News

Dear Friends,

Since tax season is here, I am sending you this e-newsletter with useful tips, information and resources to help ease the burden of doing your taxes. I've also included information on tax credits that will help you keep more of your hard-earned money in your own pocket. I hope you find this e-newsletter helpful.

Helpful Tax Information - Tax Deadline: Wednesday, April 15, 2009

Opt to E-file
E-filing your tax return will help you get your return more quickly, sometimes up to eight weeks faster. You can also opt to have your refund deposited electronically into your bank account. Depending on your income and the difficulty of your tax return, e-filing may be free; otherwise it is usually rolled into the fee charged by the tax program or office.

Need Help Preparing Your Taxes?
The VITA Program offers free tax help to low to moderate-income people who cannot prepare their own tax returns. To locate the nearest VITA site, call 1-800-829-1040.

AARP provides free tax help to people age 60 and older. To locate the nearest AARP Tax-Aide site, call 1-888-227-7669.

Also, the Michigan Association of Certified Public Accountants (MACPA) wants to make sure the person you hire is qualified to provide all the help you need. Please visit MACPA website to download their "Top 10 Questions to Ask a Tax Preparer" brochure so that you can gain the knowledge you need in order to hire the best tax preparer possible.

Get It Together
There's nothing worse than finally sitting down to do your taxes, only to find out that you're missing some important documents or receipts. Taking the time to get organized will save you time and frustration. Below are some tips to help make the process easier.

• Get serious: Schedule a time to work on your taxes and stick to it.
• Get organized: Compile all of your W-2 forms, 1099s and other tax-related forms together – it will make it easier for you or your tax preparer to calculate your return.
• Get informed: Make sure you know all the credits and exemptions you qualify for and make sure you take them.
• Get filed: Decide how you are going to file – e-file or paper.
• Get receipts: If you decide to mail in your return, always send it to the government through certified mail and request a return receipt. If you can't prove you sent your return and it doesn't show up, legally it wasn't filed.
• Get ahead: Start organizing your materials to file your 2009 taxes next year. The better you organize throughout this year, the less of a burden it will be next tax season.

Need a checklist to help you get organized?
Visit my Web site in order to print off our simple tax return checklist. Whether you're calculating your own return or having someone else do it, you'll be sure to have all the materials necessary.

Tax Credit vs. Tax Deduction

• A tax credit adds to the amount of a tax refund you receive or decreases the amount of taxes owed. Because credits are taken after you figure your tax amount, they make a direct dollar-for-dollar difference in your tax bill.
• A tax deduction can be subtracted from your income before computing your income tax. For example, if you have taxable income of $40,000 and deductions of $3,500, then you would figure how much tax you owe on the difference, which is $36,500.

Cash In On Credits and Deductions

Expanded Kiddie Tax
The kiddie tax has been expanded to apply to any child who is under 19 years old or is a full-time student over the age of 18, but younger than 24. However, the kiddie tax will not apply to children who have earned income that exceeds half of their support for the year.

Child and Dependent Care Tax Credit
If you pay someone to care for your child (under 13) or a dependent needing care, such as an elderly parent, you may be able to claim a tax credit for those expenses. The Child and Dependent Care Credit is a percentage of the expenses, ranging from 20 to 35 percent, depending on your income.

Student Loan Interest
You can deduct up to $2,500 in student loan interest payments every year, for the lifetime of the loan. If you qualify, your lender will send you a Form 1098-E. The amount of interest you paid on your student loans for the year will be reported in box 1 on the form.

Job Expenses
You can deduct education and training expenses for your current job as long as your employer doesn't reimburse you for them. Job-hunting expenses – including mileage and travel, the cost of preparing and mailing resumes, and employment and placement agency fees – are also deductible. If you're a teacher, don't forget to include teaching-related expenses for a small tax break.

First-Time Homebuyer Credit
A first-time homebuyer is allowed a refundable tax credit equal to the lesser of $7,500 or 10 percent of the purchase price of the home. In order to receive the credit, the home must have been purchased on or after April 9, 2008, and the homebuyer must have an income of no more than $75,000.

Recovery Rebate Credit
The Recovery Rebate Credit is a special one-time benefit that most people received last year in the form of an Economic Stimulus Payment. But people who did not receive the maximum amount of the Economic Stimulus Payment or whose circumstances have changed may be eligible now, including:

• Individuals who did not receive an economic stimulus payment.
• Those who received less than the maximum economic stimulus payment in 2008 – $600 per taxpayer; $1,200 if married filing jointly – because their qualifying or gross income was either too high or too low.
• Families who gained an additional qualifying child in 2008.

• Individuals who were claimed as a dependent on someone else's tax return last year, but who cannot be claimed as a dependent on this year's tax return.

Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) helps working families with incomes below $41,646 and childless workers with incomes under $15,880. Generally, you must have earned income as an employee, independent contractor, farmer or business owner to qualify. The federal government offers up to $4,824 for residents with two or more qualifying children; $2,917 with one qualifying child; and $438 with no qualifying children. For the first time this year the State of Michigan also offers a credit of 10 percent of the federal EITC amount.

Other Federal and State Tax Credits and Deductions
The Michigan League for Human Services (MLHS) is taking part in the 2009 edition of Money Back in Michigan (Tax Year 2008), an outreach effort that promotes awareness of various federal and state tax credits and deductions available to low- and moderate-income households. For more information please visit the MLHS Web site or contact the League's office at 517-487-5436 if you would like a hard copy mailed to you.

For more helpful tax information and to download tax forms and find answers to commonly asked questions, visit www.irs.gov and www.michigan.gov/taxes.

If you have any suggestions for items in the e-newsletter, please e-mail me at leegonzales@house.mi.gov. Please click on the links above to get more news about my activities here in Lansing. I look forward to hearing from you.

Sincerely,
Lee Gonzales
State Representative
District 49