By Johnny Jackson
Filing income taxes for the first time can seem an intimidating task, particularly for young people who are fresh out of college.
Officials with the Internal Revenue Service are urging those would-be filers to begin learning now about tax laws and how they can benefit from tax credits and incentives.
"I knew a little bit about it," said recent college graduate, Brady Thompson. "I don't know what I can and cannot write off. I'd like to know what sort of things do I need to save so I can have enough things to use to write off on my income taxes."
Thompson, 24, filed income taxes for the first time this year, and he did so jointly with his childhood sweetheart 24-year-old Monica. The two were married in March 2007, and graduated from college later that same year. The couple, who filed using standard deductions this year, plans to make use of itemized deductions next tax season.
"I would definitely recommend they explore our web site," said IRS Spokesman Mark Green.
Green said first-time filers make some common and preventable mistakes. One such mistake is not completing the steps required to keep their filing information accurate and up-to-date.
Newlyweds, for instance, sometimes forget to make name changes through the Social Security Administration, he said. Some working couples also forget to make adjustments to their Form W-4 withholdings to show they will be filing jointly.
"One of the biggest mistakes people make when they get married, they forget to adjust their withholdings," Green said. "That can end up in a huge tax liability for the first year filing."
He said there are tax incentives and credits for new filers, newlyweds, and recent college graduates, depending on individual circumstances. "Generally, individuals should keep receipts that are earmarked for deductions."
Undergraduate, graduate, and professional students can list their student loan interest as an itemized deductible.
"You may be able to deduct up to $2,500 from your income per tax return," he said. "Student loan interest may be deducted even while a student is in school, if the interest is being paid immediately rather than deferred.
Education credits, Green said, can help lower students' overall tax liability for 2008. He said Georgia's Hope Credit or the Lifetime Learning Credit may help offset the cost of higher education for parents or students, their spouses, and their dependents.
The amount of the credits is based on the qualified education expenses, such as college or vocational school tuition and enrollment fees, paid during the year, and may be limited by a person's modified, adjusted gross income. Room and board, insurance or personal living expenses are not considered qualified education expenses.
According to Green, the Hope Credit, which can be as much as $1,800 per student, per year is available for only the first two years of college or vocational school. The Lifetime Learning Credit, a tax credit of up to $2,000 per tax return, applies to undergraduate, graduate, and professional degree courses, and there is no limit to the number of years the credit can be taken.
Many first-time filers have moved to new locations for jobs. Those who move more than 50 miles for their job or business, may be eligible to receive a moving expense allowance.
New home owners may not know they can take advantage of itemizing their home mortgage interest, estate sales taxes, and receive energy-efficient appliance credits. And most people may be able to benefit in some way from tax credits for charitable contributions, he added.
To learn more, visit the IRS web site.
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