By Joe Olenick<br><a href="mailto:firstname.lastname@example.org">E-mail Joe</a>
January usually means three things: A new year, the holidays are over and the tax season is beginning.
Taxpayers all over the country are getting their personal and tax information together for the income tax filing season. As in most years, income taxes are due by April 15; and while there are hundreds of changes in the U.S. tax code, there are only a handful the everyday person should be aware of. But most go unnoticed, even though it could mean more money for the taxpayer.
To get started, get information together, including W-2 forms employees will receive at the end of the month, says Kathy Warblow of Jackson Hewitt in Tonawanda. Other forms include a 1099 for retirements and a 1099B for stock sales. Also, tax preparers recommend bringing last year’s return.
“They should be taking a look at their own situation,” Warblow said. “Gathering everything up. We can guide them to what they need.”
Valarie Kruse of AAA Tax Service in the Town of Lockport said that while W-2 forms usually are mailed out by the end of the month, some employers have them available online. But all W-2 forms must be mailed out by Feb. 1.
“Then you need to look at any deductions you want to take,” Kruse said.
One of the most important changes is the first time homebuyer credit, which was extended to June. According to H&R; Block, first homebuyers can receive a tax credit of up to $8,000, and repeat homebuyers may be able to receive a credit of up to $6,000. Repeat homebuyers must have lived in their current home for five of the past eight years.
“The big catch is you can’t buy a house from a relative,” Kruse said. “And you must have entered into a contract by April 30 and will close by June 30.”
Another important change involves the purchase of a new vehicle. Warblow said people can deduct the sales tax paid, up to $49,500. It’s helpful if a person is taking the standard deduction on the tax return, where the sales tax can be added to it.
“It’s for a brand new vehicle bought after Feb. 16, 2009, and before Dec. 31, 2009,” Warblow said.
With so many jobs being lost during the recession, unemployment benefits have seen a change made for the tax season. The first $2,400 in unemployment benefits that an individual received in 2009 is tax free. Also, if the taxpayer is unemployed, keeping track of job-search expenses, such as job-placement services or mileage, can help reduce tax liability, according to H&R; Block.
“And there’s going to be a lot of unemployment this year,” Kruse said.
Taxpayers can also claim some college expenses this year. Warblow said the American Opportunity Credit now applies to all four years of college, as do some other expenses. Up to $2,500 may be claimed and up to $1,000 of the credit is refundable.
“It’s for the qualified expenses such as tuition, course materials and some computer software if it’s for education,” Warblow said.
There’s also been some change with tax credits involving children, such as the Earned Income Credit. The credit was expanded to include families with three or more children. The Child Tax Credit was expanded to allow families to begin qualifying with every dollar earned over $3,000.
Another change involves charitable deductions. The IRS wants to see proof of money actually going to a charity.
“They really started cracking down on this, they want to see records,” Kruse said. “They want to see receipts, a canceled check or a statement.”
The Internal Revenue Service is encouraging taxpayers to file early and electronically. People who use “E-file” can receive their refund faster, check for accuracy and receive a quick confirmation that their return has been filed and received by the IRS within 48 hours. About 67 percent of taxpayers, or 95 million returns, were filed electronically in 2009, the IRS said.
Contact reporter Joe Olenickat 439-9222, ext. 6241.