Summary of the updates of some of the 2010 tax law credits

Here are quick highlights of some of the 2010 tax law credit changes. I think they may make some of you very happy. Know that it is necessary to qualify for these credits based on a number of specific criteria. More information can be found at Internal Revenue Service

Earned Income Credit Expanded:
The credit has been expanded for larger families. As with the original credit, childless and single taxpayers may qualify for this credit as well.

Home buyer Tax Credits:
First-time home buyer tax credit has been extended to April 30, 2010. The limit of the credit remains $8,000.

Current homeowners that have lived in their home as their primary residence for a minimum of five consecutive years may qualify for a $6,500 tax credit when purchasing a new home.

Making Work Pay Tax Credit:
The changes in the tax tables may allow for bigger paychecks, however taxpayers should make sure that with the change in the tax tables, they are having enough tax taken out of their paychecks. Too little tax withheld could result in tax due on their tax return. This credit is also available to the self-employed who qualify. Self-employed individuals should calculate their withholding during the year and adjust if necessary. IRS Withholding Calculator

American Opportunity Credit:
This is a modification of the Hope Credit, allowing for higher income and adding required course materials as part of the qualifying expenses. It is now also allowing for 4 post-secondary years instead of the former two.

Sales Tax Deduction for New Vehicle Purchases:
New cars, light trucks, motor homes and motorcycles purchased between Feb. 17, 2009, through Dec. 31, 2009 may be eligible for a deduction of state and local sales and excise taxes. For those that live in a state that does not have sales tax, a deduction for other taxes and fees is provided. This deduction is not subject to itemized deductions qualification!

Residential Energy Credit:
Homeowners that make energy saving improvements to their homes may now qualify for an increase to 30% of the cost of all qualifying improvements such as energy saving windows, efficient air conditioning & heating, and the installation of insulation. The new maximum limit of the credit is $1,500 for those modifications done in 2009 and 2010.

Still Waiting for a W-2 or 1099?

W-2s and 1099s are to be sent out by January 31st. Many companies send them out earlier, but many do not. Therefore, do not be alarmed if you have not yet received yours.

If you do not receive anything by February 14th, or if your wage statement is wrong, you should first contact your employer. If you do not get a response, you can register a complaint with the IRS and file Form 4852 for a substitute W-2 or other wage statement. The IRS will then send a letter to your employer to get a fire under them. Your employer should send you a letter with the information needed after that.

* You may not submit this form until after February 14th.

* It is important that the number you use on your wage statement matches the ID number you use on your tax return!

Complete Your Tax Worksheets

If you prepare your taxes yourself, you may have noticed worksheets in your tax packet if using the paper method or an icon to open a worksheet in a tax preparation software program. Do not ignore these important tools! Worksheets and tables are used to make sure that the taxpayer actually qualifies for the credits for which they are applying. There is a lot of valuable information contained within and the answers to the questions asked can either make or break your credit qualification. Many terrible mistakes are made by skipping this step and many a taxpayer who received a refund has had to pay back some or all of the monies received. Be smart - be complete. ;)