Key Information on the Saver’s Credit for Retirement Contributions

Saving for your retirement allow you to be automatically will allow you to be automatically eligible for a tax credit worth up to $2,000. If you contribute to an employer-sponsored retirement savings plan, like a 401(k) or to an IRA, you’ll be eligible for the Saver’s Credit.

Here are seven points the Internal Revenue Service would love you to understand regarding the Saver’s Credit:

1. The Saver’s Credit is formally called the Retirement Savings Contribution Credit. The credit will be worth up to $2,000 for married couples filing a join income tax return or $1,000 for single taxpayers.

2. Your filing status and therefore the amount of your financial gain have an effect on whether or not you’re eligible for the credit. you’ll be eligible for the credit on your 2012 income tax return if your filing status and financial gain are:

1. Single, married filing your taxes individually or qualifying widow or widower, with financial gain up to $28,750
2. Head of household with financial gain up to $43,125, married Filing collectively, with financial gain up to $57,500.
3. You need to be a minimum of eighteen years old to be eligible. you also cannot have been a full-time  student in 2012 nor claimed as a dependent on somebody else’s income tax return.
4. You need to contribute to a certified retirement savings account by the due date of your income tax return so as to claim the credit. The due date for many individuals is April fifteen.
5. The Saver’s Credit reduces the tax you owe.
6. Use Internal Revenue Service form 8880, Credit for Qualified Retirement Savings Contributions, to claim the credit. make sure to connect the form to your federal income tax return. If you utilize IRS e-file the software package can do that for you.
7. Depending on your income, you’ll be eligible for alternative tax benefits if you contribute to a retirement savings account. for instance, you’ll be able to deduct all or a part of your contributions to a conventional IRA.

While each individual tax return is unique, there are some tax rules that affect every person who files a federal income tax return. These rules involve dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2012 tax return.

1. Exemptions reduce taxable income.  There are two types of exemptions: personal exemptions and exemptions for dependents. You can deduct $3,800 for each exemption you claim on your 2012 tax return.
2. Personal exemptions.  You usually may claim one exemption for yourself on your tax return. You also can claim one for your spouse if you are married and file a joint return. If you and your spouse file separate returns, you may claim the exemption for your spouse only if he or she had no gross income, is not filing a joint return and was not the dependent of another taxpayer.
3. Exemptions for dependents.  Generally, you can claim an exemption for each of your dependents. A dependent is either your qualifying child or qualifying relative. If you are married, you may not claim your spouse as your dependent. You must list the Social Security Number of each dependent you claim on your return. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for information about dependents who do not have Social Security numbers.
4. Some people do not qualify as dependents.  While there are some exceptions, you generally may not claim a married person as a dependent if they file a joint return with their spouse.
5. Dependents may have to file.  If you can claim someone else as your dependent on your tax return, that person may still be required to file his or her own tax return. Whether they must file a return depends on several factors, including the amount of their gross income (both earned and unearned income), their marital status and any special taxes they owe.
6. Dependents can’t claim a personal exemption.  If you can claim another person as a dependent on your tax return, that person may not claim a personal exemption on his or her own tax return. This is true even if you do not actually claim that person as your dependent on your tax return. The fact that you could claim that person disqualifies them from claiming a personal exemption.

Remember that a person must meet several tests in order for you to claim them as your dependent. See Publication 501 for the tests you will use to determine if you can claim a person as your dependent.

The IRS’s e-file (electronic filing) makes it a lot simpler for taxpayers to choose which IRS tax form to file. For the most part, the e-file software chooses the best form for your particular situation for you. Most folks e-file in this eletronic age but if you prefer the old fationed way, the Iternal Revenue Service has some tips to help you choose the right form.

Those who choose to file a paper tax return should know that the IRS no longer mails paper tax packages. The best way to get forms and instructions is by visiting the IRS website at IRS.gov. You can also order forms and have them mailed to you by calling the IRS forms line at 1-800-TAX-FORM (829-3676). You may also pick up tax forms from a local IRS office, most libraries in your area and post offices carry the forms.

Here are some tips that will help paper tax return filers choose the best tax form for their situation.

You can generally use the 1040EZ if:

Your taxable income is below $100,000;
Your filing status is single or married filing jointly;
You are not claiming any dependents; and
         
If you can’t use Form 1040EZ, you may qualify to use the 1040A if:

Your taxable income is below $100,000;
You have capital gain distributions;
You claim certain tax credits; and
You claim adjustments to income for IRA contributions and student loan interest.

