Amended Returns
If you discover an error after your tax return has been filed, what should you do? You may need to amend your return. You generally must file Form 1040X to claim a refund within three years from the date you filed your original return, or within two years from the date you paid the tax, whichever is later.

Filing an Extension
If you can’t meet the April 15 deadline to file your tax return, you can get an automatic six month extension of time to file to file your return. The extension gives you extra time to file the return, it does not extend the time you have to pay any tax due. You will owe interest on any amounts not paid by the April deadline, plus a late payment penalty if you have paid less than 90 percent of your total tax by that date.

Refund, Where’s My Refund?
Are you expecting a tax refund from the Internal Revenue Service this year? If you file a complete and accurate paper tax return, your refund should be issued in about six to eight weeks from the date IRS receives your return. If you file your return electronically, your refund should be issued in about half the time, and even faster if you choose direct deposit.

Check Withholding to Avoid a Tax Surprise
If you owed tax last year or received a large refund you may want to adjust your tax withholdings. Owing tax at the end of the year could result in penalties being assessed. Having large refunds at the end of the tax year do not make much economic sense.

Tax Incentives for Higher Education
The tax code provides a variety of tax incentives for families who are paying higher education costs or are repaying student loans. You may be able to claim an American Opportunity Credit or Lifetime Learning Credit for the qualified tuition and related expenses of the students in your family who are enrolled in eligible educational institutions. Different rules apply to each credit and the ability to claim the credit phases out at higher income levels. If you don’t qualify for the credit; you may be able to claim the “tuition & fees deduction” for qualified educational expenses. You cannot claim this deduction if you’re filing status is married filing separately or if another person can claim an exemption for you as a dependent on his or her tax return. This deduction phases out at higher income levels. You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not have to itemize your deductions on Schedule A of Form 1040. However, this deduction is also phased out at higher income levels.

Charitable Contributions
Don’t forget your contributions to charitable organizations. Donations can add up to a nice tax deduction if you itemize on IRS Form 1040, Schedule A. You cannot deduct contributions made to specific individuals, political organizations and candidates, the value of your time or services and the cost of raffles, bingo, or other games of chance. To be deductible, contributions must be made to qualified organizations.

Car Donations
The IRS reminds taxpayers that the rules for taking a tax deduction for donating cars to charities have changed. The American Jobs Creation Act of 2004 has altered the rules for the contribution of used motor vehicles, boats and planes after Dec. 31, 2004. Starting then, if the claimed value of the donated motor vehicle, boat or plane exceeds $500 and the item is sold by the charitable organization; the taxpayer is limited to the gross proceeds from the sale.

Deductible Taxes
You may be able to deduct certain taxes on your federal income tax return as itemized deductions on Schedule A. Deductions decrease the amount of income subject to taxation. There are four types of deductible non-business taxes; state and local income and sales taxes, real estate taxes, personal property taxes, and foreign income taxes.

Deducting Mortgage Interest
If you own a home, you can claim a deduction for the interest paid. To be deductible, the interest you pay must be on a loan secured by your main home or a second home. The loan can be a first or second mortgage, a home improvement loan, or a home equity loan. To be deductible, the loan must be secured by your home but the proceeds can be used for other than home improvements. You can refinance and use the proceeds to pay off credit card debt, go on vacation or buy a car and the interest will remain deductible. There are other financial reasons for not wanting to do this but it will not disqualify the deduction. The interest deduction from your home equity loan is not unlimited. You can generally deduct interest you pay on the first $100,000 of a home equity loan. After that, it depends on your basis. If the home equity loan was used to improve your first or second home, or to purchase a second home, you can probably take the deduction on an amount up to $1 million or the value of the home.

Refinancing Your Home
Taxpayers who refinanced their homes may be eligible to deduct some costs associated with their loans. Generally, for taxpayers who itemize, the “points” paid to obtain a home mortgage may be deductible as mortgage interest. Points paid to obtain an original home mortgage can be, depending on circumstances, fully deductible in the year paid. However, points paid solely to refinance a home mortgage usually must be deducted over the life of the loan. If part of the refinanced mortgage money was used to finance improvements to the home and if the taxpayer meets certain other requirements, the points associated with the home improvements may be fully deductible in the year the points were paid. Also, if a homeowner is refinancing a mortgage for a second time, the balance of points paid for the first refinanced mortgage may be fully deductible at pay off.

Should I refinance?
In order to refinance your home, the current market rate should be at least 2 percentage points lower than what you are paying on your mortgage.

Can you stop paying Private Mortgage Insurance (PMI)?
Usually people that make a down payment of less than 20% are required to pay private mortgage insurance by their lender. Once you reach 20% equity, PMI is cancelled, and any money accrued in your escrow account towards it will be credited to you.

Is it better to get a home equity line of credit or a traditional second mortgage?
With a second mortgage you will have a fixed amount of money that is repayable over a fixed period of time or is due in full at a given time. A home equity line of credit, on the other hand, is much more open-ended. You have a line of credit that can be borrowed from as you wish, and it generally has a variable rate as opposed to a fixed rate.

