As April 15, better known as “Tax Day”, draws closer, millions of taxpayers are scurrying to put the final touches on their federal tax return.

But before you click "send", there are various tax deductions that you may have overlooked: 

1. Fiscal cliff tax credits. The passing of the American Taxpayer Relief Act of 2012 (better known as the “fiscal cliff” legislation of New Year’s Eve), brought about various tax breaks, credits and provisions. For example, did you know that there is a provision that will allow you to set aside pre-tax income retroactively to pay for the public transportation and parking involved in your daily commute?
2. Retirement savings credit. According to Fidelity.com, making a last-minute contribution to an IRA could save you more than $1,000 on your 2012 tax bill. You can contribute up to $5,000 to an IRA, or $6,000 if you are age 50 or older. Plus, low-income workers who contribute can also claim the saver’s credit, which is applicable to those who earned less than $28,750 for single filers, $43,125 for heads of household, and $57,500 for joint filers.
3. Child Tax Credit. This credit was scheduled to revert to $500, but thanks to the ATRA, the credit was made $1,000 permanently. The Child Tax Credit allows parents to reduce the federal income taxes owed by up to $1,000 for each qualifying dependent younger than 17.
4. Student Loan Interest deduction. Those who qualify can deduct up to $2,500 in student loan interest — no itemization necessary! Two additional education tax credits include the Hope Credit and the Lifetime Learning Credit, which can mean a credit of up to $2,500 for qualifying students.
5. Alternative Minimum Tax patch. Congress passed a fix for the Alternative Minimum Tax that will help more than 30 million middle-income taxpayers avoid paying higher taxes. Taking into account that only 4 million taxpayers had to pay it last year, this is certainly good news for the 26 million who were spared!
6. Commonly overlooked deductions. And finally, the following are some of the most frequently overlooked tax-deductable expenses:  

• Alimony paid
• Prescription eyeglasses, contacts, and hearing aids
• Medical transportation costs
• Charitable contributions
• Prescribed weight-loss programs
• Chiropractic treatments
• Drug or alcohol rehabilitation programs
• Points paid for a mortgage or refinancing a home
• Unreimbursed employee business expenses
• Mileage and other expenses associated with volunteer work
• Casualty and theft losses
• Tax preperation software and fees

 

No one wants to go through an audit from the IRS. It’s time consuming, stressful and could very well end with you paying steeps fines or even facing jail time. With that in mind, here are the top ten reasons you may get pulled for an audit this year.

Just as the economy is beginning to look up for consumers, economists warn of a “fiscal cliff” that could threaten consumers who are finally experiencing a sense of financial stability.

Your money has been waiting patiently in state and federal treasuries, playing Angry Birds and reading the same issue of Men’s Health over and over again. But now it’s time to bring your money home!

Time is running out to file your income tax returns, so here are a few tips to ensure as many of your little green friends as possible make it home this spring.

• Plan in advance. This one might be off the table for this year, but it’s never too early to start planning for next year. You should begin by keeping accurate, organized records. It’s also important to remain informed of tax laws and how they could affect you.
• Deduct for charitable donations. There's no denying that giving feels good (except for giving blood, which makes me feel terrible no matter how many shortbread cookies and juice boxes they press into my numb hands). And luckily the IRS wants to reward you for your charitable donations in the form of a deduction. Just make sure you give to a tax-exempt organization that can provide you with a letter detailing the donation. Your roommate’s bongos are a good place to start.
• Deduct for losses occurring due to disaster or theft. The key to this deduction is that the event that caused the loss must be “identifiable, unexpected and unusual.” This includes car accidents, natural disasters and vandalism, but it does not include natural deterioration or your house cat’s unwavering belief that picture frames, vases and collectible plates belong on the floor, not the shelf, thank you very much.
• Deduct for job search expenses. You can only deduct for expenses accrued on the job hunt if you’re seeking the same position, but with a different company. First-timers and people looking to shift into a new industry are, unfortunately, out of luck. Be sure you keep receipts and records for every cost associated with the process. Related costs could include printing and mailing résumés, transportation to and from interview locations, and fees paid to employment agencies. Phone calls to and from your prospective employers are even tax-deductible, though you should probably still avoid the urge to call every 20 minutes to ask if they’ve hired you yet.
• Take the time to know what deductions you qualify for. So maybe your bike was stolen because you forgot to chain it up, or maybe your Uncle Carl isn’t exactly as “tax-exempt” as he claims to be. You may still qualify for certain deductions! Do you pay interest on a home mortgage? Do you pay union dues? Do you have to purchase and clean your own uniform for work? Familiarize yourself with the available credits and deductions for the tax year to ensure you’re not cheating yourself out of extra cash.

