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Tax Tips
 
A Special Financial Education Center Update from State Treasurer Janet Cowell
 
Tax season is upon us and, in my capacity as State Treasurer, I want to help North Carolinians take advantage of low-cost tax preparation resources that will save them money and boost our state’s economy.

For many, a tax refund may be the largest windfall of money that they receive this year. Consider using your refund to pay down debt, or to make a one-time contribution to either your retirement savings or personal savings.

Here are five tips to make this tax filing season a success:

1. Take advantage of free resources

When it comes to tax preparation, more expensive does not necessarily mean more accurate or better service. Free tax preparation services are available to households earning $53,000 or less per year, military, and the elderly.

Free Tax Preparation

To find a free tax preparation site, call 800-906-9887 or view a listing of sites in your area.

Free Online Filing

IRS Free File (income limit of $60,000) offers a variety of tax software options for customers to prepare their own tax returns. Some providers also offer free or low cost filing of state tax returns. The website www.myfreetaxes.com offers free federal and state tax return filing (income limit of $60,000) with certified volunteers available to answer questions, through the Facilitated Self Assistance Program at the IRS.

2. File a complete return

It is important to ensure you have all the necessary documents before beginning the filing process. Make a list of all your sources of income and potential deductible expenses for the year.

Did you make payments on a student loan? Receive an early distribution from a retirement account?

These are commonly missed items that can impact your total tax liability. Avoid having to file an amended return by waiting for all relevant documentation.

3. File a timely return

The tax filing deadline this year is April 15th. If you cannot file your return on time, you may request an extension. Remember, the extension to file is not an extension to pay a balance due. If you cannot pay the full amount of taxes you owe, you should still file your return by the deadline and pay as much as you can to avoid penalties and interest.

4. If you have a balance due – know your payment options

If you have a balance due on your federal tax return, you have payment options. Contact the IRS immediately at 1-800-829-1040 or visit irs.gov/Payments to review your options. You may qualify for a short-term extension, an installment agreement, or an offer in compromise.

For a balance due on your North Carolina tax return, contact your nearest NCDOR service center or call 1-877-252-4983 to discuss payment options.

5. Start planning for next year

Start planning now for the impact that major life changes may have on your tax liability next year. Changes in the status of dependents, income, employment or marital status can have a significant impact on your tax refund or balance due. Additionally, major changes were made to North Carolina tax law for 2014. To avoid an unexpected tax bill, consult with your payroll department and tax advisor to ensure that enough federal and state taxes have been withheld throughout the year.

Earned Income Tax Credit

The Earned Income Tax Credit (EITC) is a federal income tax credit that benefits low-to-moderate-income working individuals. Single or married couples with income of $52,427 or less may be eligible for a federal credit of up to $6,143.

EITC is for workers whose income does not exceed the following limits in 2014:
  • $46,997 ($52,427 married filing jointly) with three or more qualifying children
  • $43,756 ($49,186 married filing jointly) with two qualifying children
  • $38,511 ($43,941 married filing jointly) with one qualifying child
  • $14,590 ($20,020 married filing jointly) with no qualifying children
To determine if you are eligible or to get more information, visit the EITC website or call 1-800-829-1040.