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Higher Education Tax Credits

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This is an education tax credit update from a Minneapolis tax lawyer.  American Opportunity Tax Credit and the Lifetime Learning Tax Credit are two federal tax credits designed to help eligible taxpayers offset their higher education expenses.

To qualify for either credit, a taxpayer must pay postsecondary tuition and fees for himself, spouse or dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, the student cannot file for the credit.

Only one of the credits is available in a single tax year per each student. This means that, in a given tax year, a taxpayer cannot claim both credits for the same student’s college expenses. If a taxpayer pays college expenses for two or more students in the same year, then he can choose to take credits on a per-student, per-year basis. For example, the taxpayer can claim the American Opportunity Credit for a sophomore daughter and the Lifetime Learning Credit for a senior son.

Let’s look closer at some of the key facts about American Opportunity Tax Credit and Lifetime Learning Tax Credit.

The American Opportunity Credit

The credit is available for students enrolled in a post-secondary education program in pursuit of an undergraduate degree or other recognized educational credential, but only for the first four years. The student must be enrolled at least half time for at least one academic period. Qualified expenses include tuition and fees, coursed related books supplies and equipment.

The credit can be up to $2,500 per eligible student. The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return. Moreover the credit is refundable; this means that a taxpayer may be able to receive up to $1,000 in refund even if he owes no taxes.

Lifetime Learning Credit

Unlike the American Opportunity Credit, the Lifetime Learning Tax Credit is available for all years of postsecondary education and for courses to acquire or improve job skills. This also means that the student does not need to be studying in pursuit of a degree or other recognized education credential. Qualified expenses include tuition and fees, course related books, supplies and equipment.

The credit can be up to $2,000 per eligible student. The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return. This tax credit, however, is not refundable and is limited to the amount of tax a taxpayer must pay on his return.

If you have questions with respect to any tax credits, contract us NOW to discuss your case with an experienced Minneapolis tax attorney.

Tax Filing Deadline Extended to April 18, 2011

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On January 4, 2011, IRS extended the tax filing and tax payment deadline for individual taxpayers until April 18, 2011. The extension is made due to the Emancipation Day, a holiday observed in the District of Columbia, which falls this year on Friday, April 15, 2011.

Taxpayers who request an extension will have until October 17, 2011, to file their 2010 tax returns.

This year, the IRS expects to receive more than 140 million individual tax returns this year, with most of those being filed by the April 18 deadline.

The IRS also cautioned taxpayers with foreign accounts to properly report income from these accounts and file the appropriate forms on time to avoid stiff penalties. IRS Commissioner Doug Shulman stated earlier that the IRS “will continue to focus on offshore tax compliance and people with offshore accounts need to pay taxes on income from those accounts.”

Sherayzen Law Office is an experienced tax law firm that has helped numerous clients in Minnesota and across the United States to bring their affairs, including proper reporting of foreign financial accounts, into full compliance with the U.S. tax laws.

Contact Sherayzen Law Office NOW to discuss your case with an experienced Minneapolis tax attorney!

Tax Lawyers Minneapolis | 7 Reasons To File Tax Return Even if You Do Not Have to Do It

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In some case, you may want to file a tax return even though you do not have to. Here are the top seven reasons for this course of action for the tax year 2010.

1. Tax Refund. If federal income tax was withheld from your paycheck, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax, you may be entitled to a tax refund. You will only be able to get it if you file a tax return.

2. Making Work Pay Tax Credit. You may be able to take this credit if you had earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.

3. Earned Income Tax Credit (“EITC”). You may qualify for EITC if you worked, but did not earn a lot of money. Remember, EITC is a refundable tax credit; this means you could qualify for a tax refund.

4. Additional Child Tax Credit. This is also a refundable tax credit. It may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

5. American Opportunity Tax Credit. The maximum credit per student is $2,500 and the first four years of post-secondary education qualify.

6. First-Time Homebuyer Tax Credit. In order too qualify for the credit, you must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010. The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. If you bought a home as your principle residence in 2010, you may be able to qualify and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.

7. Health Coverage Tax Credit. Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit. The credit is worth 80% of monthly health insurance premiums when you file your 2010 tax return.

If you have questions with respect to whether you should file your tax return, contact Sherayzen Law Office NOW and discuss your case with an experienced Minneapolis tax attorney!

Tax Lawyers Minneapolis: Preparing for Initial Consultation II (for Individuals)

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In previous article, I discussed the first part of preparation for an initial consultation with Minneapolis tax lawyers; the first part was mainly concerned with what type of information you should bring to your Minneapolis tax attorney. In this essay, I shift the focus toward the second part of the preparation which is about what type of questions you need to ask your tax lawyer.

Usually, the questions that you want your tax attorney to answer should, at the very least, cover the following four areas:

1. Cost and Billing

One of most important areas that you need to cover is the cost of the case as well as the manner in which you will be billed. Unless this is a flat-fee case, you should not expect your attorney to give you a precise amount of money you will need to spend on your case. Usually, your tax lawyer will give you an estimate, which, in the end, may or may not correspond to the actual cost of the case. I usually provide a fairly conservative estimate and it is rare for my clients to pay above the estimate; usually, it occurs where a client fails to fully disclose the circumstances of the case or otherwise causes a significant delay in the proceedings of the case.

In terms of the manner of billing, you are likely to billed per hour in most tax litigation and voluntary disclosure matters. Regular tax returns, especially for returning clients whose circumstances have not changed in any significant way, are usually subject to a flat fee.

