By Wayne Taylor, Executive Director Louisiana Baptist Foundation
This year you have a few extra days to file your federal and state income taxes.
The deadline to file your 2010 federal income taxes is Monday, April 18, 2011; your Louisiana income taxes are due Monday, May 16, 2011.
The United States Congress waited later than usual (mid-December 2010) to pass some changes to the federal tax laws.
Most of these changes are temporary, with some tax laws only good for 2011, others extend through 2012 and a few laws are retroactive to 2010.
Unless you have a simple tax return with no deductions, you may need a Certified Public Accountant (CPA) or tax software to ensure you get the maximum deductions and pay the least tax.
The already ridiculous tax system, coupled with Congress delaying and deferring revenue decisions until the last minute and passing taxes that are retroactive and temporary, is one reason the U.S. economy has yet to recover.
Due to indecision on the part of Congress, people who would take the risk to start and run a business are not able to plan ahead and evaluate to see if they can make a profit. If the rules of the tax game keep changing, entrepreneurs will not risk money to build buildings, buy inventory and hire people to work.
The following is a partial summary of last-minute tax law changes that affect individual income taxes.
The federal income tax brackets were adjusted for inflation, reducing individual income tax rates through 2012.
Qualified capital gains and dividends continue to be taxed at maximum rate of 15 percent through 2012.
The 2 percent reduction in Social Security tax for employees is only good for this year 2011.
If you are self-employed, you can deduct the cost of health insurance, not only to reduce income on Form 1040 line 29 but also on Schedule SE line 3 to reduce Social Security tax. This includes premiums paid for adult children (under age 27 at the end of the year) even if they are not a dependent.
A short-term “patch” to the ever- encroaching Alternative Minimum Tax, or AMT, was passed, providing a higher exemption amount for 2010 and 2011.
Some limitations on itemized deductions and personal exemptions for more affluent taxpayers have been repealed through 2012.
If you are a school teacher, the deduction for up to $250 for class room expenses was renewed through 2011.
The ability to deduct sales taxes in lieu of state income tax as an itemized deduction was extended through 2011.
If you or a dependent is in college, the American Opportunity Tax Credit will reduce your income taxes up to $2,500 for education expenses and can refund up to $1,000 if you did not pay any income taxes. This tax credit was renewed for 2011 and 2012 with higher income limitations and can be used for four years.
The maximum adoption credit for 2010 was increased to $13,170 per child and is refundable even if the taxpayer owes no tax.
A tax break that is near and dear to our heart at the Louisiana Baptist Foundation was retroactively enacted for 2010 and extended through 2011. If you are 70½, you can make a charitable donation up to $100,000 directly from your IRA to a church or charity and that distribution will not count as income.
The IRS offers “Free File” on-line tax filing to eligible tax payers on their website www.freefile.irs.gov.
The IRS hopes to save money by reducing errors caused by individuals as well as time and money printing and mailing forms and checks. Eligible tax payers can prepare and e-file federal income tax returns for free and should receive tax refunds within 10 days.
Twenty tax software companies make their products available for free if you have an adjusted gross income less than $58,000.
If your income is over $58,000, you can fill out electronic versions of the IRS forms online and e-file them for free. These “paperless” forms only do basic math and do not support state tax returns.
If your tax returns require more complicated forms or you want to maximize your itemized deductions, you can purchase tax preparation software or contact a professional tax preparer.
Some final tax tips: Do not fall for a Tax Anticipation Loan. They are a rip-off with interest rates as high as 40 percent and go as high as 500 percent APR. Just be patient; it can take as little as 10 days to have your tax refund direct-deposited into your checking account.
Louisiana does have a method for you to file your state income taxes on-line. Go online tohttp://revenue.louisiana.gov/sections/eservices/LAFileOnline.aspx
Another source of help filing your income tax is a local Volunteer Income Tax Assistance program (VITA). To find one near you, call 1-800-906-9887.