COLLEGE STATION Brace yourself. Income tax time is coming.
When it comes to getting ready to file your income tax return, remember what the Boy Scouts say: Be prepared.
That’s the advice of Dr. Joyce Cavanagh, Texas Cooperative Extension family economics specialist.
Make sure you have all your forms before you do anything else, she said. Have all your W-2 forms and 1099 forms from any employer or financial institution where you have interest-bearing accounts.
“W-2 and 1099s have to be in hand by Jan. 31,” she said. “If you’re itemizing, you need to keep track of your property tax and interest paid on your home. Don’t file too soon you might not have all your necessary paperwork yet.”
To save themselves from a surprise, Cavanagh advised those who have mutual funds to check to see if they are going to owe taxes on those funds this year.
This tax season will bring some changes in what can be deducted and what can’t, Cavanagh said.
As of Aug. 17, 2006, she said, only charitable contributions of clothing and household goods in very good condition are qualified as deductions. And receipts will be required when claiming any cash contributions made after that date. The Salvation Army’s Web site at http://www.salvationarmyusa.org/ or the Internal Revenue Service’s site at http://www.irs.gov/ have more information.
Also this year, a credit for the Federal Telephone Excise Tax will be available on a one-time basis, Cavanagh said.
“People will be able to claim it whether they itemize or not or whether they file a tax return or not,” she said. “If you don’t need to file a return (for example, people who didn’t have enough income in 2006) you can file for this on Form 1040-EZT and get the telephone excise tax credit.”
This amount should be $30-$60 “depending on filing status and number of dependents,” Cavanagh added. “It’s a one-time credit for 2006 returns.”
And then there’s the Earned Income Credit, she said.
“People who meet the requirements for Earned Income Credit need to file whether or not they owe taxes in order to receive (this credit).” The IRS Web site can help in determining whether or not you meet those requirements, she added.
All these changes can be extremely confusing but the good news is: You’re not in this alone, she said.
“Free tax preparation assistance is available in most communities for those with low- to middle incomes and the elderly,” she said.
The two most common are the IRS’s Volunteer Income Tax Assistance program frequently called VITA and AARP’s Tax Aide program, Cavanagh said.
Although some volunteer income tax assistance preparation sites may have income limits, she said, “most AARP sites will prepare returns for anyone in the low- to middle-income range.”
Information on these services is available on the AARP Web site at http://www.aarp.org/ or the IRS Web site.
If you are using a tax-preparation service of any kind, Cavanagh advised taking a copy of last year’s return and the Social Security cards of everyone you are claiming as dependents with you.
For more information on this and other financial topics, visit Extension’s Family and Consumer Sciences Web site at http://fcs.tamu.edu/ and click on the link to Money.