Second Look Tax Services CPA Boulder
Are you certain you received the largest refund last year? Well, how about the last 3 years of taxes? Whether you or another preparer filed your taxes, you may not have claimed every credit or deduction you were entitled to on a past-year tax return, which could mean you left money on the table that could have gone towards investing, personal savings, or paying current expenses.
However, it's not too late to review old returns to see if anything was missed. Bakke CPA will review old tax returns that you or others prepared for the last 3 years. Some of the most common mistakes we discover reviewing prior year returns is the filing status and missed credits such as the American Opportunity Tax Credit, Lifetime Learning Credit, Retirement Savings Contribution Credit, and the Foreign Tax Credit.
The American opportunity tax credit (AOTC) is a credit for qualified education expenses that are paid for an eligible student during the first four years of college. The taxpayer or taxpayer claiming the student (parent) can get a maximum credit of $2,500 per student. Also, if the credit the taxpayer qualifies for brings the amount of tax they owe to $0, they can have 40 percent of any remaining amount of the credit up to $1,000 refunded. The total amount of the credit is 100% of the first $2,000 of qualified education expenses paid for each student and 25% of the next $2,000 of qualified education expenses paid.
American Opportunity Tax Credit
Lifetime Learning Credit
The Lifetime Learning Credit (LLC) is a credit for qualified tuition and education expenses paid for students enrolled in an qualified educational institution. The Lifetime Learning Credit can help pay for undergraduate, graduate and professional degree courses, which also include courses to gain or improve current job skills. The credit also has no limit on the number of years you can claim it. The LLC is worth up to $2,000 per tax return and is 20 percent of the first $10,000 of qualified education expenses. The Lifetime Learning Credit is not refundable, which means the taxpayer can use the credit to pay any tax they owe but they won’t receive any of the credit as a refund.
Retirement Savings Contribution Credit
Some taxpayers may be able to take a tax credit for making eligible contributions to their IRA or employer sponsored retirement plans. The Retirement Savings Contribution Credit is 50%, 20% or 10% of the taxpayer's retirement plan or IRA contributions up to $2,000 ($4,000 if filing jointly) and depending on the taxpayer's adjusted gross income for the year. Here is a chart to calculate the credit.
Foreign Tax Credit
If the taxpayer paid or accrued foreign taxes to a foreign country or U.S. possession and the income is subject to U.S. tax, then they may qualify to take either a credit or a deduction for those taxes.
The taxpayer may claim a credit/deduction only for foreign taxes that are imposed on by a foreign country or a U.S. possession and is done by deducting the foreign taxes on Schedule A. In many cases, it is most advantageous to take the credit, which reduces your U.S. tax liability dollar for dollar. If the taxpayer is an individual, estate or trust, and they paid or accrued foreign taxes to a foreign country or U.S. possession, they may need to file Form 1116 to claim the foreign tax credit.