Tax filers see refund changes
Some Alabama tax payers are getting a bit of shock on two fronts when filing their 2009 income tax return – federal income tax refunds are generally larger than in years past, while others are being required to pay in state income tax.
The first shock can be attributed to new federal tax credits that could mean hundreds of dollars, if not thousands, in one’s return.
Barbara Coon, an accountant at Ronald Penn in Opp, said the “making work pay” credit, the “first-time homebuyer” credit and the “earned income credit,” or EIC, generally shows the biggest impact on one’s refund.
Coon said the “making work pay” credit allows most low-and middle-income workers to see deductions of $400 per single person per year, with a married couple getting up to $800 total, even if only one spouse works. This credit is only good for 2009 and 2010.
Perhaps the largest tax credit comes in the form of the EIC, which allows low to moderate income working individuals and families a credit for up to three children. The maximum benefit for 2009 was raised to $5,657.
As for the first-time homebuyers credit, which allowed up to an $8,000 credit on one’s 2009 return, Coon said these participants should be mindful of their state liability.
To avoid having to pay state income tax, both Coon and Andalusia accountant Daniel McMullen suggested evaluating one’s withholding amounts.
“Oftentimes, having to pay can be avoided by increasing your state withholding amount by $10 or so each pay period,” McMullen said.
Residents have until April 15 to file income tax returns.