"This year, the economy has dictated several changes to tax policy," said Ethan Ewing, president of Bills.com, a free online portal that offers an array of personal finance information for consumers.
Bills.com's top eight tax topics that filers should know about include:
1. Maximize deductions: Consult with a tax advisor to receive all qualified tax deductions. Remember:
• Donations to nonprofit organizations of money, vehicles, clothing and household items, or stocks or other investments.
• Contributions to retirement accounts, medical savings accounts, health savings accounts and 529 college savings plans.
• Medical and dental expenses that exceed 7.5 percent of adjusted gross income.
• Flexible spending account contributions for expenses such as child care and medical care.
• Some health insurance premiums, such as those for self-employed individuals or people who cannot choose to purchase health insurance at work.
• Student loan interest and some education expenses.
• Some job-hunting or moving expenses.
2. Take credit for economic impacts: Ask a tax advisor how you are affected by any losses in investments, or how a job loss affects current or future tax.
3. Deduct an investment in America: Taxpayers who bought a first home in 2008 can claim a maximum $7,500 income tax credit on their 2008 tax return. That credit must be repaid in $500 increments on future annual tax returns. Americans who purchase a first home between Jan. 1, 2009, and Dec. 1, 2009, may be eligible for a tax credit of up to $8,000, which need not be repaid. They can claim this credit on the 2008 tax return (either filed on time or with a six-month extension) or on the 2009 tax return.
4. Get paid back for green improvements:
5. When a refund is not great: Some people are disappointed if they do not get a refund. But a refund means the taxpayer gave the IRS an interest-free loan. For most people, that cash would serve them better in their wallets every week. Those who have a sizable refund coming should talk with a tax advisor about completing a new W-4 with their employer, choosing a number of exemptions that will provide for the most appropriate withholding of taxes.
6. File on time: Filing late incurs penalties and interest for those who owe money to the IRS. If a return is filed more than three years late, the filer forfeits any refund on that return. The penalties for not paying tax owed with a filed return are much less than the penalties for not filing a return with an unpaid balance. Filers who are considering not filing a return because they cannot pay the bill are probably better off filing and avoiding the substantial late-filing penalties. When individuals or couples cannot pay because of a death in the family, serious illness, financial records lost in a natural disaster, or reason the IRS deems "reasonable cause," the IRS might waive penalties for those who contact the agency to negotiate solutions.
7. Get an extension: If for some reason a taxpayer cannot complete his or her return, he or she can file for an extension (IRS Form 4868). Keep in mind that this is an extension to file, not an extension to pay taxes owed. Penalties might still apply, but they will be less than if the person simply does not file.
8. Get help: Specialists, often found at or through reputable debt settlement firms, can negotiate directly with the IRS on behalf of consumers who owe $10,000 or more. Tax relief specialists usually are attorneys, enrolled agents or certified public accountants with special training and experience. They can navigate the intricacies of IRS forms and calculations, help consumers understand the criteria the IRS imposes, and then help them get back into good standing with the IRS.
"Tax filing season is a necessary evil," Ewing said. "With appropriate preparation, you can make sure you are paying only what you owe and no more."
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About Bills.com (www.bills.com)
Based in San Mateo, Calif., Bills.com is a free one-stop portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. As the online portal to Freedom Financial Network, LLC, the company has served more than 50,000 customers nationwide since 2002 while managing more than $1 billion in consumer debt. Its RSS feed is available at http://www.bills.com/
Bills.com holds the No. 257 spot on the Inc. 500 list for 2008, and the No. 3 spot on Entrepreneur Magazine's Hot 100 list of the fastest-growing U.S. companies. Company co-founders and co-CEOs Andrew Housser and Brad Stroh were named to the Silicon Valley/San Jose Business Journal's "40 Under 40" list in 2008, and were recipients of the Northern California Ernst & Young 2008 Entrepreneur of the Year Award.