According to reports, the majority of filers simply use the standard deduction rather than itemizing – which can leave many feeling short-changed. So keep in mind that if you just can’t be bothered with all of those numbers and decimal points, you can hire a professional do the legwork for you! Just remember: It's your money.

Note: This guest post was written by Jesse Campbell, counselor for Money Management International.

It’s always good to have options. It’s even better to choose the right option, particularly when it involves paying your federal income tax obligation.

With April 15th fast approaching, many are discovering that they have a tax liability they are not prepared to pay. Consumers who find themselves in this predicament do have some options, but it is critical to select the payment plan that is right for you.

If you cannot pay your tax bill by midnight on April 15, and you make no other arrangements, the IRS will obviously consider your payment, or lack of, as late. Because your balance owed is subject to interest and a monthly late payment penalty, it is in your best interest to pay in full as soon as you can to minimize the additional charges.

Options:

You may consider financing the full payment of your tax liability through loans, such as a home equity or personal loan from a financial institution, or obtaining a cash advance through your credit card. Believe it or not, the interest rate and any applicable fees charged by a bank or credit card can be lower than the combination of interest and penalties imposed by the Internal Revenue Code. Contact the IRS. They offer multiple payment agreements based on your circumstances. Some are short-term, while others are structured to stretch the payments over a longer period of time through an installment payment plan.

If you don’t find these options appealing, you can pay the amount due by credit card. That’s right, Uncle Sam allows you to charge your taxes, and at first glance this might appear to be the best alternative.

Before opting to charge the amount of your tax liability consider the following benefits and drawbacks associated with this option:

Benefits:

• Paying your taxes by credit card gives you the opportunity to pay Uncle Sam by April 15 even if you don’t have the money available to make the payment. The payment date will be the date the charge was authorized, but you have the flexibility of paying off the debt over time to your card issuer.
• Even though you can arrange a payment plan through the IRS, when you charge your taxes you do so without the hassle of filling out forms.
• It’s convenient. Payments can be made by phone, Internet or when e-filing.
• You might be able to earn rewards by charging the amount due. If you have a cash-back rewards card, or a card through which you can earn miles or points, charging a large amount could reap nice benefits.

Drawbacks:

• According to the Taxpayer Relief Act of 1997, the IRS is restricted from paying the transaction fee normally associated with credit card charges. Therefore, the IRS outsources the credit card payments to a number of companies which are set up to accept tax liability payments. They pass the transaction fee, now renamed a Convenience Fee, along to consumers. Although the fees vary by service provider, they are all based on the amount of the payment at a rate of between 1.95% and 2.35% of the total charged. For example, if you owe $5,000 in taxes, your fee to charge them to your credit card could be $100 or more. This fee obviously eats into any rewards you might earn.
• Payments to the IRS may not be eligible to earn rewards. Your issuer may not allow IRS payments as part of their rewards program, or the rewards may be tied to certain categories, one of which is not taxes. Be sure to check with your issuer before you make the charge if earning rewards is part of your reason for charging your taxes.
• Even if you are allowed to earn rewards through this charge, you need to determine if the rewards are greater than any potential fees assessed. Many cash-back cards cap rewards at 1%. Therefore, in the $5,000 scenario above, you could only earn $50. You’ll have paid $100 in fees, and only earn $50 in rewards, not a winning situation.
• The IRS charge will be treated like any other charge to your card. Interest can be added on, late fees will apply, and if the charge puts you over your credit limit, an over-limit fee will be tacked on. Thus, the longer you take to pay your credit card balance, the larger your original IRS debt becomes due to the additional interest and fees.
• If the amount you charge is large, it may utilize a significant amount of your credit line, thus limiting your access to credit for other necessities. Further, if too large a percentage of your credit line is used, it could lower your credit score.
• Because no one knows what tomorrow holds, be aware that income taxes most often cannot be included in a bankruptcy, even if they’ve been charged to a credit card.

Additionally, some creditors are now paying close attention to the charging patterns of their customers, and could consider someone an increased risk if they charge their taxes. This could result in punitive term changes to your account in the form of an increased interest rate or a lowered credit line. Consumers need to weigh the considerable downsides to paying their taxes with their credit card before selecting this option.

This guest post was provided by the National Foundation for Credit Counseling (NFCC). Money Management International is a member of the NFCC. The NFCC is the nation’s largest and longest serving national nonprofit credit counseling organization. NFCC Members annually help over three million consumers through close to 800 community-based offices nationwide.

