Category: irs payment

Category: irs payment

What Education Credits are Available?

What Education Credits are Available?

Tax relief

Taking advantage of any tax credit you qualify for can reduce your tax burden significantly. Filling out IRS forms can be daunting and confusing, especially when it comes to knowing what credits and deductions you can claim. The tax relief credits you may qualify for aren’t always clear. You don’t want to miss out on any tax benefits you’re entitled to, but you also don’t want to raise any red flags by claiming a credit that you don’t qualify for. 

Some of the education credits are significant and can help relieve some financial burdens you may be experiencing while attending school, along with having a job and other responsibilities. If you’ve attended college this year or are currently attending college, there are some tax relief options available. Here are some of the details so you don’t miss out on important tax advantages.

The American Opportunity Tax Credit

The American Opportunity Tax Credit helps taxpayers potentially increase their tax refund or reduce their balance owed. You can claim up to $2,500 in tax credits on your tax return, which can be used to purchase school supplies and materials, as well as be applied to tuition and other associated fees. The amount of tax relief you receive depends on your adjusted gross income. Single taxpayers should not exceed an adjusted gross income of $80,000, and married taxpayers filing jointly should not exceed $160,000. Anyone with a lower income than these numbers can take advantage of a refundable credit of up to 40%, which is received in the form of a check directly from the IRS if no taxes are owed.

The Lifetime Learning Credit

The Lifetime Learning Credit is also an important education credit to pursue. It allows taxpayers to take advantage of up to a $2,000 credit each year out of the first $10,000 in educational expenses. And as long as a taxpayer’s adjusted gross income does not exceed $58,000 for individuals and $116,000 for married filing jointly taxpayers, then a credit of up to $2,500 can be claimed. As the credit name indicates, there’s no limit on how many years you can claim the Lifetime Learning Credit, as long as you are enrolled in college and incurring educational expenses.

Rocket Tax offers virtual credit counseling and tax preparation to ensure you receive all of the tax benefits you can take advantage of. Education credits can put money directly back into your pocket, but you just have to remember and keep track of all the expenses you incur related to your education. Any tax relief amount can help you reduce the amount you owe after filling out your IRS forms or potentially give you a nice increase in your tax refund. We are here to help you make sense of all the education credits available to you, so contact us today to schedule an appointment and speak with a tax professional.

How Does the Coronavirus Stimulus Package Impact You?

How Does the Coronavirus Stimulus Package Impact You?

When the coronavirus began spreading rapidly across the country, immediate action was needed to help individuals, families and businesses impacted by it. The Coronavirus Aid, Relief and Economic Security Act (CARES) was a $2 trillion stimulus package designed to do exactly that. Most people should have received their allotted IRS payment of $1,200 for an individual, $2,400 for people married filing jointly and $500 per qualifying child in the household. These payments were based on your most recent tax filing. And if you have not yet filed your 2019 taxes, then you may receive a tax credit with your 2020 tax return to ensure you receive the proper amount. Here are some other ways the coronavirus stimulus package may impact you.

Unemployment Payments And The Paycheck Protection Program

The dollar amount of unemployment payments increased by $600 per week through July 31, 2020. The qualifications for unemployment has also expanded temporarily to help people who previously may not have qualified, like freelancers, part-time workers, independent contractors and self-employed workers. The Paycheck Protection Program was also implemented to help small businesses with less than 10,000 employees keep the majority of the workforce on the payroll with benefits. If you lost your job or had to temporarily close your business due to the coronavirus pandemic, these aspects of the CARES Act may be the most impactful for you.

No Penalties On Early Retirement Withdrawal

Typically individuals have to pay a 10% penalty for withdrawing funds from their retirement plan before reaching the required age. However, this penalty is waived for up to $100,000 of funds withdrawn as long as you qualify as being impacted by the coronavirus.  The qualifications include:

  • You or someone in your household is diagnosed with the coronavirus
  • Experiencing financial hardships due to the inability to work
  • Reduction in hours worked as a result of the coronavirus
  • Inability to work due to child care closures

Are Stimulus Payments Made If No Tax Return Is Filed?

If you don’t file a tax return due to only having disability income, social security retirement or railroad retirement benefits, you may still qualify for an IRS payment through the CARES Act. The IRS payment will come via the same method you use to get your regular checks, either by mail or direct deposit. The same goes for anyone who only received Veteran Affairs benefits and don’t file a tax return as a result.

Tax Credits For 2020

Your tax situation may have changed this year compared to your most recent tax return filed. Since the IRS payment is made based on your last-filed tax return, you may not receive a portion of your stimulus payment if you recently had a child, were removed as a dependent from someone else’s tax return or other circumstances. However, you may still get tax relief on your 2020 taxes in the form of a credit for the amount you should have received.

Rocket Tax is here to help you understand exactly how the CARES Act impacts you directly. Everyone has been impacted differently, so contact us today to see how we can help you get the most tax relief possible before the tax deadline.