An Individual Retirement Account (IRA) is an excellent vehicle for you to use in preparing for your retirement and accumulating your finances. In addition to building your financial fortune, an IRA provides the contributor numerous tax benefits.

In 2013, an individual can contribute $5,500 for the year or the amount of your taxable income. For example, an individual under 50 who has taxable income above $5,500 the limit is $5,500 whereas an individual who has taxable income of only $4,000 the contribution limit is $4,000.  For someone who is 50 years or older, the contribution amount increases by $1,000 raising the amount to $6,500.

The amount you contribute also may be deducted on your income tax return thereby reducing not only the amount of income which is taxable on the federal level but also on the state level. Additionally, in states which have a school income tax, contributions to an IRA reduce the amount which is subject to the school income tax. Therefore, not only will you be saving for your retirement you will also be saving money by paying less income tax potentially on three different taxes.

There are limitations on the amount you may deduct based on whether or not you are covered by a retirement plan at work, your filing status and your modified adjusted gross income (AGI). If there is a retirement plan offered at your place of employment there are lower limits placed on your modified AGI than if there is no retirement plan offered where you work.

An additional income tax benefit entitled The Saver’s Credit is available for low and moderate income taxpayers. This credit is a non-refundable income tax credit meant to reward taxpayers who are working hard and need more assistance saving for retirement. This credit can reduce the taxpayer’s federal income tax liability to zero but cannot be refunded.

As indicated from the above information, there are several definite advantages to contributing to an IRA. In addition to providing you a means of accumulating money for your retirement, contributing to your IRA saves you money on your income taxes thus giving you more money to save!

You are able to claim your child as a dependent on your income tax return because you provide for their support but they have earned their own money – do they need to file a return? First you need to ensure you are able to claim your child as a dependent by answering a few simple questions:

• Did your child reside with you for more than half the year?
• Did you provide for more than half of their support?
• Were they under the age of 19 for the entire year or under 24 if they are a full-time student?

If you are able to answer yes to all of the above questions, you are entitled to claim your child as a dependent. These tax rules even apply if your child is a student who does not live with you because they reside at an educational facility.

For dependent children the Internal Revenue Service (IRS) treats your child’s income differently based on whether they earned their money due to working or through any investments they might have. Dependent children who earn more than $5,950 (for 2012) of earned income need to file an income tax return and might owe tax to the IRS. Earned income is defined as income they received by providing services to an employer, even if it is only occasionally through a part-time job. If your child earns less than this amount they still might want to file if their employer withheld any federal income tax. Chances are under these circumstances they would have a refund coming and the only way to receive the money back is to file an income tax return.

If however, the money your child earns is from interest or dividends resulting from their investments they will need to file an income tax return if this income is $950 or more. You, as the parent, do have the option of including your child’s unearned income with your income tax return on Form 8814.

If you determine your child does need to file an income tax return, it is his or her responsibility if your child is capable but if not it is your responsibility to file for them. If you do prepare your child’s return because they are too young, you must also sign the return along with the notation that you are signing as the parent or guardian. The plus for having to sign for your child is it allows you to discuss your child’s return with the IRS if necessary.

If your child is required to file an income tax return, the preparation would provide an excellent opportunity for you to teach financial responsibility and the importance of keeping accurate financial records. Learning financial responsibility at an early age will assist your child in becoming successful in all future endeavors!!

You have already filed your income tax return and you discover you made a mistake; what do you do? If you determine you made a mistake after you filed your tax return you will need to prepare and file an amended return. Amended returns may be filed within three years from the date you filed your original tax return or within two years from the date you paid the tax, whichever is later.

If you made a mathematical error, the IRS will notify you of the error and you will just need to send any additional tax owed or wait for your refund whichever the case may be. If you neglected to include a form or schedule which was required in your tax return, the IRS will send you a notice requesting the missing document. But if you realize you need to correct your filing status, change your number of dependents, adjust your total income, tax deductions or tax credits you will need to file an amended return.

To file an amended tax return you will need to use Form 1040X and mail the return as you cannot e-file an amended return. If you discover you need to amend more than one tax year, you will need a separate 1040X form for each year. You will need to mail each amended return separately to the appropriate IRS processing center.

Once you determine you need to prepare an amended return, carefully examine the 1040X. This form has three columns: column A will contain the figures from the original return; column B will show any changes you are making and column C shows the corrected figures or how the return should have appeared had it been correct initially. There is also a section to explain any changes made. If there are any additional forms involved in the changes, they will need to be attached to the 1040X. If you neglect to include the required additional forms, it will delay the processing time.

If your original return resulted in a refund and your amended return adds to the refunded amount, do not file your amended return until you have received the initial refund. But if your amended return indicates you owe more money, pay the additional money immediately to decrease the amount of interest and penalties you might owe. The time the IRS typically takes to process an amended return is usually 8 to 12 weeks.

If you find it necessary to file an amended return, save copies of all documentation supporting the changes made along with copies of the amended return. Also, it is much better for you to amend any errors rather than waiting for the IRS to find your error (s) and send you a notice. If you find amending your tax return to be too overwhelming, you can hire the services of a professional income tax preparer and let him or her deal with the process. But whatever avenue you choose, do not stress as filing an amended return is a common occurrence; thousands do every year!

The government as well as the Internal Revenue Service (IRS) is currently shut down. Unfortunately, this is providing a perfect opportunity for scammers to pose as the IRS and attempt to obtain personal information in an effort to scam unsuspecting taxpayers. These scammers are taking advantage of the fact many taxpayers do not realize IRS agents are not working and therefore are not calling taxpayers.

Scammers will take advantage of any situation which allows them to dupe taxpayers into revealing personal information and the government shutdown is providing them the perfect situation. According to numerous complaints, scammer activity has increased since the shutdown and the calls are all similar. Most of the “agents” speak with a heavy accent when they request verification of personal information. The personal information they are seeking includes full name, Social Security number and address. If they are lucky enough to convince the taxpayer into divulging this information they will then ask for the taxpayer’s bank account number so the “overdue tax bill” can be automatically deducted thus saving the taxpayer money. If the taxpayer resists the treats begin and the calls come more frequently!

Some of the more common intimidations include threats of a visit from the sheriff or police, jail time and bank levies. For immigrants, the threats include threatening to contact immigration officials.

If you are contacted by an individual claiming to be calling from the IRS – the recommended course of action is to take a message and ask for a badge number as well as a telephone number to call back. Once the government shutdown has ended, contact the IRS at 1-800-829-1040 to inquire if you actually do have any income taxes owed but until then do not worry!! Even if you do owe money, the IRS has stated they are not issuing liens or levies while the government is shut down. Most importantly whether the government is shut down or not do not give out personal information to anyone who calls you on the phone!!