J. William Seabrooke CPA P.C.

The exclusive purpose for the information which is provided from this website is to disseminate information, and not to provide tax advice.

 Congress regularly changes the provisions of the U.S. Tax Code for different reasons.  One reason is to provide an offset to your income tax liability which is in the form of a “tax credit” which is similar to and almost as important as a credit posted to your credit card account.  Both reduce the amounts that you owe to either the taxing authority (Internal Revenue Service) or your credit card company.  You’ll never have too much of either!  Insofar as “tax credits” are concerned, they are classified as “refundable” or non-refundable”. 

Refundable tax credits are the best.  For example, if you do not owe any income taxes but you have a $2,000.00 refundable tax credit, you’ll receive a tax refund of $2,000.00.  However, in the same situation with a non-refundable tax credit of $2,000.00 you will receive no tax refund.

Four Tax Credits that Can Boost your Refund 

A tax credit is a dollar-for-dollar reduction of taxes owed.   Some tax credits are refundable meaning if you are eligible and claim one, you can get the rest of it in the form of a tax refund even after your tax liability has been reduced to zero.

Here are four refundable tax credits you should consider to increase your refund on your 2011 federal income tax return:

1.   The Earned Income Tax Credit is for people earning less than $49,078 from wages, self-employment or farming.   Millions of workers who saw their earnings drop in 2011 may qualify for the first time. Income, age and the number of qualifying children determine the amount of the credit, which can be up to $5,751. W  orkers without children also may qualify.   For more information, see IRS Publication 596, Earned Income Credit.

2.   The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, while you work or look for work.   For more information, see IRS Publication 503, Child and Dependent Care Expenses.

3.   The Child Tax Credit is for people who have a qualifying child.   The maximum credit is $1,000 for each qualifying child.   You can claim this credit in addition to the Child and Dependent Care Credit.   For more information on the Child Tax Credit, see IRS Publication 972, Child Tax Credit.

4.   The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low-to-moderate income workers save for retirement.   You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan.   The Saver’s Credit is available in addition to any other tax savings that apply. For more information, see IRS Publication 590, Individual Retirement Arrangements (IRAs).

There are many other tax credits that may be available to you depending on your facts and circumstances.   Since many qualifications and limitations apply to various tax credits, you should carefully check your tax form instructions, the listed publications and additional information available at www.irs.gov.   IRS forms and publications are available on the IRS website at www.irs.gov and by calling 800-TAX-FORM (800-829-3676).

 Links:

• 1040 Central
• Publication 596, Earned Income Credit (EIC) (PDF 281K)
• Publication 972, Child Tax Credit (PDF 128K)
• Publication 503, Child and Dependent Care Expenses (PDF 167K)
• Saver’s Credit
• Form 1040 Instructions (PDF 1,101K)
   

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