child care tax credit
I Am My Daddy’s Tax Deduction
I know my daddy loves me but he seems much happier with me during income tax time. A whole year of taking care of me yields some sort of tax windfall as long as my daddy’s adjusted gross income is not too high and he is not in the alternative minimum tax. The one thing I have learned by being the daughter of a public accountant practicing tax is that you get your tax benefits as soon as you are able. Money received today is much better than money received tomorrow.
I do love my daughter and I am very proud to hear her say these words. It is absolutely true that is always better to get money today as opposed to waiting for tomorrow. If we are in receipt of funds today, we can make investments, put more money in our 401K’s, pay extra on our mortgages, and take care of our current life styles without running up debt and finance charges. What is really being said here is take advantage of your income tax benefits today. Do not wait until year end; do not run up credit card debt to make ends meet just to get a big tax refund. Have use of your money this very day and begin planning for your future. Here’s how you can take advantage of your income tax benefits today:
Husband and wife with two kids 4 exemptions
Mortgage interest ($24,000-10,300 standard deduction) 4 exemptions
Real estate taxes ($4,000) 1 exemption
State income taxes ($7,000) 2 exemptions
Contributions ($10,000) 3 exemptions
In this scenario, husband works and wife has no income. The standard deduction for married individuals filing a joint return is $10,300 which is already factored into the income tax withholding tables used by your employers. This amount was subtracted from the mortgage interest expense but could have been deducted from the total to arrive at the same result. The personal exemption amount used in this calculation was $3,300 with exemptions rounded to the nearest ones place. Assuming that this family is in the 25% bracket for federal purposes, the extra 10 exemptions will save $8,250 annually. This would breakdown to $688 more each month. Imagine the difference this would have in your monthly budget. If this money were invested each month or used to pay down some of the outstanding mortgage balance, the economic benefit will go well beyond this tax savings. The power of compounding interest will turn this monthly benefit into a much bigger economic gain.
Please my friends, my daughter and I urge you to calculate your income tax benefits for 2007 and beyond. Please take advantage of your benefits today to secure a more advanced economic well being tomorrow. Remember, if both spouses work, the subtraction will have to be $20,600 as both spouses will have this standard deduction built in to their respective withholding tables. If you are in the alternative minimum tax, please do not take into consideration your real estate taxes, personal property taxes, and income taxes.
Ron Piner, CPA
Host of “Better Business”
Saturday Mornings at 10ET
On WBIS AM 1190
www.wbis1190.com
www.mwibonline.com
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Preparing taxes is one of the least enjoyable tasks a person faces each year. While many single or multiple income households feel that they can prepare their taxes on their own each tax season, it is a good idea to think about taking advantage of professional tax preparation services. In fact, if you’ve ever found yourself wondering if you could take a specific deduction, if you could take advantage of other deductions you don’t know about, if you could be paying less or getting a larger refund, or even if you simple wonder if you are preparing your taxes properly, you should consider professional tax preparation.
When you are thinking about using professional tax preparation services, it is important to think about what you are looking for from your accountant. If you would like to have your taxes done as fast as possible, it is probably best to have them done by a nationally recognized service that specializes in quick professional tax preparation. This type of professional tax preparation is designed to have your taxes done as quickly and as thoroughly as possible.
If you are looking to make a tax plan for the future, a licensed tax professional is the best option for professional tax preparation. You can choose from either a Certified Public Accountant (CPA) or an Enrolled Agent. A CPA is an accountant who has passed certain examinations and met all other statutory and licensing requirements of a United States state to be certified by that state. This usually includes 150+ hours of business and accounting related college education in addition to a CPA exam that usually runs about 14 hours. Many corporate and small businesses use CPAs for their professional tax preparation as well as special tax circumstances like tax audits.
An Enrolled Agent is someone who has successfully completed an IRS test that encompassed all facets of taxation as well as passed a background check. Enrolled Agents must also complete an 8-hour exam over the course of two days. Unlike CPAs or tax lawyers, Enrolled Agents undergo testing by the IRS without intervention from a third party. Enrolled Agents can also have their earned title removed by the IRS for wrongful conduct.
If you are considering professional tax preparation because of a specific problem, you will want to find a professional who is trained to handle your specific issue. As with any other product or service, professional tax preparation is available at a number of different prices and you should compare to find a fee that suits your budget. Not every professional tax preparation service will be able to schedule an immediate appointment, so your tax needs and urgency should be taken into consideration. Most importantly, when you are using professional tax preparation services, you want to make sure that your accountant offers you a guarantee for his or her work.
Financial specialist David Campbell provides articles for http://www.tax-preparation-professionals.com
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