If you cannot use the 1040EZ or the 1040A, you’ll probably need to file using the 1040. The reasons you must use the 1040 include:

Your taxable income is $100,000 or more;
You claim itemized deductions;
You are reporting self-employment income; and         
IRS Publication 17, Your Federal Income Tax, provides helpful information about which form is best for you.

Access to IRS forms and instructions or information about e-filing, including IRS Free File, is available 24 hours a day, seven days a week on IRS.gov. Tax products often appear online well before they are available on paper. You’ll find downloadable tax products on IRS.gov by clicking on the “Forms and Pubs” link on the Home page.

As part of its efforts to support people in the areas hit by Hurricane Sandy, the IRS is expediting the review and approval process for organizations that are applying for tax-exempt status to provide relief for Hurricane Sandy’s victims.

Often, it’s best to use existing charities, including churches and other places of worship, because they tend to have fund-raising and distribution infrastructures already in place and frequently can administer relief programs more efficiently than newly formed organizations.
 
But those who have decided they would prefer to start their own charity should apply to the IRS for tax-exempt status by filing IRS Form 1023. At the top of the form write, “Disaster Relief, Hurricane Sandy.”

The IRS will expedite those applications and ensure they meet the legal requirements for tax exemption.  

Relief also applies to tax-exempt organizations required to file Form 990 series returns with an original or extended deadline. See IR-2012-83, IRS Provides Tax Relief to Victims of Hurricane Sandy; Return Filing and Tax Payment Deadline Extended to Feb. 1, 2013.

Don’t say the IRS never does anything for the “little guy”. The earned income credit EITC is a refundable tax credit designed for working families and individuals with low to moderate income. The amount of the credit varies depending on your level of income and how many dependents you support.

To be eligible for the earned income credit, your earned income and adjusted gross income need to be within certain ranges. The amount of the tax credit varies based on your earned income and how many qualifying children you are supporting in your household.

For the years 2009 through 2012, the Earned Income Credit is temporarily increased for working families with three or more dependents. Previously the earned income credit maxed out at two dependents. The earned income credit will revert back to maxing out with two dependents starting in 2013.

The earned income tax credit is a great benefit for workers who don’t make much money or to those who did work but then lost a job. This tax break returns to qualified individuals a portion of the taxes they paid. It can actually produce a tax refund for eligible filers who had no tax liability. Unfortunately, most tax credits are nonrefundable meaning they simply zero out a tax bill. For example, if you owe $800 and have a $1,000 credit, your bill of $800 is zeroed out but the remaining $200 is not returned to you. With a refundable credit such as the earned credit income, the IRS would refund the extra $200 to you.

There is however, a drawback to the credit. The filing process is rather complicated and typically eligible taxpayers don’t have much cash to spare; they normally cannot afford professional help in filing for it. The IRS has an online program to help these filers.

The easiest way to find out if you qualify for the earned income credit is to use an application found on the IRS Web site called the EITC Assistant. This process will help you determine if you are eligible for the Earned Income Credit and will help you calculate the amount of the credit. You do not have to be a parent to qualify. Be aware that there are links to applications for more than one tax year so be sure to pick the right one.

Married couples who file separate returns are not eligible for the earned income credit. If you are married but haven’t lived in the same home as your spouse for the last six months of the year, then you may be able to file as head of household and take the credit.

The rules governing the earned income tax credit are rather complicated. Do yourself a favor and use the IRS website to determine if you qualify.

Like death, taxes are unavoidable. With proper planning you can make things easier on yourself and your family. Your annual tax liability can be very uncertain but there are several online calculators to help determine your estimated tax liability along with your average and marginal tax rates.

Money Chimp

This calculator from MoneyChimp is straightforward and easy to use. You don’t need to be a CPA to figure this out.

http://www.moneychimp.com/features/tax_brackets.htm

Calc XML

This one is more complicated because you need to know the amounts of your IRA contribution, itemized deductions and personal exemptions. However, because this calculator requires those additional pieces of information, the end result is likely to be more accurate.

http://www.calcxml.com/calculators/federal-income-tax-estimator

Complete Tax

This calculator hosted by CompleteTax has several steps and requires you to input quite a bit of information in order to calculate your estimated federal income tax. It’s part of a system for filing your taxes online but you can use the calculator without using their filing system.

http://www.completetax.com/income-tax/calculators/federal.asp

e-File

Efile is another website for filing income taxes online but you can use their calculator without buying any of their other services. Again, you need to have a lot of information at your fingertips or this calculator will be of no use.

http://www.efile.com/tax-service/tax-calculator/

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