By April Sorrow
University of Georgia
“Shopping around for a tax service makes a difference. You will save in terms of the fees you pay and the amount of taxes you end up owing or have due to you in a refund,” said Michael Rupured, consumer economics specialist with UGA Cooperative Extension.
The Volunteer Income Tax Assistance program certified by the Internal Revenue Service provides free preparation and, in most cases, electronically file returns. The program targets working families with incomes less than $45,000 a year. Call 1-800-829-1040 to find out more.
The AARP Tax Counseling for the Elderly program often provides senior citizens free tax services. It will prepare returns for VITA-eligible filers, too.
“You can use the Internet to prepare and file your return,” Rupured said. “Online options are generally very user-friendly, though often somewhat tedious and time-consuming.”
Other options are professional accountants to commercial tax preparation chains, he said. But the fees charged vary depending on qualifications, complexity of the return, the number of forms required and other services provided.
Some companies offer tax refunds on the spot. But, Rupured said these refund-anticipation loans are an expensive way to get refunds. With electronic filing, the IRS will deposit refunds in seven to 10 days.
Itemize or not?
Two-thirds of Americans choose standard deduction over itemizing deductions. But taking the time to itemize could save money, said Joan Koonce, a financial management specialist with UGA Extension.
“Medical expenses that exceed 7.5 percent of your adjusted gross income are deductible,” she said. “You can also deduct mortgage interest paid on your first and second home. First and second mortgages, home equity loans and home equity lines of credit apply. Real estate and other property taxes are deductible expenses, too. In addition, primary mortgage insurance premiums are deductible by some homeowners who purchased their home during a certain period of time.”
State and local income taxes or sales tax paid on retail purchases are also deductible. As are charitable gifts given to IRS-approved organizations. Gifts to religious, scientific or educational organizations might also be deducted.
Total work expenses – such as union dues or equipment -- greater than 2 percent of adjusted gross income can be deducted.
“Remember that if you and your spouse are married filing separately and one of you chooses to itemize deductions, the other must do the same,” Koonce said. “Keep receipts for the items you are deducting in the event you are audited.”
In addition to deductions, you may qualify for a credit.
You might be eligible for the credit this year if you did not receive an economic stimulus payment, received less than the maximum economic stimulus payment, gained an additional qualifying child or could no longer be claimed as a dependent on another person’s tax return.
“Keeping up-to-date on the tax changes for this season is important to help you ease the tax burden or possibly get a refund,” Koonce said.
Here are a few changes for the 2008 tax season:
• You can contribute $1,000 more than last year to an Individual Retirement Account. The max contribution for those under 50 is $5,000. It’s $6,000 for those 50 and older.
• Each year, the standard deduction and exemption amount adjust for inflation. The standard deduction has increased $200 to $10,900 for married couples filing jointly; $5,450 for married couples filing separately and singles; and $8,000 for household heads. Personal and dependency exemptions increased to $3,500.
• Green tax credits are available up to $500 for home energy-saving improvements. You can get a credit of 30 percent, up to $2,000, for equipment that is solar or wind powered.
• Children’s investment income, or kiddy tax, taxes certain amounts of investment income from investments held in a child’s name at the parents’ marginal tax rate. Now, children under 19 and full-time students up to age 24 can be taxed at their parents’ marginal tax rate on their investment income over $1,800.
For more information, go to the IRS Web site at www.irs.gov.
(April R. Sorrow is a science writer with the University of Georgia Public Affairs Office.)