Need advice on tax credit, retirement savings? Here are six tips to help.
Your age and your income may make you eligible for tax credits if you make the right kind of payments to a retirement plan, either through your employer or a private scheme.
Six things you need to know about savers credit:
1. The Savers Credit, also called the Retirement Savings Contribution Credit, is for people with the following 2011 income:
Single people, married couples claiming separately, or widows and widowers, up to $28,250
Breadwinner up to $42,375
Married couples claiming together $56,500
2. To be able to claim you must be 18 or over, not have been a student full time in the last year, and not been named as a dependent on another return.
3. If you contribute to an eligible IRA or a 401k or another plan, you may be able to get up to $1000 credit ($2000 for a joint claim). This is calculated as a percentage of the eligible contribution. The high rates are for those with the lowest income.
4. In your calculations, you need to take off any payouts from your plan due to the contributions you’ve made. This is in the case of payouts received over the two years prior to claiming credit plus the claim year and any time remaining at the end of the claim year before the date due, including extended periods.
5. Most claimants can deduct at least some money contributed to an IRA.
6. Use form 8880 to claim your tax credit.
Innocent Spouse Relief has always been available as a way for taxpayers who file joint tax returns and who were not aware, nor had any kind of reason to be aware, that her or his spouse had underpaid or understated their liability for income taxes. It was designed to offer the innocent taxpayer some protection from the faults of their partners and spouses and details of how it works were to be found in Publication 971 which was entitled Innocent Spouse Relief.
The regulations detailed in Publication 971 state that innocent spouse requests that are seeking relief from liability need to be filed within 2 years from the time that the IRS begins action for collection against the spouse. The point of this time limit was always that it was established to encourage early and swift resolution while there was still evidence remaining. However it has been announced that the IRS now intends to issue new regulations stating that they will be removing this two year time limit. In doing so they have stated that the reason for its removal is that they wish to extend the period in order to assist more innocent spouses in their relief requests.
From now on the IRS will not be applying that 2 year limit to any equitable relief cases and any taxpayers who have previously been denied relief requests purely on the basis of the two year limit are now eligible to reapply if they wish to. To do so they need to fill out IRS form 8857. In addition, those taxpayers who have ongoing cases currently held in suspension are now going to be afforded the benefits of the new rules and need not restart their application. Similarly they will not be applying the two year restriction to any cases that are pending litigation that involve equitable relief and if litigation has become final, they will suspend collection under many circumstances.
All changes are effective immediately and can be found in Notice 2011-70.
Alex is a freelance journalist and financial blogger. He loves to write about football and jazz but spends most of his days writing about mortgages, credit cards and tax reduction.