Whaaaat?, you say. You’re working on 2014 between now and April 15th.
But if you’re one of those people who overlooked a tax deduction or, better yet, a tax credit like EITC, you’re running out of time to amend your 2011 return and capture some of that money.
An amended return must be filed within three years of the date you filed the original return or within two years of when you paid the tax.
Fix your tax glitches
Tax law allows you to amend returns when you’ve discovered an error, that’s not math related. (If it’s just math, the IRS will fix it without an amendment.)
Remember that you can not only do better with this year’s return, you have the right to go back to the last three tax years to claim money you left on the table in prior years. But the IRS may correct your math blunders, but it won’t claim overlooked deductions or credits for you.
Overlooked tax savings
The biggest missed deductions for my bankruptcy clients are mortgage interest and taxes paid through a Chapter 13 plan.
My client last week had paid $65,000 in mortgage interest through his Chapter 13 plan over 5 years, but hadn’t claimed it on his taxes. And come April 15th, he’ll lose the chance to go back to the 2011 return and claim the deduction, and the reduction in tax the deduction brings with it.
Property taxes and state income taxes, if paid through a Chapter 13 plan, ought to be equally deductible.
And if your Chapter 13 took care of business debts or payroll or sales taxes, those may be deductible business expenses.
Deductions vs. credits
We talk loosely about “writing off” certain expenses on our taxes. That’s short hand (or short-speak) for a deduction.
A deduction reduces the amount of income on which our taxes are figured. Less income, less tax.
But better than a deduction is a credit. A tax credit is like a preloaded credit card. It’s a dollar for dollar reduction in the actual tax you owe.
Which brings me to the Earned Income Tax Credit, money available for the claiming, by low and moderate income families.
Earned Income Tax Credit
This is one of the very few tax breaks that go to low income Americans; studies show most tax breaks go to the very rich (but that’s another post).
We’re talking real money here: the smallest credit for a single person with no children is $496; the largest, for a family with three or more children is $6,143.
A family with three or more children can claim the credit for 2014 even if their income was $52,427. And you don’t have to have children to get the credit if you are over 25, not claimed as a dependent by another taxpayer, and made less than $14,590.
Here’s the IRS EITC page with links and more detail about who qualifies and how to claim the credit.
The United Way’s EarnItKeepItSaveIt program helps taxpayers, for free, file to claim the credit.
Only days left
You lose out on a refund or a tax credit for 2011 if you don’t amend your return in time. The time, as I calculate it, is April 15, 2015.
So if you left money on the table for prior tax years, get moving and get an amended return, or an original return on file, in time to get your money back.
Image in the public domain courtesy of Nemo and Pixabay.