What are the possible implications if I co-sign for a loan?
The co-signer enters an agreement to be responsible for the repayment of the loan if the borrower defaults. If you do agree to co-sign on a loan for someone, you can request that the financial institution agrees that it will refrain from collecting from you unless the primary borrower defaults. Also, make sure that your liability is limited to the unpaid principal and not any late or legal fees. If you are asked to co-sign for someone, you may want to provide another option and suggest that they get a secured credit card. This way, they can build up their own credit history and not open themselves up to the possibility of taking on a debt too large, placing themselves, and you, in financial danger.

How does a reverse mortgage work?
A reverse mortgage is a way for you to take advantage of some of the equity that is currently tied up in your home. A reverse mortgage works in reverse, the homeowner is paid monthly payments instead of having to pay. The major difference between this and a home equity loan is that you aren’t required to pay anything back to the lender as long as your retain ownership of the home. This could be used to supplement income, defray the cost of medical aid, pay for college education, and stop a foreclosure or to make it possible to retire. When the homeowner sells the home or dies, the home must be paid off and, if sold, the remainder of equity is given to its rightful heirs.

What are the advantages of prepaying a mortgage, and should I if I can?
It is highly recommended that you prepay as much of your mortgage as possible every month, which will drastically reduce the total principal and interest amount that you pay out over time. This decision, as many others, should be thought out and analyzed carefully.

Gift Giving
If you gave any one person gifts valued at more than $13,000, it is necessary to report the total gift to the Internal Revenue Service. You may even have to pay tax on the gift. The person who received your gift does not have to report the gift to the IRS or pay either gift or income tax on its value. If you are married, both you and your spouse can give separate gifts of up to the annual limit to the same person without making a taxable gift.

Earned Income Tax Credit for Certain Workers
Millions of Americans forgo critical tax relief each year by failing to claim the Earned Income Tax Credit (EITC), a federal tax credit for individuals who work but do not earn high incomes. Taxpayers who qualify and claim the credit could pay less federal tax, pay no tax or even get a tax refund.

Credit for the Elderly or Disabled
You may be able to take the Credit for the Elderly or the Disabled if you were age 65 or older at the end of last year, or if you are retired on permanent and total disability, according to the IRS. Like any other tax credit, it’s a dollar-for-dollar reduction of your tax bill. The maximum amount of this credit is constantly changing. Generally, you are a qualified individual for this credit if you are a U.S. citizen or resident at the end of the tax year and you are age 65 or older, or you are under 65, retired on permanent and total disability, received taxable disability income, and did not reach mandatory retirement age before the beginning of the tax year. Even if you do not retire formally, you are considered retired on disability when you have stopped working because of your disability. If you feel you might be eligible for this credit, please contact us for assistance.

Selling Your Home
If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return.

Foreign Income
With more and more United States citizens earning money from foreign sources, the IRS reminds people that they must report all such income on their tax return, unless it is exempt under federal law. U.S. citizens are taxed on their worldwide income. An important point to remember is that citizens living outside the U.S. may be able to exclude up to $91,500 of their foreign source income if they meet certain requirements.

Marriage or Divorce
Newlyweds and the recently divorced should make sure that names on their tax returns match those registered with the Social Security Administration (SSA). A mismatch between a name on the tax return and a Social Security number (SSN) could cause your tax return to be rejected by the IRS.

Tips and Taxes
Do you work at a hair salon, barber shop, casino, golf course, hotel or restaurant or drive a taxicab? The tip income you receive as an employee from those services is taxable income. As taxable income, these tips are subject to federal income, Social Security and Medicare taxes, and may be subject to state income tax as well.

Capital Gains and Losses
Almost everything you own and use for personal purposes, pleasure or investment is a capital asset. The IRS says when you sell a capital asset, such as stocks, the difference between the amount you sell it for and your basis, which is usually what you paid for it, is a capital gain or a capital loss. While you must report all capital gains, you may deduct only your capital losses on investment property, not personal property. If your capital losses exceed your capital gains, the excess is subtracted from other income on your tax return, up to an annual limit of $3,000 ($1,500 if you are married filing separately).

Coverdell Savings Accounts
A Coverdell Education Savings Account (ESA) is a savings account created as an incentive to help parents and students save for education expenses.

IRA Contributions
If you haven’t contributed funds to an Individual Retirement Arrangement (IRA) for last tax year, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15 due date for filing your tax return for last year, not including extensions. Generally, you can contribute a percentage of your earnings for the current year or a larger, “catch-up” if you are age 50 or older. You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these annual amounts. You may be able to take a tax deduction for the contributions to a traditional IRA, depending on whether you — or your spouse, if filing jointly — are covered by an employer’s pension plan and how much total income you have. You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution. Contact us to review the limitations.

How much protection do I get from federal deposit insurance?
Only deposit accounts at federally insured depository institutions are protected by the FDIC. Check to see if your bank falls into this category. In general, the government will protect accounts up to $250,000. If you have an account with special ownership, such as a trust, or an account with co-owners, this may change the amount of coverage you receive.