Are you in line to receive a tax refund? Were you hoping to have received more of your hard earned money back into your bank account? As of 2010, there is an automatic way to invest your tax refund into government U.S. Series I Savings Bonds. This is a great way to increase your refund by earning interest, as well as a convenient way to ensure your money ends up working for you instead of being spent.

Bond Purchasing Limits

For all bond purchases automatically made with your tax refund, you must purchase US Savings bonds in multiples of $50, and the most you can request is $5,000 worth. The bonds will be issued in your name, unless you file a joint return, in which case the bonds will be issued in both you and your partners’ name. Please note that you cannot designate a beneficiary under this option.

Split Your Refund Deposits: Form 8888

As in previous tax years, you can choose to split your refund up into several accounts, including the following: savings account, checking account, a retirement fund, a health savings account, and/or a Coverdell education savings account by using Form 8888: Direct Deposit of Refund to More Than One Account. This year you can also choose to split your refund between these accounts and U.S. Series I Savings Bonds, or put your entire refund into purchasing these treasury bonds. Most likely you will need this form to do so (see below).

How to Purchase

If you are using your entire tax refund to purchase bonds, and it meets the criteria (at least $50, in multiples of $50, and no more than $5,000), then you do not need to fill out Form 8888. Instead, you would enter the information below on the appropriate lines on your tax return.

If, however, your tax refund needs to be split up, then you need to use Form 8888 to do so. For example, if your refund is $1,680, you could purchase $1,650 in bonds, but then would need to deposit the $30 into another financial institution, thus requiring the use of Form 8888.

You can use TurboTax to help you fill out the form. On Form 8888, fill in a dollar amount in line 1a, 2a, or 3a (depending on how many ways you are splitting your return deposit), the routing number(s) on line 1b, 2b, or 3b, and the account number(s) on line 1d, 2d, or 3d. Check whether or not each account is ‘checking’ or ‘savings’. For the line where you want to purchase the bonds, enter the dollar amount in line 1a, 2a, or 3a (remember the bond purchasing limits above when figuring out how much to put on these lines). For the routing number, enter the following: 043736881. Enter the word BONDS on line 1d, 2d, or 3d, and check the box ‘savings’.

You will receive the bonds in the mail. However, if you make a mistake, you will receive your refund as a check from the IRS instead.

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Most taxpayers are well aware of the deduction that comes from claiming dependent children on their taxes. But what are the rules on claiming dependents on taxes? And what about other relatives? And, when can those formerly claimed as dependents on someone else’s return begin to claim themselves?

If someone else can claim you as a dependent, you cannot receive a personal exemption for yourself, and your standard deduction is limited. If you are filing using TurboTax, the program will help you determine the limitations.

You can claim someone as a dependent if they are a United States citizen, do not file a joint return, and meet either the qualifying child test or qualifying relative test, both discussed in IRS Publication 501 and explained below.

Qualifying Child

The most common reason to claim someone as a dependent on your taxes is because they are a qualifying child. To be a qualifying child, the dependent must meet all six of the following tests:

• Relationship: the dependent must be your child (including foster, step, or adopted child), your sibling (including half or step), or any of their descendants (e.g., your grandchild, niece, or nephew)
• Age: the dependent must be under 19 and younger than you (younger than either you OR your spouse if filing jointly), under 24 and a full-time student for at least part of 5 months of the calendar year, or permanently and totally disabled regardless of age.
• Residency: the dependent must live with you for at least half the calendar year.
• Support: the child cannot have provided more than half of his or her own support (i.e., necessary living expenses) for the year
• Joint Return: the child cannot have filed a joint return with a spouse, except if the return was only filed to claim a refund
• Special Test: if the parents are divorced, only one can claim the child as a qualifying child. If both would be otherwise eligible, this is usually the parent with the highest gross income, unless the parents have agreed otherwise.

Qualifying Relative

If your potential dependent does not qualify as a qualifying child, he may instead be classified as a qualifying relative, and still be claimed as a dependent. To be a qualifying relative, the dependent must meet all of the following tests. Note that there is no age test for a qualifying relative.

• Not a qualifying child: A dependent cannot be deemed your qualifying relative if he is a qualifying child for you or any other taxpayer.
• Relationship: the dependent must live with your OR, if he does not live with you, be your child (including foster, adopted, step, or in-law), your sibling (including half, step, or in-law), your parent or grandparent (including step or in-law but NOT including foster), or a direct descendant of any of the preceding relatives.
• Gross income: the relative’s gross income must be less than $3,650
• Support: you must provide more than half of the support for this person during the year. If multiple parties combine to provide more than 50% (e.g., two adult children each provide 30% of a parent’s support), any one taxpayer who provides more than 10% can claim the relative with the written permission of the others.

With the tax deadline just over a week away, it’s important to understand the rules on claiming dependents on taxes and when claiming dependents is appropriate.

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Do you have any students in your family, or are you a student yourself? If so, then the American Opportunity Tax Credit may help you decrease your tax obligations for 2009 and 2010. Like the Hope Credit, you can claim this new tax credit for tuition and certain fees you pay for higher education either last year or in 2010. But there have been some changes to the benefit of students and those who claim students.

