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Time Running Out To Claim Prior Year Tax Breaks

By Cathy Moran

hourglass-23654_1280Time is running out on your 2011 tax return.

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.)

I’ve written lots  about overlooked tax deductions and credits.

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 IRS has instructions on how to claim the credit for past years, including links to the earnings caps for 2011, 2012, and 2013.

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.

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Filed Under: Taxes

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

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You’ve arrived at the Bankruptcy Soapbox, a resource of bankruptcy information and consumer law.

Soapbox is a companion site to Bankruptcy in Brief, where I try to be largely explanatory and even handed (Note I said “try”).

Here, I allow myself to tell stories and express strong opinions. We dig deeper into how to consider bankruptcy and navigate a bankruptcy case.

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Bankruptcy specialists for individuals and small businesses in the San Francisco Bay Area

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