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Building Bucks

Building Bucks

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Building Bucks

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  1. Building Bucks Taxes and Tax Credits

  2. Taxes and Tax Credits • Take advantage of tax deductions and incentives • Earned Income Tax Credit (EITC) • Child Tax Credit (CTC) • Refund splitting • Clients who file electronically can instruct the IRS to direct deposit their refund into multiple accounts

  3. Income Tax Basics • Due annually on April 15 • Compares your actual taxable income to the amount you have paid through the year • If you’ve overpaid, you will receive a refund • If you have not had enough withheld, you will owe money to the IRS

  4. Filing Your Income Taxes • Withholding • determined by income level and information on W-4 form • Withholding allowances claimed will reduce amount withheld • If you claim more than 9 allowances, your employer may be required to send your W-4 to the IRS for review

  5. Tax Filing Strategies 3 Main Strategies • Do it yourself via… • Paper • Software • E-filing • Professional assistance • Assistance from a volunteer-run program

  6. Do It Yourself • Print paper copies of necessary forms, fill out, mail in to IRS OR • File taxes electronically • PROS: Costs nothing, empowering, helps you get a handle on your own financial situation • CONS: More difficult, time consuming, and higher chance of mistake

  7. Tax Filing with Assistance • Professional Assistance • Certified Public Accountant (CPA) • Tax preparation business • Volunteer Assistance • Volunteer Income Tax Assistance (VITA) • Taxpayer Counseling for the Elderly (TCE)

  8. VITA and TCE • Provide income tax assistance to low-income individuals, handicapped or elderly • Volunteers trained by the IRS and the Wisconsin Department of Revenue prepare basic income tax returns free of charge • What to Bring: • Forms W-2 wage and tax statements • Information on other sources of income and any deductions • Social security cards • Rent certificate or copy of property tax bill • Record of any Wisconsin Works payments

  9. Filing Income Taxes Necessary Information: Deductions/Credits Information: Advance Child Tax Credit Payment Child Care Costs Education Costs Adoption Costs Charitable Donations Job Expenses Medical and Dental Expenses • Social Security Number or Individual Taxpayer Identification Number • Record of all income sources over the last year • Information on any income adjustments

  10. Steps to Filing Income Tax • Determine gross income • Calculate Adjusted Gross Income (AGI) • Subtract deductions • Claim exemptions • Calculate tax rate • Subtract credits • Calculate your refund or taxes owed

  11. Tax Refunds • Ways to receive your refund: • Mailed from the IRS within 6 weeks of receiving your return. • Direct deposit into your checking, savings, or retirement account. • Split deposit between multiple accounts.

  12. If You Owe • Promptly pay the tax owed including any additional penalties and interest. • You can pay the bill with your credit card, electronic funds transfer, check, money order, cashier’s check or cash. • An installment agreement may be requested if you cannot pay the liability in full.

  13. Reduce Taxes Due Next Year • Contribute part of your paycheck to an IRA. • Purchase a home or real estate. • Take a “tax” loss on your investments. • Have dividend or municipal bond income. • Place some of your income into trusts and estates, a type of “tax shelter.”

  14. Managing a VITA/TCE Site • Complete IRS certification process • Focus on key client groups • Tax filers with larger refunds • Couples with children • Older taxpayers • Promote savings and asset building • Help families get through unexpected crises • Assets can be used as equity • Assets can be invested • Provide an inheritance for children

  15. Types of Saving • Checking Account • Faster refund • Easily accessible • Savings Account • Faster refund • Slow spending of refund • Savings Bond • Easy to save on behalf of others • Good return • CD • Save for a few months for a goal or expense • Good return

  16. Asset Building Model(use while delivering tax preparation) • Promotional materials – highlight opportunities to save. • Intake – identify clients with/without bank accounts and those with interest in savings. • Waiting Period – set up accounts and share more product information. • Tax Preparation – encourage clients to save. • Quality Review- urge client to use unexpected refund for savings. • Exit Surveys

  17. Clients without Refunds • Provide tax planning advice. • Referral to financial literacy workshops. • Encourage credit counseling for those with debt and credit issues.