Below is a list of the new changes for the American Opportunity tax credit.

Higher Amount You can Claim

• The new American Opportunity tax credit limit is $2,500, up $700 from the Hope Credit.

New Definition for Tuition and Qualified Expenses

• Tuition is still covered for the American Opportunity tax credit, but now course materials are also covered, which include books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.

Refundable Tax Credit

• Unlike the Hope Credit, you can now get up to $1,000 of the tax credit refunded to you by Uncle Sam or 40% of it; this will make a difference to lower-income taxpayers who owe smaller amounts of taxes.

Help for Middle and Higher Income Earners

• Phaseout begins at $80,000 for single filers, or $160,000 for married joint filers.
• Full credit is allowed to help offset the Alternative Minimum Tax.

Years Three and Four of the Post-Secondary College Years can be Claimed

• The American Opportunity tax credit can be claimed for 4 years of post-secondary education, versus the first two years of the post-secondary education under the Hope Credit (although this credit is only good for 2009 and 2010 at the moment).

In order to claim the American Opportunity tax credit, you will need to fill out form 8863 and attach it to Form 1040 or 1040A.

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Looking for unemployed tax deductions? You’re in luck, there are several tax deductions related to unemployment, job searching, or moving for a new job that will give you tax relief at a time when you probably need it most.

Unemployment reached 10% in the United States for 2009, sending over 16 million people home without their normal paychecks. Some politicians and statisticians argue that the number is actually higher than 10% because the way that the information is gathered on unemployed people means that some people who are technically unemployed are not counted at all, including people who have been unemployed so long that they have simply just stopped looking for a job, or people who are underemployed (i.e. working part-time, but want more hours).

Tax Exempt Unemployment Payments

Typically if you receive unemployment from the government, you have to pay income taxes on all of it. With the passing of the American Recovery and Reinvestment Act, the first $2,400 of any unemployment compensation you received in 2009 is not taxable.

In order to take this tax exemption, on the 1099-G form you receive from the government, subtract out $2400 from the amount in Box 1, and then report this new amount on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040EZ. You can file a 1040EZ online for free.

Tax Deduction for Employment Search

You can deduct certain job search expenses so long as you are searching for a job in the same occupation, you itemize your taxes, and your miscellaneous itemized deduction write-offs (where you will be taking the job expense deductions) is greater than 2% of your adjusted gross income. If you are temporarily working in another field while looking for a job in the same occupation as before, then you can still take this tax deduction.

The following job search expenses are tax deductible: resume preparation, postage, copying fees, headhunter fees, meals while traveling (up to 50%), and mileage (for going to and from interviews, job counselors, etc.). These costs cannot be reimbursed by a potential employer.

Tax Deduction for Moving Expenses When Moving for a New Job

Did you move to take a new job? To qualify for the moving tax deduction, your new job must be at least 50 miles farther from your old home than your old job location was. Also, you must work at the new job for at least 39 weeks during the first 12 months after you move in the area of your new job.

If you qualify, you can deduct “reasonable” costs associated with your move, such as the cost of traveling from your old home to your new home, and the cost of moving your family members, including gas mileage, airfare, parking, tolls, etc. You can also deduct the cost of packing up your belongings and moving them, as well as connecting and disconnecting utilities, shipping your car and pets to your new home, the cost of storing your belongings within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home, and lodging while in-transit.

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I just finished an amended tax return for a client this week. She originally efiled her tax return for free with H&R Block.

However, a few weeks later she received some 1099s reporting interest she had forgotten about. In addition, she didn’t know that she was eligible to claim the American Opportunity education tax credit for her tuition.

When to File an Amended Tax Return

You’ll need to file an amended tax return if you made a mistake and need to fix your income, deductions, or credits.

In this case, my client needed to report the additional interest which affected her income, and she needed to claim the education tax credit.

How to File an Amended Tax Return

Amended tax returns have to be filed using the paper form 1040X. You can find the 1040X in all the tax software programs like TurboTax. You need to include a corrected income tax return with the amendment. Here’s how to complete the 1040X:

• New Numbers. Include the numbers from your original tax return, your new tax return, and the difference between the two.
• Explanation. You’ll need to explain to the IRS what you are changing and why. For example, if you forgot to claim your new car tax deduction, identify the change clearly and explain why. I also include the amount of the change and keep the explanations very concise.
• Mail Your Return. Amended tax returns cannot be efiled, so you’ll have to mail them to the IRS. Don’t forget to sign and date your return before you drop it in the mail!

How Long to Keep your Amended Tax Return

After you file your amended tax return, keep your tax return for 3 years or 2 years from when you paid the tax if it’s later. For more information, see how long to keep tax returns.

Amended Tax Return Deadline

The deadline for filing amended tax returns is three years after the original tax deadline on April 15. For example, a 2009 tax return can be amended until April 15, 2013.

The good news… our client will be getting back another $2,000 for filing an amended tax return!

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