Tax season is here again! Do you fear doing your taxes or feel that it is a chore? It doesn't have to be scary or take a lot of work. If you prepare ahead of time, you will find it easy to do. Make sure you're aware of the tax credits available for families that can lower your taxable income.

Defining Tax Talk

The Internal Revenue Service or IRS has its own tax language. Below are standard tax words and phrases.

• Deduction: Any amount that can be subtracted from the total salary you pay taxes on.
• Credit: An amount of money the IRS allows you to deduct for different situations. There are many different credits you can take as a deduction if you are eligible. There are credits you can take just by having children, credits for earning under a certain amount of money, credits for the money you pay to go to college, and more. A credit will be deducted from your tax bill. If you do not owe anything, you will receive the credit in the form of a refund.
• Refund: Money that you will receive from the IRS if the total amount of your deductions and credits is more than the taxes owed on your earnings.
• Dependent: A child who lives with you or that you pay for half or more of his or her expenses during the year; or your spouse or parent if they are not able to work or take care of themselves.
• Filing Status: A category that is based on whether you're married or not, and the amount of the total household expenses you pay. You have to choose a filing status on your tax forms. You will be taxed according to which filing status you list on your taxes. The filing status you can choose from are:
  • Single (not married)
  • Married filing jointly (you file with your spouse)
  • Married filing separately (married, but you and spouse file separate tax returns)
  • Head of household (you have one or more children, and could be married or single. If married, you don't live with your spouse)
  • Widower
  
  For most of the tax credits, IF you are married, you MUST file as married filing jointly in order to receive these credits.
• Eligibility: In order to take credits or deductions, you will need to meet the rules for taking that credit or deduction. For example, in order to be eligible for the Child Tax Credit, you have to have a dependent child under the age of 17 years.

Popular Federal Tax Credits for Families

Here are the top tax credits for many families. You can take any or all of these credits if you qualify. See if any of these apply to you:

EARNED INCOME TAX CREDIT (EITC)

The EITC may be for you, if:

1. You are married and your combined salary is less than:
   • $34,692 a year (and you have 2 or more children).
   • $30,666 a year (and you have 1 child).
   • $12,239 a year (and you have no children).
2. You are single and your yearly salary is less than:
   • $33,693 a year (and you have 2 or more children).
   • $29,666 a year (and you have 1 child).
   • $11,239 a year (and you have no children).

This credit is best for: Single people or married couples with low incomes.

To receive this credit you must: Have a yearly salary that meets the limits based on the number of children you have. If you are married, your filing status must be married filing jointly.

CHILD TAX CREDIT

Do you know that you can receive a tax credit of up to $1,000 for each child that you have under the age of 17?

This credit is best for: Parents with children under the age of 17. You earn a credit for each child under 17.

To receive this credit you must: Have at least one child under the age of 17.

CHILD AND DEPENDENT CARE TAX CREDIT

This tax credit has several requirements. However, if you do quality for this credit, you can deduct a lot of the child care or dependent care expenses you paid in 2003.

This credit is best for:

• Working parents (both parents have to work) with children under the age of 13 who
  are in child care or in an after school care program.
• One parent who works and the other parent is a full-time student who doesn’t work and they have children under the age of 13 who are in child care or in an after school care program.
• Anyone who pays for the care of his or her spouse who has a disability and who is unable to care for himself or herself.
• Anyone who pays for the care of an ill or disabled parent.

To receive this credit you must:

• Work and earn enough to be taxed on that income.
• Pay for the care of a dependent: a child under 13 years old, a spouse with a disability, or a parent who needs care while you are at work.

DON’T MAKE THIS MISTAKE…

- Over 600,000 families did not take advantage of $238 million in tax refunds for Child Tax Credit
- 15% of eligible families do not take claim Earned Income Tax Credit

Don’t Forget Your State Tax Credits

Many states have their own Child Care and Dependent Care Credit. If the state that you live in has this credit, you can file this type of claim both in your state and federal taxes. Contact your state tax or revenue office for more information.

Currently the following states do have Child Care and Dependent Care Tax Credits:

Arkansas Minnesota California Missouri Colorado Nebraska Delaware New Mexico District of Columbia New York Hawaii North Carolina Idaho Ohio Iowa Oklahoma Kansas Oregon Kentucky Rhode Island Louisiana South Carolina Maine Vermont Maryland Virginia Massachusetts

Get Help to Prepare Your Taxes

Many working families do not use professional tax preparers because of the high costs. There are plenty of well-known tax preparation chains that have offices everywhere, but they can charge up to $300 or more per tax return. These fees are out of range for many families, and especially for many low income or elderly people on fixed incomes. At the other end, some families may use friends or coworkers who do taxes, on the side, and may not be aware of the latest tax updates or requirements.

It is important to make sure that when you do file your taxes, you are getting them done by someone who has enough experience and the latest information on tax laws. The IRS, states, and many private companies have come up with help to get free tax services to those who need it.

Try These Options for Free or Low Cost Help with Taxes

• The Volunteer Income Tax Assistance  (VITA) program, a free service created by the IRS, to help low-income people with their taxes. To find a program nearest you, call 1-800-TAX-1040 or 1-800-829-1040.
• The American Association of Retired Persons (AARP) has free tax preparation services for low income, non-English speaking, and senior citizens in many states. To find an office near you, visit www.aarp.org/taxaide  or call their toll free line at 1-888-227-7669.
• There are many states that have free tax assistance locations.
  • Alabama
  • California
  • Colorado
  • Iowa
  • Kansas
  • Kentucky
  • Maine
  • Massachusetts
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshite
  • New York
  • Northa Carolina
  • Ohio
  • Utah
  • Vermont
  • Wyoming
    
    To locate the nearest VITA site, call 1-800-829-1040.
• Other places that often offer free tax help are:

• Community colleges
• Law clinics
• Libraries

What You Need to Take With You

When you are ready to do your taxes, make sure you have everything you need to help things go smoothly. Hopefully, all through the year you have been keeping your important receipts and papers in a special folder or envelope so that you can just pick it up and take it with you.

Here are the papers and information you will need to take with you:

• Photo identification such as a driver's license, VISA, or work I.D.
• All W2s and 1099s (yours and spouses)
• All receipts (child care, dependent care - or totals for each; tuition expenses, moving expenses, other expenses you will deduct)
• Tax ID numbers for all providers of care
• Social Security Numbers, birthdates of all family members listed on your tax returns
• A copy of last year’s tax return(s)

With all the necessary papers, you are well on your way to getting the tax credits and deductions for which you qualify.

For More Information

There is a lot of help out there to help you with your taxes. Here are some resources.

• National Women's Law Center . By Phone: 202-588-5180. By Email: info@nwlc.org
• AARP By Phone: 1-888-687-2277
• Children's Defense Fund . This website has a lot of state and federal tax resources. By Phone: (202) 662-3645.
• Volunteer Income Tax Assistance. A free volunteer program, under the IRS, to help low-income families prepare their taxes. By Phone: 1-800-829-1040
• Center for Budget Priorities . The center has information and resources for low-income families. They also focus on tax issues and other federal and state policies and programs affecting families. By Phone: (202) 408-1080