Building Bucks Taxes and Tax Credits

Take advantage of tax deductions and incentives – Earned Income Tax Credit (EITC) – Child Tax Credit (CTC) Refund splitting – Clients who file electronically can instruct the IRS to direct deposit their refund into multiple accounts

Income Tax Basics Due annually on April 15 Compares your actual taxable income to the amount you have paid through the year – If you’ve overpaid, you will receive a refund – If you have not had enough withheld, you will owe money to the IRS

Filing Your Income Taxes Withholding – determined by income level and information on W-4 form – Withholding allowances claimed will reduce amount withheld – If you claim more than 9 allowances, your employer may be required to send your W-4 to the IRS for review

Tax Filing Strategies 3 Main Strategies 1.Do it yourself via… Paper Software E-filing 2.Professional assistance 3.Assistance from a volunteer-run program

Do It Yourself Print paper copies of necessary forms, fill out, mail in to IRS OR File taxes electronically PROS: Costs nothing, empowering, helps you get a handle on your own financial situation CONS: More difficult, time consuming, and higher chance of mistake

Tax Filing with Assistance Professional Assistance – Certified Public Accountant (CPA) – Tax preparation business Volunteer Assistance – Volunteer Income Tax Assistance (VITA) – Taxpayer Counseling for the Elderly (TCE)

VITA and TCE Provide income tax assistance to low- income individuals, handicapped or elderly Volunteers trained by the IRS and the Wisconsin Department of Revenue prepare basic income tax returns free of charge What to Bring: – Forms W-2 wage and tax statements – Information on other sources of income and any deductions – Social security cards – Rent certificate or copy of property tax bill – Record of any Wisconsin Works payments

Filing Income Taxes Necessary Information: Social Security Number or Individual Taxpayer Identification Number Record of all income sources over the last year Information on any income adjustments Deductions/Credits Information: Advance Child Tax Credit Payment Child Care Costs Education Costs Adoption Costs Charitable Donations Job Expenses Medical and Dental Expenses

Steps to Filing Income Tax 1.Determine gross income 2.Calculate Adjusted Gross Income (AGI) 3.Subtract deductions 4.Claim exemptions 5.Calculate tax rate 6.Subtract credits 7.Calculate your refund or taxes owed

Tax Refunds Ways to receive your refund: – Mailed from the IRS within 6 weeks of receiving your return. – Direct deposit into your checking, savings, or retirement account. – Split deposit between multiple accounts.

If You Owe Promptly pay the tax owed including any additional penalties and interest. You can pay the bill with your credit card, electronic funds transfer, check, money order, cashier’s check or cash. An installment agreement may be requested if you cannot pay the liability in full.

Reduce Taxes Due Next Year Contribute part of your paycheck to an IRA. Purchase a home or real estate. Take a “tax” loss on your investments. Have dividend or municipal bond income. Place some of your income into trusts and estates, a type of “tax shelter.”

Managing a VITA/TCE Site Complete IRS certification process Focus on key client groups – Tax filers with larger refunds – Couples with children – Older taxpayers Promote savings and asset building 1.Help families get through unexpected crises 2.Assets can be used as equity 3.Assets can be invested 4.Provide an inheritance for children

Types of Saving Checking Account – Faster refund – Easily accessible Savings Account – Faster refund – Slow spending of refund Savings Bond – Easy to save on behalf of others – Good return CD – Save for a few months for a goal or expense – Good return

Asset Building Model (use while delivering tax preparation) 1.Promotional materials – highlight opportunities to save. 2.Intake – identify clients with/without bank accounts and those with interest in savings. 3.Waiting Period – set up accounts and share more product information. 4.Tax Preparation – encourage clients to save. 5.Quality Review- urge client to use unexpected refund for savings. 6.Exit Surveys

Clients without Refunds Provide tax planning advice. Referral to financial literacy workshops. Encourage credit counseling for those with debt and credit issues.