10 Tax Code Tips Everyone Needs to Know

Paying taxes is confusing and grueling enough without the government throwing out unexpected curves.

This year, U.S. 1040 tax returns couldn't begin to be filed until Feb. 14, and then the IRS pushed the refund cycle back an additional week, said Kathleen Jerding Stern, a Frankfort-based tax CPA and owner of Jerding Tax & Financial Services, Inc.

"I think that's the biggest reason why I'm so busy this year," she said. "Everyone is just so confused."

"We didn't know what (deductions and credits) the IRS was going to keep and what they weren't," Jerding Stern added. "The biggest changes are what's gone."

To shed some light on tax season, we've compiled 10 tax code tips--with the help of Jerding Stern--that might affect the typical Frankfort resident.

Don't worry, though, we'll start on a, up note.

• No Limit on Itemized Deductions. "That's good news," Jerding Stern said.
• American Opportunity Credit. If you have a child in college (first four years of undergraduate work) and he or she is legally your dependent, you can take a $2,500 credit for college tuition and/or books. This credit is good for multiple dependents, too. If your married or jointly filed adjusted gross income is more than $160,000, the credit can be reduced.
• Child Tax Credit. If you have dependent children who were younger than 17 at the end of 2010, you might qualify for this credit, which can provide up to $1,000 per child. This credit was supposed to expire in 2010, but it's back, Jerding Stern said. Take advantage of it if you can.
• Energy Credit. This is a tricky one. It's been renewed for the 2010 tax year with a maximum $1,500 credit if you spent at least $5,000 and  installed energy-efficient windows or doors, certain types of high-efficiency furnaces and air conditioners, or energy-saving roofs. However, the credit for buying Energy Star appliances is no longer available. "People have been saving their receipts for appliances and bringing them in, and it doesn't matter. They don't help," Jerding Stern said.
• Small Business Owner Health Insurance Deduction. This one is extra tricky because there's no line item for it. You just have to know about it, Jerding Stern said. What it boils down to is that self-employed people can deduct their own or their dependent children's medical insurance costs before calculating their self-employment tax.
• Charitable Non-Cash Contributions of $5000 or Less. Don't just write "three bags" on those receipts from Vietnam Veterans or Morningstar Mission, Jerding Stern said. Keep an itemized list with estimated values of everything you're donating. "You'd be surprised how quickly it adds up," she said. Jerding Stern provides a five-page inventory list with estimated values for her clients to facilitate good recordkeeping and increase those itemized deductions.
• Short Sales or Foreclosures. If you get out of your primary home mortgage through a short sale or foreclosure, there is no impact on your taxes. "But that's this year," Jerding Stern said. "Who knows what will happen next year?"
• Credit Card Debt. Be aware that if you negotiated with a credit card company to write off a portion of your debt, you will get a 1099 for that amount, which counts as income on your tax return, Jerding Stern said. For example, if you had $20,000 in debt and settled with the credit card company to only pay them $6,000, you will get a 1099 for $14,000, which gets added in to your total gross income.
• Automobile Sales Tax Deduction. Not this year, Jerding Stern said. Many of her clients have come in with their bill of sale expecting to have the sales tax deducted, but that's not a valid credit for 2010 taxes.
• Unemployment Income Tax Break. Like the car sales tax deduction, this tax break is also gone. Last year, Jerding Stern said, the government didn't tax the first $2,400 of unemployment compensation. For the 2010 tax year, any unemployment you received is fair game and counted as income.

Don't forget: Tax day isn't April 15 this year; it's April 18. Washington, D.C. is celebrating Emancipation Day on April 15, so tax day has been moved to the following Monday.

For any questions regarding your own tax liability, contact a tax professional directly or go to the IRS website.