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You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, some people should file even if they aren’t required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.

Even if you don’t have to file for 2011, here are six reasons why you may want to:

1. Federal Income Tax Withheld You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
2. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.
3. Additional Child Tax Credit This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
4. American Opportunity Credit Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.
5. Adoption Credit You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.
6. Health Coverage Tax Credit  Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.

Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.

For more information about filing requirements and your eligibility to receive tax credits, please contact us.

Along with the lazy, hazy days of summer come some extra expenses, including summer day camp. But, the IRS has some good news for parents: those added expenses may help you qualify for a tax credit.

Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the summer and throughout the rest of the year.

1. The cost of day camp may count as an expense towards the child and dependent care credit.
2. Expenses for overnight camps do not qualify.
3. Whether your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit.
4. The credit can be up to 35 percent of your qualifying expenses, depending on your income.
5. You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

If you are facing financial difficulties and struggling to meet your tax obligations the IRS can help. As the tax filing season begins, in addition to new credits, deductions and exclusions, the IRS is taking steps to help people who owe back taxes. Here are some areas where IRS can help:

• Added Flexibility for Missed Payments: The IRS is allowing more flexibility for individuals with existing Installment Agreements who have difficulty making payments because of a job loss or other financial hardship.  Depending on the situation, the IRS may allow a skipped payment or a reduced monthly payment amount. Taxpayers in this situation should contact the IRS.

• Additional Review for Offers in Compromise on Home Values:  An Offer in Compromise (OIC), an agreement between a taxpayer and the IRS that settles the taxpayer’s tax debt for less than full amount owed, may be a viable option for taxpayers experiencing economic difficulties.  However, the equity taxpayers have in real property can be a barrier to an OIC being accepted. With the uncertainty in the housing market, the IRS recognizes that the real-estate valuations used to assess ability to pay are not necessarily accurate. So in instances where the accuracy of local real-estate valuations is in question or other unusual hardships exist, the IRS is creating a new, second review of the information to determine if accepting an offer is appropriate.

• Prevention of Offer in Compromise Defaults – Taxpayers who are unable to meet the periodic payment terms of an accepted OIC will be able to contact the IRS office handling the offer for available options to help them avoid default.

• Postponement of Collection Actions: IRS employees will have greater authority to suspend collection actions in hardship cases where taxpayers are unable to pay. If an individual has recently encountered a job loss or other financial problem, IRS assistors may be able to suspend collection in some situations without documentation to minimize burden on the taxpayer.

• Expedited Levy Releases: The IRS will speed the delivery of levy releases by easing requirements on taxpayers who request expedited levy releases for hardship reasons.  Taxpayers seeking expedited releases of levies to an employer or bank should contact the IRS number shown on the notice of levy to discuss available options. When calling, taxpayers requesting a levy release due to hardship should be prepared to provide the IRS with the fax number of the bank or employer processing the levy.

If you are behind on tax payments there could be additional help available if you are facing an unusual hardship situation.  For assistance with your back taxes contact the phone numbers listed on your IRS correspondence.

Many individuals have home offices, but are unclear on whether or not they can claim these home offices as tax deductions. The IRS explicitly states that home offices can be deducted from your taxes. However, they are also very clear that this home office can only be used for work-related purposes. It must also be used regularly for work-related purposes (meaning it cannot be a spare room that you happen to do some work in now and then).

Is your home office suitable for an IRS deduction?

If so, then it is worth exploring how to claim the home office on your taxes. Self-employed individuals can do this when they file their tax return. If you are an employee of a business it is necessary in case of an audit to be able to prove that your home office is for the sole benefit of your employer.

Necessary Information When Claiming Home Office Deduction

There are a few necessary steps when claiming your home office. These steps include:

• Providing the area of the room that is used exclusively for business.
• Providing the total area of your home.
• Calculating the percentage of your home which your home office takes up.

You will also need to have on hand your mortgage payment, household expenses, and other similar expenses.

Use Caution When Claiming a Home Office Deduction

You should absolutely claim any eligible home office deductions. Doing so can significantly lower your tax liabilities. Be sure to keep all receipts and other relevant information on hand just in case.

Call us with any questions about claiming your home office as a tax deduction. We’ll be happy to take a look at your situation and see what we can do save you more money.

The estate tax, as of July 2010, is not currently in place. If individuals with large estates die, leaving their riches to their heirs, their heirs will not have to pay a dime to the IRS. This is in contrast to the previous rates, which have reached as high as 45%.

The estate tax expired at the end of 2009, and Congress has not yet reinstated it (although it is set to come back in 2011). This means that if Congress does not take action before the end of the year, individuals who inherited money in 2010 will face a much smaller tax liability this year than they would have otherwise.

A Retroactive Law?

Congress, however, is considering reinstating the estate tax retroactively. This would then reinstate the estate tax not only for those individuals who die after the bill is passed, but also for those who have died during 2010.

Several high profile individuals are calling on Congress to reinstate the estate tax – commonly referred to as the “death tax”. George Steinbrenner’s estate would have been taxed at around 45%, some analysts say.

That’s $450,000,000.00 for the IRS.

Implications for the Public

Stay aware of whether or not the estate tax stays dead in 2010. If it does, then you or someone you know may face smaller tax liabilities if – heaven forbid – a loved one dies.

This estate tax news has huge implications for individuals everywhere. Although many are hoping that the estate tax is not reinstated, many others (particularly in Congress and in government) are hoping to reinstate it and receive the additional revenue that the estate tax would provide.

We will keep you posted close to the end Congress’ final session this year, which is the deadline for a retrospective bill to be passed.