2. Time

The next area you should question your Minneapolis tax attorney about is how long the case will need to be conducted. The estimates here are likely to vary significantly. While it is fairly easy to predict when a tax return will be finished, it is much harder to estimate an amount of time a voluntary disclosure process may take (especially if more issues come up during the disclosure process).

3. Participation

Ask your Minneapolis tax lawyer about who will handle your case – i.e. whether the attorney will handle it personally or turn it over to his associates. When you are dealing with a large law firm, you run the risk that the attorney with whom you are having the initial consultation will not be the one handling your case, especially if you are a small business or an individual. Due to common division of labor in large law firms, it is very likely that the case will be turned over to inexperienced associates whose work will be only reviewed by the attorney who conducted the initial consultation.

If, however, you are hiring a small firm or a solo practitioner, you are very likely to avoid this problem and your case will be handled from the beginning through the end by your experienced tax lawyer who is probably an owner of the law firm and personally responsible for the case.

4. Percentage of Practice

Ask your Minneapolis tax lawyer about how much time per month, on the average, he devotes to his tax practice. At the very minimum, your tax attorney should devote about 25% of his practice to tax law. If, however, the attorney has specialized associates (for example, someone who is a lawyer and a CPA), then he can have a lower percentage devoted to tax law because he may work closely with his experienced and specialized associate.

Conclusion

While these four questions do not represent a complete list of questions you should ask your tax attorney, they are likely to provide that minimum background necessary for the review of a retainer agreement with your Minneapolis tax lawyer.

Sherayzen Law Office can help you with your tax issues, whether you want to check your tax return, negotiate with the IRS, or engage in complex tax planning.

Contact Sherayzen Law Office NOW to discuss your tax case with an experienced Minneapolis tax attorney!

Tax Lawyers Minneapolis: Preparing for Initial Consultation I (for Individuals)

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A little disclaimer first: this article is concerned only with individuals contacting Minneapolis tax lawyers for a consultation. I will discuss preparation of business owners for an initial tax consultation in another article.

There are two sides to your preparation for the initial consultation with your Minneapolis tax lawyer. First, the information you need to supply to your tax attorney. Second, the questions you want to ask your tax lawyer. This essay deals with the first part of the preparation.

It is important to understand that your Minneapolis tax attorney will initially have to rely almost exclusively on the information that you supply to him. Moreover, failure to supply the necessary information during initial consultation may lead to significant delays in your case and increase your legal expenses. This is why it is very important to come prepared to the initial interview.

Below, you will find a number of suggestions about how to prepare for the initial consultation with your Minneapolis tax attorney. These suggestions come from my personal experience when I had to advice my clients on what to bring with them to the interview in order to maximize the efficiency of the case and my ability to provide sound tax advice.

The first step is to ask your tax attorney about what you should bring with you. The most common response is that you should bring all documents that are related to your case. Usually, however, I would list specific documents which are customary in a given tax situation. Unfortunately, I have found that a lot of clients, for various reasons, are not willing to bring many of these documents but only what they think a Minneapolis tax lawyer needs. Later on, this usually leads to repetitive documentary requests by a tax attorney from his clients.

“Everything related to the case” usually includes all official documents, accounting documents, e-mails, letters, corporate tax documents, et cetera. Sometimes, this would mean divulging sensitive financial information. For example, if you have foreign bank accounts and you are retaining your attorney to help resolve an FBAR issue, then these bank accounts will need to be submitted to your tax lawyer as well.

The next step is for you to review what documents you actually have. The exact list of documents may differ depending on your particular situation; however, here is a non-exclusive list of the most usual documents you need to bring to your tax attorney:

a) Tax returns: copies of your tax returns, usually going back three tax years. Your tax attorney, however, may advise you to bring tax returns for the past six years in certain situation;
b) Supporting documentation for tax returns (including deductions and credits): usually, you do not have to provide it for the initial interview unless this is relevant to your case (for example, you are contacting a tax attorney to file a tax return);
c) Housing documents: this issue usually comes up with respect to claiming first-time homebuyer tax credit or for tax planning purposes.
d) IRS correspondence: all relevant IRS correspondence should be provided to your tax lawyer;
e) Your correspondence: letters, e-mails, faxes, et cetera if they are relevant to your case;
f) Business/Investment documentation: I discuss preparation for a business-related tax consultation in another article, but it is important to mention here that if your individual tax issue is related to your business or investment activities, then you should bring relevant business documents (incorporation documents, business structure documentation, business tax I.D. number, et cetera);
g) Any other documents relevant to your case: if there is anything else that you think is relevant to your case, then bring it with you. I once had a client who brought carton boxes with unique ID numbers on them.

The third step is to find out what information you are missing. Compare the information you obtained from the second step with the list of documents your attorney provided and what you think is relevant to the case. Identify the documents that are missing and try to obtain the missing information before meeting with your tax attorney. If this is not possible, then let your attorney know during the consultation what information you are missing and whether you will be able to find it after the meeting.

Once you go through these three steps, the first part of the your preparation for the initial tax consultation is finished. I will discuss the second part of your preparation in the next article.

Remember, Sherayzen Law Office can help you with your tax issues, whether you want to check your tax return, negotiate with the IRS, or engage in complex tax planning.

Contact Sherayzen Law Office NOW to discuss your tax case with an experienced tax attorney!