The Earned Income Tax Credit: Use it, don't lose it!

Many of us have heard about the Earned Income Tax Credit, but research shows that 15-25% of households entitled to it don't claim their credit. This is a crying shame, because these are some of the people who could use the extra dollars the most. While the wealthier folks have access to tax experts who can advise them on how to write off a whole assortment of things from business trips to office equipment and more, the lower income citizens aren't so lucky. They are less likely to seek out and have access to the information that will give them a tax break on something far more important--their children.

As with all tax breaks, there are a few requirements one must meet to qualify, but here is a quick rundown for single parent qualifying incomes that one must fall at or below:
$36,348 for two or more qualifying children
$32,001 for one qualifying child
$12,120 for no children

Yes, that's right, you don't even have to have a rugrat to qualify for the EITC (although you must fall within the age range of 25-65, among other things). Married couples filing jointly are allowed to earn $2,000 more in each category and still claim the credit (all figures are for the 2006 tax year).

So what kind of money are we talking? Well, the maximum credit in 2006 was $4,536 for two or more children, and up to $2,747 for one child. But wait, there's even more good news. There's no need to wait until you file your taxes in the spring to receive your credit; by filling out a W-5 with your employer, you can get advance EITC credits added to your paychecks during the year. It's a great way to make those sometimes skimpy-seeming paychecks stretch a bit further. Why let the government hang onto your money all year?

Let's spread the word about the EITC to those who need it most, and a lot of money can go back to its rightful owners.

Tax Break Balances Minimum Wage Hike

Maybe that extra value meal doesn't need a price hike, after all

If you are like me, when you first heard about the increase in the federal minimum wage, you had serious concerns. How will this affect the cost of my value meal number 2 at McDonald's? Will I be able to afford to continue clogging my arteries on a regular basis?

In seriousness, most of us agree that trying to make ends meet on $5.15 per hour is close to impossible. But would a wage increase actually help the working poor, or would it just drive the prices of goods and services up to the point where the working poor still couldn't afford them?

It turns out that our lawmakers did have some sympathy for the small business owners who would be most impacted by the increase in expenses brought on by the minimum wage hike. Along with the wage increase, a series of tax breaks for small businesses was passed. These include expanded deductions and write-offs, along with incentives to hire people from some economically disadvantaged groups, such as people on public assistance and people just released from prison.

Sounds like a potentially win-win situation, not only for small businesses and minimum wage workers, but for everyone who doesn't want to see the rising costs of doing business reflected in the amount we pay for our goods and services.

The Hackable IRS?

About a year ago the General Accounting Office came out with some concerns about the security of the information held by the IRS.

Yes, take a moment and let that sink in; the information that the IRS was holding about you – which is basically everything, right? – was found to be at risk. These concerns included things such as access controls to computer network management, user account security, file permissions and logging and monitoring of security related events. 81 such worrisome little details in all.

But that was a year ago and the GAO communicated its concerns to the IRS. Surely in a year these problems should have been cleared up, right?

Wrong. How does half sound to you? In a review summarized here the GAO found that the IRS has resolved 41 of the issues that they identified.

I wonder; how the IRS would take it if we only paid half our taxes? I’m just asking…

IRS Plans Random Audits

So, you’ve done everything right and completely above board on your taxes. You even rejected some of your accountant’s suggested deductions because they seemed a little close to the edge. Nothing, you told yourself, to raise any flags with the IRS. The money lost over a deduction or two was worth knowing that you wouldn’t face an audit.

Well, things have changed and even the most studiously honest tax returns may face review. The IRS is bringing back a controversial audit lottery that will randomly target taxpayers. Apparently no groups will be given special attention and no one is exempt from being possibly selected.

The first bunch of 13,000 tax payers will be selected from various income categories this autumn and reviews will commence in October.

Is there anything that you can do to prepare? Not really. Some audits will be carried out without the taxpayer even being aware that it is happening. If the IRS is able to confirm the return with their records then the investigation will stop. But most cases are expected to result in some face to face time with the taxpayer.