For those who have yet to file, some 11th-hour tax guidance
Steven J. Elliott, a senior tax manager for UHY Advisors in New York answered questions in an online chat on Boston.com yesterday. Here are some last minute tax tips he offered.
Q. I bought a hybrid car in February of last year. I never considered myself as a high wage earner but when I tried to apply for the tax credit, the AMT eliminated the credit. I do not have to pay the AMT, but apparently I am too close to the limit. Are there any alternatives or anyway around this problem? I feel duped by the car company that so widely promoted the credit.
A. Consider having a CPA take a look at your return . The car manufacturers can't know everyone's tax situation.
Q. Please explain the $4,000 hidden deduction for tuition -- line 35 on 1040 reads domestic production activities deduction. I have a freshman in college.
A. You need to file Form 8863 to claim your daughter's education expenses and to see whether claiming the deduction of $4,000 is better than claiming the Hope credit. Hope credits are available for the first two years (freshman and sophomore). After that, the lifetime learning credit is available.
Q. My 81-year-old mother lives with me. She draws Social Security, her only income. Almost all of her money goes to insurance and medications. My husband and I pay all utilities and groceries and transportation costs for her. Can we claim her as a dependant?
A. Yes, it sounds like you can claim your mother as a dependent this year since her income (not counting Social Security) is less than $3,300.
Q. My husband owns a sole proprietorship for which he is claiming income. I do his books, but do not receive a salary per se. How can I claim the child care that I paid for while I was doing his books?
A. Unfortunately, if you are not receiving income via Form 1099 or any other earned income, or are not also disabled or a part-time student, you cannot claim the child care costs.
Q. If a 17-year-old is being claimed by his mom as a dependent, can this child still file a return and get a refund?
A. Your son or daughter is still able to file their own return (but not claim the dependency exemption) and be entitled to any refund due to them.
Q. I owe this year and right now don't have enough. What happens when I mail in my taxes without money? Can I pay with a credit card?
A. You are doing the right thing by filing even if you can't pay. IRS and the states will send you a notice about a month from now. Pay whatever you can now to reduce interest and late-payment penalty. You may later be able to qualify for installment payments. [And] yes, you can pay by credit card, but will pay some fees for that. Go to irs.gov and mass.gov for details.
Q. Does filing an extension in any way raise a red flag or equate to a higher rate of audit?
A. No, No, No -- filing an extension does not raise any red flags. Millions of taxpayers file extensions for a variety of reasons each and every year.
