AMES, Iowa -- With the April 15 tax deadline just a month away, an Iowa State University accounting professor says last-minute filers can still find tax savings. But his best tip this year is simply to make sure you file on time to receive full benefit from the government's recently-announced tax rebate.
ISU Associate Professor of Accounting Bill Dilla oversees the campus IRS Volunteer Income Tax Assistance (VITA) program. He says that most taxpayers don't even have to worry about whether they qualify for the economic stimulus rebate. The Internal Revenue Service will figure eligibility and amounts in most cases, and begin sending payments to an estimated 130 million people in May.
"If you're unsure about whether you qualify after you look at the IRS materials (http://www.irs.gov/), it's still better to file your return," said Dilla. "Even if you have a zero tax balance, you may still qualify for it if you have earned income. Some may be underneath the income threshold that requires them to file a tax return, but they still might have enough to get the credit."
Even if this wasn't a rebate year, Dilla says it's always best to beat the April 15 deadline -- especially for those who can't afford to pay their taxes at that time.
"If you owe tax liability and you think you'll be unable to pay, you should still file your return by the deadline and then contact the IRS, because they will work out a payment plan with you," he said. "It's better to work out a plan with them rather than just throw in the towel and not pay, because if you don't file, there are serious consequences as far as penalties go."
Dilla reports that there are also benefits to e-filing. For those receiving a refund, e-filing saves the IRS a step and hastens the process of receiving payment. And for those who owe, they can electronically defer having money withdrawn until April 15.
But for those who insist on paper, Dilla says they can still save time and money by using one of the numerous income tax software packages. The software programs help taxpayers automatically find some deductions the they may have previously missed.
And people with adjusted gross income of $54,000 or less can use IRS Free File (http://www.irs.gov/app/freeFile/jsp/index.jsp?ck), which connects them to downloadable free filing software from the major companies.
Of course, trained tax professionals, like Dilla, also can help find some last-minute tax savings. Here are some of his top tips for last-minute filers:
- Education expense credits. "If you're not claimed by someone as a dependent and you've got some post-secondary education expenses, you may qualify to deduct them," he said. "For a lot of people in the first two years of college, it's the Hope Education Credit. For others, it's the Lifetime Learning Credit."
- Child care tax credit. "If your children are under a certain age and you're paying for child care in order to work, this is an important credit," Dilla said.
- Low-income child tax credit. "That is a credit for being low-income and having children, and it doesn't depend on child care or anything else like that," Dilla said.
- For low-income taxpayers, the Earned Income Credit (EIC). "The important difference with this credit is that it's a refundable credit," he said. "So if you owe money on your taxes, but you have a larger earned income credit, you'll receive money back from the government. Any low-income taxpayer can qualify for EIC, although having dependents does mean that you can have more income and qualify."
- Energy tax credits. "If you replace an old, inefficient furnace, or you get new windows, you may be eligible for an energy credit," said Dilla. "It may be a small amount, like 10 percent of what you spent, but it comes off the bottom line of your taxes."
- Making IRA contributions to save on tax liability. "If you are below a certain income threshold, you can still contribute to your standard IRA up to April 15 and get a tax deduction for 2007," he said.
Dilla also encourages taxpayers to receive free live assistance from VITA volunteers, like the accounting students he supervises at ISU. They're available on Tuesdays from 3 to 5 p.m., and Wednesdays and Thursdays from 6 to 8 p.m. in room 2148 of the Gerdin Business Building. They'll be there through Thursday, April 10, except during ISU's spring break from March 17-21.