IRS-issued Preparer Tax Identification Number (PTIN) before preparing any federal tax returns. Preparers must have also completed a minimum of 15 hours of continuing education
• Avoid preparers who ask you to sign a blank return — It is important to review your tax return completely and ask questions before signing it. Remember, you are ultimately responsible for what is reported on your tax return. Make sure you understand and are comfortable with the accuracy of the return. Check for errors such as incorrect social security numbers and addresses; these common mistakes can delay IRS processing of your return. Also, make sure the preparer signs your tax return and includes their PTIN
Make note of common life changes
There are several common occurrences in life that may lead to additional deductions and credits – and ultimately a higher tax refund. Here are a few:
• Did you get married this year?
A change in marital status has a profound effect on your tax status. Married taxpayers filing a joint return have higher standard deductions, lower tax rates, and they have the advantage of two exemptions of $3,800 a piece, even if only one taxpayer worked. Married taxpayers must always claim all income on their tax return when they file jointly. You may file separately, but you lose the benefit of claiming many tax credits and some deductions. In addition, the tax brackets are smaller when filing separately, which generally means a much higher tax.
• Did you welcome a new child to your family?
Having, or adopting, a child can significantly reduce your tax liability. As a parent you may be entitled to a dependent exemption of $3,800 per child as well as a $1,000 Child Tax Credit for each dependent child under the age of 17. If you and your spouse work you may also be entitled to a credit of up to $2,100 for daycare expenses for children under age 13. If your dependent child started college or trade school this year, you may be eligible for the American Opportunity or Lifetime Learning credit. You may even qualify for a student loan interest deduction if you are paying student loan interest for an adult child. There is also the Earned Income Credit For families who earn less than $50,270.
• Did you become the primary caretaker for your parent or parents?
If so, you may be able to claim your parent as a dependent. If you are paying your dependent parent’s medical expenses, or nursing home expenses, you may be able to claim them on your tax return. You may even qualify for a credit for the expense of home health care, senior daycare, or care in your home, while you work.
• Have you changed jobs, received a promotion, increased your 401(k) contributions or become self-employed?
If so, certain deductions may have opened up to you, and you may also need to change your withholdings.
• The expenses of looking for a new job, such as 55.5 cents per mile for driving to job interviews, employment agencies and headhunters may be claimed. The expenses you have for creating a resume, contacting potential employers long-distance, and out-of-town travel may all be deductible.
• If you started your own business you need to be sure you are keeping records of the miles you are driving for your business, all expenses you may have from pens, paper, log books, and business cards to employee benefits and expenses.
• Did you buy or sell a home?
Taxpayers who purchased, sold, or arranged a short-sale of a home, may have tax write offs or consequences. While most costs associated with the purchase or sale of a home are not directly deductible, they can be used to adjust the basis of your home to keep your gain below the $250,000 ($500,000 if married filing jointly) tax exempt amount. However, the mortgage interest and real estate taxes you pay each year for your home may be deductible on your tax return. When you add these to other deductions, such as charitable contributions, you may be able to substantially lower your income taxes.
E-file your return
The majority of taxpayers today electronically file (e-file) their tax returns. E-filing is safer than filing a paper return, offers faster processing time, greater accuracy and confirmation the IRS has received your return. Jackson Hewitt offers free e-filing.
File early to avoid tax return identity theft
A thief can steal someone’s identity by taking an unsuspecting person’s social security number and personal information, and then using it to file a tax return under the person’s name and identity — typically with fabricated information and deductions, and a resulting fraudulent refund. Unfortunately, in many cases, the victim is unaware that this has happened until a tax return is filed, only to find that a return has already been submitted in their name with fake information
Here is what consumers should do to keep personal information out of the wrong hands as they prepare and file a return:
• Plan to file early – the sooner that your information is properly received by the IRS, the less likely it is that a thief will be able to access it.
• Make sure you e-file, or electronically file, your tax return. By e-filing, only you and your tax preparer will be handling your documents. The less people handling your information, the lower your chances are of having your personal information compromised.
• Keep important documents, such as copies of tax returns, credit card statements, cancelled checks, paystubs and similar data in a secure location like a locked file cabinet, or scan the information into a secure computer or web-based document storage program and destroy the original copies.
• Be sure to destroy documents older than four years. DO NOT simply throw them away — destroy them or at least shred them.
• Be aware that the IRS never communicates via e-mail. If you get an e-mail inquiry from someone claiming to be from the IRS, or if you get a phone call asking for you to e-mail personal information, do not provide these details without verifying the legitimacy of the request first.
• If you suspect your identity has been stolen, contact the IRS right away.