COLUMBIA – As Thursday's tax deadline looms, last-minute filers are facing a set of tax credits, some new or expanded this year, that may cause a few headaches.
Andrew Zumwalt, an MU Extension associate state specialist in financial planning, said some credits are so confusing that people don’t even realize they could qualify for them.
He encouraged keeping a cool head when dealing with taxes, even for last-minute filers who might be feeling some stress. Although some forms cannot be submitted online, Zumwalt advised taxpayers not to underestimate the power and convenience of electronic filing.
“That way, people don’t need to know the math, they just need to know the law,” he said.
Here is an explanation of tax matters that may be sources of confusion this year.
Homebuyer tax credits
First-time homebuyers are eligible for a tax credit of up to $8,000 on their 2009 tax returns, Zumwalt said.
Qualifying filers are classified as homebuyers who purchased a principal residence in 2009 (though the deadline has been extended to April 30).
Only those who did not own a home for at least three years are eligible. For married couples, neither spouse can have owned a home in the last three years.
Taxpayers who lived in the same home for at least five of the last eight years do qualify for up to $6,500 if they bought a house last year.
Energy tax credits
One tax credit aimed at easing the burden of home-improvement costs is the energy efficiency credit. Zumwalt said this credit gives people up to 30 percent of the money spent on qualified energy-efficient improvements, such as furnaces, insulation, windows, doors and water heaters. With a $1,500 cap, this means people could get up to $500 from this credit.
Making work pay
Under the economic stimulus package, federal withholding amounts were decreased for all workers after April 2009, Zumwalt said.
In addition, the government offered a $400 Making Work Pay credit to further encourage spending. But many workers fail to remember to claim it, Zumwalt said.
People who receive Social Security, disability or veteran’s benefits could get the credit if they are employed, but it will be reduced by the amount of the economic recovery payment they received in the summer of 2009.
Workers still claimed as dependents saw the benefits of smaller withholding but cannot get the tax credit.
Earned income tax credit
Zumwalt said one credit that always causes confusion is the earned income tax credit. This is a refund for low-income earners that offsets the amount of payroll and Social Security taxes imposed by the government.
According to the IRS Web site, this credit was established to encourage employment, and those who qualify need to be sure to check to see if they are eligible.
Zumwalt said some taxpayers who haven't filed yet can get help from countywide assistance programs through the Columbia Public Library, Missouri United Methodist Church and MU Extension.