Taxes: Suggestions for Preventing Problems with Your Income Taxes
Authored By: Oregon Law Center and Legal Aid Services of Oregon
1. Use a certified preparer if you need help with taxes.
If you pay someone to prepare your tax return, choose that preparer wisely. Taxpayers are legally responsible for what's on their own tax returns even if prepared by someone else. So, it is important to choose carefully when hiring an individual or firm to prepare personal returns. Most return preparers are professional, honest and provide excellent service to their clients. In Oregon, paid tax preparers must be licensed. If you pay the preparer, he or she also has to sign your tax return. CASH Oregon offers free tax preparation for people who live in Multnomah, Clackamas or Washington county. To find tax preparation services in other counties, visit AARP Tax-Aide or call the IRS at 1-800-829-1040 to find the nearest free tax preparation site.
2. Use your correct Social Security number on your tax return.
If you use the wrong Social Security number it may delay your refund. Do not use a false Social Security on your tax return. If you cannot receive a valid Social Security number, you should request an "ITIN" number and use it to file your tax return. The ITIN number can be requested by filling out Form W-7. The ITIN number is only for filing your taxes and cannot be used for working.
3. Use the correct number of dependents on the form you file with your employer..
When you start a job, you will have to fill out a Form W-4 where you have to write down the number of allowances you may claim. Generally, you may claim an allowance for each dependent you will claim on your tax return. The number of allowances determines, for the most part, the amount of taxes taken from your wages during the year. If you claim more allowances on the W-4 form than you really have, it is likely that you will owe taxes when you file your tax return. It may even result in fines for you. For more information, see "How much should be taken from my check for taxes?"
4. Know the difference between Credits.
Each one of the tax credits has different rules and they often change from year to year:
Earned Income Credit (EIC)(for 2009): It can give you a refund of up to $5,657, even if no taxes are owed. However, to qualify, your children have to live with you for more than 6 months out of the year. Also, you and the children need to have valid Social Security numbers. If you are married, and live with your spouse, he/she also needs to have a valid Social Security number so your family can qualify for the EIC.
Note for immigrant families:If some of your family members do not have valid Social Security numbers, but are in the process of legalizing and will receive valid numbers in the future, you cannot receive the EIC now. However, when they receive the valid numbers, you can fill out a1040X form, which is an amended return, for the last three years and receive the EIC for those years.
Child Credit:The child credit is a non-refundable credit of up to $1,000 for each qualifying child. To be a "qualifying child," the child must be under 17 years old, you must have provided over half their support, and they must have lived with you for over half the year. This credit can be claimed for certain other relatives that are not your children?for example, your brother or sister. To see if you might be eligible for this credit, review IRS Publication 972 about theChild Tax Credit.
Additional Child Tax Credit:If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim some or all of the difference as an "Additional" Child Tax Credit. The Additional Child Tax Credit may give you a refund even if you do not owe any tax. This credit is claimed by completing and includingForm 8812with your tax return.
Child and Dependent Care Credit:If you paid someone to care for a child, spouse, or dependent, so you could work or look for work, you may be able to claim this credit. You will be required to identify the care provider on your tax return. To learn more, review IRS Publication 503 aboutChild and Dependent Care Expenses.
Oregon Working Family Child Care Credit:Low income families who pay certain child care expenses may be eligible for this credit on their state tax return. Be sure to keep proof of these expenses in case the state requests it.
Dependent Exemption: You may be able to claim people that you support as "dependents" on your tax return. Each dependent reduces your taxable income, which reduces the tax you owe. To figure out how many dependents you can claim, see IRS Publication 501 aboutExemptions.
The requirements mentioned here are only some, but not all, of the requirements for these credits. Before claiming these credits, you should carefully review the requirements to make sure you qualify. General information about claiming these credits is available in IRS Publication 17,Your Federal Income Tax.
5. Keep proof of expenses.
Each year theInternal Revenue Service (IRS)denies refunds to thousands of persons until they can prove certain things, such as if they lived with and supported their children. That is why it is very important to keep receipts for rent, electricity, and other expenses. Families with dependents in Mexico or Canada should also keep any money orders or transfers sent to your dependents in those countries.
6. Pay attention to letters from the IRS.
Be sure to read anything you get from the IRS very carefully. Often, there is a time limit for responding and it is very important to respond before the deadline. If you don't respond on time, you may lose important legal rights. If you don't understand what the notice says or need help responding, you can call the IRS at the phone number on your letter, or call the Low Income Taxpayer Clinic at Legal Aid Services of Oregon. For more information about responding to notices from the IRS, please see [link to brochure about IRS notices].
7. What can I do if I need more help with a tax problem?
Call the Legal Aid Low Income Taxpayer Clinic and apply for our services. If you are eligible, we will make an appointment for you to speak with an attorney. After your appointment, we will review your case to determine whether we can help you.
Legal Aid Services of Oregon is an independent non-profit law firm that provides statewide legal services to low-income clients. The Low Income Taxpayer Clinic is designed to help people who cannot afford a private attorney with their tax problems. The Low Income Taxpayer Clinic is not part of the IRS and we do not share your information with the IRS without your permission. We never charge a fee for our services.
Low Income Taxpayer Clinic
Legal Aid Services of Oregon
503-224-4086 or 888-610-8764