Back to School – Tax Saving Tips:
As the summer comes to an end, parents and students prepare for another school year. Knowing what expenses classify as a tax deduction and tax break can greatly assist students as well as the parents.
So, what are education expenses?
For elementary and secondary education, expenses include tuition, fees, books, supplies, equipment, academic tutoring, and special needs services required for enrollment at an eligible institution.
For higher education, expenses include tuition, books, fees, supplies, equipment and special needs services required for enrollment at an eligible institution. Additionally, room and board may also qualify as long as they do not exceed the minimum amounts as determined for financial aid programs.
• Student Loan Interest deduction: Upto $2,500 of interest paid on qualified educational loans can be deducted, depending on modified gross income which should be within a specified range.
• American Opportunity Tax Credit: can amount to $2.500 and is available for the first four years of post-secondary education at a qualified education institution. The taxpayer must have received Form 1098-T from the educational institution to avail the credit and the credit is based on amount paid and not billed.
• Tuition and Fees Deduction: is limited to $4,000 depending on Adjusted Gross Income of the Taxpayer.
• Lifetime Learning Credit: is $2,000 for qualified education expenses, such as tuition, correspondence courses, travel, supplies, books, research and typing expenses related to the educational program, if the Taxpayer has returned to school to maintain or improve skills required by the current employer.
• If you are a student who, during summer, earned income, you can open a Roth IRA. Your earnings will grow tax-free, which means, any interest you accrue, you don’t pay taxes on it. But if you withdraw (or take out) money from the Roth IRA before you are 59 ½, your withdrawal will be subject to a 10% penalty.
Additionally, opening an Educational Savings Account, such as CESA or participating in 529 Plan to pay for qualified educational expenses is highly recommended.
Tax Credits & Deductions: Do you know the difference?
While both Tax deductions and tax credits reduce an individual’s income tax liability, the main difference is that tax deductions reduce taxable income, depending on the taxpayer’s marginal tax rate which rises with the income. Tax deductions cannot reduce taxable income below 0 (zero). However, tax credits reduce a person’s tax liability and have the same value for all taxpayers with tax liability at least equal to the credit. Some of the Tax Credits are refundable and are not limited by the taxpayer’s liability. Know the difference… read more…
The difference between Tax Deductions and Tax Credits!
IRS alerts Payroll and HR Professionals to Phishing Scheme involving W-2s. The following are some of the details contained in the e-mails:
– Kindly send me the individual 2015 W-2 (PDF) and earnings summary of all W-2 of our company staff for a quick review
– Can you send me the updated list of employees with full details (Name, Social Security Number, Date of Birth, Home Address, Salary) as at 2/2/2016.
– I want you to send me the list of W-2 copy of employees wage and tax statement for 2015, I need them in PDF file type, you can send it as an attachment. Kindly prepare the lists and email them to me asap.
Please note that:
The IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels.
Report suspicious online or emailed phishing scams to:firstname.lastname@example.org. For phishing scams by phone, fax or mail, call 1-800-366-4484. Report IRS impersonation scams to the Treasury Inspector General for Tax Administration’s IRS Impersonation Scams Reporting.
Identity theft: Steps you can take to protect your identity!
Protect yourself from identity theft!
Sure you can do your taxes online using TaxAct or TurboTax, but going to a Tax preparer makes more sense if you want to save some cents (or dollars)!
File online or go to a Tax Professional?
As the Tax Season rolls in, Taxpayers are tempted to inflate deductions and expenses to rake in larger refunds disregarding the consequences!
Learn more about the consequences of such actions!
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