Back-to-School Tax Tips for Students and Parents

Going to college can be a stressful time for students and parents. The IRS offers these tips about education tax benefits that can help offset some college costs and maybe relieve some of that stress.

• American Opportunity Tax Credit.  This credit can be up to $2,500 per eligible student. The AOTC is available for the first four years of post secondary education. Forty percent of the credit is refundable. That means that you may be able to receive up to $1,000 of the credit as a refund, even if you don’t owe any taxes. Qualified expenses include tuition and fees, course related books, supplies and equipment. A recent law extended the AOTC through the end of Dec. 2017.

• Lifetime Learning Credit.   With the LLC, you may be able to claim up to $2,000 for qualified education expenses on your federal tax return. There is no limit on the number of years you can claim this credit for an eligible student.

You can claim only one type of education credit per student on your federal tax return each year. If you pay college expenses for more than one student in the same year, you can claim credits on a per-student, per-year basis. For example, you can claim the AOTC for one student and the LLC for the other student.

You can use the IRS’s Interactive Tax Assistant tool to help determine if you’re eligible for these credits. The tool is available at IRS.gov.

• Student loan interest deduction.  Other than home mortgage interest, you generally can’t deduct the interest you pay. However, you may be able to deduct interest you pay on a qualified student loan.

The deduction can reduce your taxable income by up to $2,500. You don’t need to itemize deductions to claim it.

These education benefits are subject to income limitations and may be reduced or eliminated depending on your income.

IRS POSTPONES August 30 Furlough Day

 

The Internal Revenue Service is postponing the furlough day scheduled for Friday, Aug. 30 due to its successful ongoing efforts to cut costs. In early September, the IRS will reevaluate the need for an additional furlough day before the federal fiscal year ends on Sept. 30.

IRS 2011 Tax Filing Stats, 145.4 Million Returns Filed in 2011

The Internal Revenue Service today announced the availability of Statistics of Income—2011, Individual Income Tax Returns (Publication 1304), on irs.gov/taxstats. U.S. taxpayers filed 145.4 million individual income tax returns for tax year 2011. This was up 1.7 percent from 2010.

Also in tax year 2011, the adjusted gross income less deficit reported on those returns totaled $8.4 trillion, a 3.5-percent increase from the prior year.

The report is based on a sample drawn from the 145.4 million individual income tax returns filed for tax year 2011 and provides estimates on sources of income, adjusted gross income, exemptions, deductions, taxable income, income tax, modified income tax, tax credits, self-employment tax, and tax payments.

Classifications include tax status, size of adjusted gross income, marital status, age, and type of tax computation. A brief text reviews the requirements for filing tax returns, explains the changes in tax law, and describes the sample used to produce the report. Publication 1304 is currently available for download at irs.gov/taxstats.

IRS Postpones Furlough, for August 30.

The Internal Revenue Service today announced it will be open on Friday, Aug. 30, following the postponement of its fifth scheduled agency-wide employee furlough day.

"We have made substantial progress in cutting costs. … Our progress is such that we have decided to postpone the furlough day scheduled for Aug. 30. We still have more work to do on the budget and cost-savings, so we will reevaluate in early September and make a final determination as to whether we will need another furlough day in September," said Danny Werfel, IRS Acting Commissioner, in a message to IRS employees.
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The IRS has so far taken three furlough days on May 24, June 14 and July 5 due to the current budget situation, including the sequester.

‪Last month, the IRS was also able to cancel the previously scheduled July 22nd furlough day due to cost-cutting efforts. 

Moving This Summer, The Expenses May Save you $ in Taxes.

If you make a work-related move this summer, you may be able to deduct the costs of the move. This may apply if you move to start a new job or to work at the same job in a new job location. The IRS offers the following tips on moving expenses you may be able to deduct on your tax return.

In order to deduct moving expenses, you must meet these three requirements:

1. Your move closely relates to the start of work.  Generally, you can consider moving expenses within one year of the date you first report to work at a new job location. Additional rules apply to this requirement.

2. You meet the distance test.  Your new main job location must be at least 50 miles farther from your former home than your previous main job location was. For example, if your old main job location was three miles from your former home, your new main job location must be at least 53 miles from that former home.

3. You meet the time test.  After you move, you must work full time at your new job location for at least 39 weeks during the first year. Self-employed individuals must meet this test and also work full time for a total of at least 78 weeks during the first 24 months upon arriving in the general area of their new job location. If your income tax return is due before you have satisfied this requirement, you can still deduct your allowable moving expenses if you expect to meet the time test.
See Publication 521, Moving Expenses, for more information about these rules. If you can claim this deduction, here are a few more tips from the IRS:

• Travel.  You can deduct transportation and lodging expenses for yourself and household members while moving from your former home to your new home. You cannot deduct the cost of meals during the travel.
• Household goods.  You can deduct the cost of packing, crating and transporting your household goods and personal property. You may be able to include the cost of storing and insuring these items while in transit.
• Utilities.  You can deduct the costs of connecting or disconnecting utilities.
• Nondeductible expenses.  You cannot deduct as moving expenses any part of the purchase price of your new home, the costs of buying or selling a home, or the cost of entering into or breaking a lease. See Publication 521 for a complete list.
• Reimbursed expenses.  If your employer reimburses you for the costs of a move for which you took a deduction, you may have to include the reimbursement as income on your tax return.
• Update your address.  When you move, be sure to update your address with the IRS and the U.S. Postal Service to ensure you receive mail from the IRS. File Form 8822, Change of Address, to notify the IRS.
• Tax form to file.  To figure the amount of your deduction for moving expenses, use Form 3903, Moving Expenses. 

Is California Next? New York to Suspend Driver's Licenses of Tax Delinquents

New York Governor Andrew M. Cuomo announced a new initiative Monday to encourage individuals who owe significant back taxes to the state to pay their bills by suspending their New York State driver licenses when their past-due tax liability exceeds $10,000.