2/8/2010 11:59:00 PM IRS allows Haiti credits on 2009 income tax returns
Thousands were killed and many displaced after Haiti's Jan. 12 earthquake. Taxpayers can claim 2010 cash donations to qualified charitable groups for Haitian earthquake victims on their 2009 tax returns because of a special act of Congress. (AP Photo/Rodrigo Abd)
U.S. taxpayers can take advantage of several new, extended or expanded tax credits this year on their 2009 and 2010 tax returns.
Bill Brunson, who conducts media relations for the IRS in the Southwest, is touring the region to get the word out about these tax credits. James McCormick, special agent and public information officer based in Phoenix, joined the tour.
Brunson also advises people to join the increasing majority of taxpayers who are filing electronically. For one thing, IRS computer software asks questions about these new tax laws so people don't miss out on credits. For another thing, electronic filings save the federal government a lot of money. It costs the feds 20 cents to process an electronic filing versus $2.50 to process a paper filing.
The new "Making Work Pay" tax credit that started in April 2009 affected a lot of workers since federal tax withholding amounts on their paychecks changed. To make sure they are withholding enough to avoid paying taxes at the end of the year, people can go to the online withholding calculator at www.irs.gov.
"If you want to change it, now's the time to do it," Brunson said. Taxpayers can change their withholding now to cover the entire year of 2010.
Following is a list of other tax credit changes:
• Taxpayers can claim 2010 cash donations to qualified charitable groups for Haitian earthquake victims on their 2009 tax returns because of a special act of Congress. Receipts are necessary, and phone bills count as receipts on text donations.
• Congress increased the Earned Income Tax Credit by $800 in 2010 and 2011 to help low-income taxpayers during the tough economy. The maximum credit is $5,657. About one-fourth of people who qualify for this credit fail to claim it, Brunson said.
Qualifications depend on household size, and credit amounts vary. For example, families with three children must earn less than $48,279.
• The American Opportunity Credit (formerly the Hope Credit) now provides as much as $2,500 for higher education, up from $1,800 through an act of Congress. Students also can claim it four years now, instead of just two.
• The $8,000 First-Time Homebuyers Credit was going to expire Nov. 30, but Congress extended it to continue through April 30. Buyers must sign a contract by April 30 and close on the home by June 30. People also can get a $6,500 credit if they already own a home but plan to move and buy a different one.
Brunson noted that the IRS has begun a three-year process to start regulating tax preparers. All preparers will need a license within three years.
In the meantime, taxpayers should watch out for warning signs, McCormick said. For example, it is illegal for taxpayers to charge customers based on the amount of their refunds. And don't sign blank tax returns, he added.