Thanks to Congress extending the payroll tax cut, millions of Americans will continue to receive a fatter paycheck. However, a recent National Foundation for Credit Counseling (NFCC) poll revealed that 66 percent of workers did not realize that their paychecks were larger, in spite of the 2 percent payroll tax cut having been in place for more than a year.

In 2012, the maximum amount of earnings subject to the Social Security tax increased to $110,100 — up from $106,800 in 2011. The tax cut will put a significant amount of money back into the hands of consumers. For example, for those earning the maximum, the two percent reduction translates into a tax savings of more than $2200 annually. Even workers making $50,000 – approximately half of that amount – will see an additional $1,000 in their paychecks over the course of the year. This is money that can be put to good use, but only if consumers are aware it’s there.

This leaves employers with a unique opportunity to exercise corporate responsibility by offering financial education to their employees, starting with a solid understanding of how the payroll tax cut funds can be put to good use.

MMI challenges businesses to act upon this opportunity, noting that it offers advantages for not only the employee, but also the employer. In fact, the financial educators at MMI have made it easy for employers to offer their employees financial education through our comprehensive Financial Solutions program.

The program is designed to help employers, credit unions, banks and community organizations assist their employees, members and customers by providing financial education programs that address the most prevalent financial hardships and issues impacting individuals and families.

• Benefits that employers can realize by providing financial education include the following:
• Positions the employer as a trusted resource for financial information.
• Demonstrates that the employer is concerned about the financial well-being of the employee.
• Creates a more financially stable employee, one who is not distracted by financial concerns, collection calls while at work, or continually requesting advances from their paycheck.
• Provides an opportunity to educate the employee on the benefits of contributing to the employee retirement plan, something they may not have previously been able to do.
• Provides a platform for emphasizing the importance of saving, as using this money to begin or add to a savings account could provide a safety net for future financial emergencies.

Debt is often the main stumbling block standing between an employee and financial stability. A financial education workshop is the ideal place to illustrate the meaningful impact that putting the payroll tax cut money toward debt repayment can have on overall financial health.

Money Management International is a member of the NFCC. The NFCC is the nation’s largest and longest serving national nonprofit credit counseling organization. NFCC Members annually help over three million consumers through close to 800 community-based offices nationwide.

Did you know that your paychecks in 2011 were a bit heftier than in years past? If you didn’t, then you’re not alone. According to a January poll conducted by the National Foundation for Credit Counseling (NFCC), 66 percent of respondents did not realize that, thanks to a 2 percent Social Security tax cut, their paychecks were larger this past year.

The problem is, if consumers find it that easy to overlook more money in their paycheck, they are likely overlooking the impact their spending habits – even buying one cup of coffee a day – can have on their overall financial situation.

If you’re wondering how much money a two-percent tax cut really amounts to, consider this: The 2 percent Social Security payroll tax cut puts $1,000 back into the pockets of a family earning $50,000 annually – a significant amount of money that could mean the difference between financial stability and financial distress each month.

Those aware of the increase appeared to have allocated the money responsibly, with the largest number of respondents indicating they used it to pay off debt, while the second-largest number caught up on past-due bills. Smaller percentages of respondents either increased their retirement contributions or saved the money. Only 1 percent indicated that they spent the money on something for themselves.

It’s important to remember that the key to financial wellness is having a solid budget – you have to be aware of every penny you spend and every penny you earn.

The January poll questions and answers are as follows:

With the 2011 two percentage point payroll tax cut, last year I …

• … saved most of it (3 percent)
• … caught up on past-due bills (8 percent)
• … increased my retirement contributions (4 percent)
• … treated myself to something special (1 percent)
• … used it to pay off debt (18 percent)
• … didn't realize my paycheck was larger (66 percent)

The NFCC’s January Financial Literacy Opinion Index was conducted from Jan. 1 to Jan. 31, 2012 via the NFCC website (DebtAdvice.org), and was answered by 1,797 individuals.

Money Management International is a member of the NFCC. The NFCC is the nation’s largest and longest serving national nonprofit credit counseling organization. NFCC Members annually help over three million consumers through close to 800 community-based offices nationwide.

One way to fund a retirement is through an Individual Retirement Account (IRA).

You may have a good idea of where your money is going on a day-to-day basis, but before you start working on a spending plan or budget, it is important to call attention to the number one budget breaker: periodic expenses.

Have you thought about your taxes yet? If you’re like many Americans, you will procrastinate as long as you can—especially if you suspect that you might owe the IRS. But calculating your taxes before the deadline doesn’t mean you have to file early. What it does mean is that you’ll have more time to prepare for the results.