With the April 15, 2010 tax deadline fast approaching, tax preparation is fully underway. We invited Timothy Shortsleeve, an esteemed CPA, to provide some tips and tricks to make your filing easier to navigate through. Here are some things to consider:

Give Yourself Some Credit:

Many of the credits identified below are new. Make sure you don’t overlook any that might apply to you! See www.irs.gov to learn more.

NEW: Making Work Pay Credit – Many working individuals can claim this credit on their 2009 returns. The credit amount is 6.2% of 2009 earned income, up to a maximum credit amount of $400 for an unmarried person or $800 for a joint-filing married couple. The credit is refundable, which means it can reduce your federal income tax bill to zero. Then, you can collect any leftover credit amount in cash when you file your return. www.irs.gov.

NEW: American Opportunity Credit for College Costs – The Stimulus Act replaced the familiar Hope Scholarship credit for higher education expenses with the new (and more generous) American Opportunity credit. The new credit can save filers as much as $2,500 per student; it can cover up to four years of undergraduate education costs; and it is available to taxpayers with higher incomes.  www.irs.gov.

NEW: Credit for Government Retirees – The Stimulus Act also granted a $250 free-money goodie to certain government retirees. It comes in the form of a one-time 2009 refundable tax credit of $250 for each eligible individual or $500 for a joint-filing married couple when both spouses are eligible. Warning: If you’re eligible for this $250 credit, it must be subtracted from any Making Work Pay credit that you would otherwise be entitled to collect. www.irs.gov.

ENHANCED: Credits for Energy-Efficient Home Improvements – For the 2009 tax year, two separate credits are available, and the rules are significantly more generous than in previous years. The credits are equal to 30% of qualifying home energy- efficiency improvement expenditures. The first credit is capped at $1,500, but the second credit is generally uncapped and can amount to big savings. www.irs.gov.

ENHANCED: Refundable Child Credit – The child credit equals up to $1,000 for each qualifying child under 17. For those who owe only a modest amount of federal income tax or no tax at all, part of the child credit is refundable. After the refundable part of the credit has been used to reduce your federal income tax bill to zero, you may collect any unused refundable amount in cash. For the 2009 tax year, the rules for the refundable part of the credit have been enhanced to make it available to individuals with less earned income. To find out if you are eligible for the refundable part of the credit, fill out Form 8812 (Additional Child Tax Credit). Enter the refundable credit amount on line 65 of Form 1040. www.irs.gov.

ENHANCED: Credits for Homebuyers – The Stimulus Act extended and enhanced the credit for qualified home purchases between Jan. 1, 2009 and Nov. 6, 2009. Then, the Worker, Homeowner and Business Assistance Act of 2009 went even further for qualified purchases through the rest of 2009 and into 2010. As a result, for the 2009 tax year, one set of rules applies to purchases that closed between Jan. 1, 2009 and Nov. 6, 2009, and another more generous set of rules applies to purchases that closed between Nov. 7, 2009 and Dec. 31, 2009. In addition, a credit for a 2010 purchase can be claimed on a 2009 return. However, for a 2010 purchase, the home must be under contract by no later than April 30, and the deal must be closed by no later than June 30. Existing Homeowners can now qualify.  www.irs.gov.

ENHANCED: Earned Income Credit – If you have three or more qualifying children, you may be eligible for a more generous earned income credit (EIC) than in previous years. Also, the income restrictions on the EIC have been eased to make more taxpayers eligible. The EIC is also a refundable credit. Any credit amount left over after your federal income tax bill has been reduced to zero is refunded to you in cash. To find out if you are eligible for the EIC under the enhanced rules that apply for 2009, fill out Schedule EIC in your Form 1040 instruction package. Enter the EIC amount on line 64a of Form 1040. www.irs.gov.

Other Important Changes to be aware of:

NEW:  Vehicle Sales Tax Deduction – A new deduction for state and local sales and excise taxes paid on new (but not used) vehicles that were purchased (not leased) between Feb. 17, 2009 and Dec. 31, 2009. The write-off is limited to the amount of taxes on the first $49,500 of a vehicle’s purchase price. You can claim this break whether you itemize or not.

First $2,400 of Unemployment Compensation Is Tax-Free – The old law says unemployment compensation benefits count as taxable income. However, the Stimulus Act granted a one-year exemption for the first $2,400 of unemployment compensation received in 2009. Any unemployment benefits in excess of the $2,400 tax-free limit must be reported as income on line 19 of your 2009 Form 1040.

Don’t forget that Organization is EVERYTHING! – Organization is the key to successful and accurate tax preparation. Be sure to review and organize all of your documents, and then use a scanner, like the Fujitsu ScanSnap, to store your documents digitally.

I hope these tips help your filing this year. Happy Taxes!

Timothy S. Shortsleeve, CPA.CITP
Partner
Bonn, Shortsleeve & Ray, LLP
www.bsrllp.com