Jackson Hewitt(R) Weekly 'Tax Time Tip': Why Filing A 2009 Tax Return May Be Advantageous For Individuals Not Required To Do So By Law
PARSIPPANY, N.J. // PRNewswire-FirstCall // -- Not everyone is required to file an annual tax return. However, hundreds of changes to the tax code for 2009 present advantages for many individuals to file – even if they are not obligated to by law. With Form W-2's and other key tax documents now in hand, millions of people within certain categories should evaluate whether or not to file a 2009 tax return. According to Jackson Hewitt Tax Service®, the decision may not be obvious.
This Week's Tip: If you are not required to file, by law, evaluate if it may be a good idea to do so. "There are certain individuals who are not mandated to file an annual tax return, due to certain conditions," said Mark Steber, chief tax officer, Jackson Hewitt Tax Service Inc. "But in light of the many tax credits and deductions available this year, filing a tax return may be a strong consideration for individuals who may qualify for certain credits and/or deductions."
You are not required to file an annual tax return if you:
- Have an income below the annual minimum requirements ($9,350 for Single; $18,700 Married Filing Jointly; $3,650 Married Filing Separately; $12,000 Head of Household; $15,050 Qualifying Widow / Widower)
- Qualify as a dependent child and have income less than $950
- Only receive income from Social Security or Veterans Administration (VA) Disability
Steber highlights five reasons those who fall into the above groups may want to file a return this year:
- The work you do can work for you: Available for tax years 2009 and 2010, the Making Work Pay Credit equals 6.2 percent of a taxpayer's earned income – with a maximum refundable tax credit up of up to $400 for single filers and up to $800 for married couples filing a joint return. Taxpayers should also speak with a tax preparer about any available occupation-based deductions, such as those for subscriptions, uniforms and other expenses.
- More incentives to keep learning: There are several deductions and credits related to education. One new benefit, the American Opportunity Credit (formerly called the Hope credit), is available to taxpayers who are in the first four years of college or a trade school. This credit applies to students (for example, the taxpayer, a spouse, or a dependent) who is in the first four years of college or trade school and enrolled in school at least half time. The maximum credit available is $2,500 with 40% of the total credit treated as a refundable credit.
- New home? New credit: One of the most notable new tax changes gives those buying a home for the first time the ability to deduct up to $8,000 ($4,000 for those who file separately) of the cost of the home, provided they close by June 30, 2010. The credit is limited to 10% of the purchase price of the home up to $8,000 and is fully refundable. You do not have to repay the credit unless you move out of, or sell your home within 36 months of the purchase. In addition, taxpayers (and their spouses) who have lived in their home for five consecutive years out of the eight years preceding closing on a new house may qualify for a reduced credit ($6,500 or $3,250 for those who file separately).
- Children can mean credits: Claiming a qualifying child as a dependent is a common way to enhance a tax refund, provided certain conditions are met. The Earned Income Tax Credit is based on the taxpayer's total earned income (income received from wages and self-employment) total adjusted gross income, and the number of qualifying children. This popular credit has been expanded to offer higher credit amounts, higher income thresholds and a new provision for taxpayers with three or more children. The Child Tax Credit and the Additional Child Tax Credit are other options for taxpayers who meet certain income qualifications.
- Health Insurance Credit: The Health Coverage Tax Credit (HCTC) is a unique tax credit that individuals can receive either monthly as their health plan premium becomes due or yearly as a credit on their federal tax return. This credit pays 80% of a qualified health plan premium for those who are eligible individuals, which may include pension recipients who are at least 55 years old, individuals receiving a Trade Readjustment Allowance (TRA) under the Trade Adjustment Assistance (TAA) program and attending TAA-approved training, or individuals receiving a wage subsidy under the Alternative TAA (ATAA)/Reemployment Trade Adjustment Assistance (RTAA) program for older workers. To be eligible, taxpayers must also meet additional requirements and have a qualified health plan. Individuals may also be able to obtain the tax credit for family members if certain conditions are met.
Here is an example of a situation in which someone may decide to file even though it is not required: A single father of one works part-time and attends school full-time. He received a Pell Grant for all tuition and fees, but paid $1,200 for books and software required for his courses. His income in 2009 was $5,000 with withholding of $50 – well below the minimum filing requirement of $9,350 for a single taxpayer. While he is not required to file, if he does do so, he may be eligible for several credits and would receive a refund of $2,849 – $50 in withholding, $310 through the Making Work Pay Credit, $1,709 through the Earned Income Tax Credit, $300 through the Additional Child Tax Credit, and $480 in American Opportunity Credit.
"Finally, remember that tax credits offset your tax liability, which allows you a dollar for dollar reduction in your income tax obligation," added Steber. "Refundable credits allow any excess credit amount over the income tax liability to be treated like withholdings."
About Jackson Hewitt Tax Service Inc.
Jackson Hewitt Tax Service Inc. (NYSE: JTX), with more than 6,000 franchised and company-owned offices throughout the United States, is an industry leader providing full service individual federal and state income tax return preparation. Most offices are independently owned and operated. Jackson Hewitt is based in Parsippany, New Jersey.
SOURCE Jackson Hewitt Tax Service Inc.