CBS 6 Tax Guide: 15 things you need to know

Part 1: Anything new this year?

Buried within the all-too-familiar tax forms are changes that all filers should be aware of.

The changes may be good news.

Tax brackets have been expanded by about 5 percent since 2008.

At the same time, the personal exemption has increased for the 2009 tax year to a little more than $3,600 per person.

So, between these two changes, you might be able to escape being squeezed into a higher tax bracket, meaning you might actually pay less in personal income tax than you did last year.

Part 2: Trapping more of us

The alternative minimum tax has been ensnaring a growing number of taxpayers, even though it was originally intended only to make wealthier individuals pay their fair share.

The good news is that the exemption for the AMT has been raised this year to nearly $71,000 for joint returns and nearly $47,000 for individuals. If you are making more than that, the AMT may affect you.

Also new this year, you can think about taking an additional standard deduction and avoid the trouble of itemizing. This applies if you have limited real property taxes that would be deductible if you itemized, suffered a loss in a federally declared disaster, or paid sales tax on a qualified car or truck.

If you choose to claim the additional standard deduction because of one or more of these, you'll need to file a new form, called Schedule L.

Part 3: Credits and deductions

With the goal of making sure you do not overpay your federal income taxes, you should check that you are claiming all of the deductions and credits you are entitled to. There can be some confusion about the difference between credits and deductions.

What is the difference? A credit is far more valuable because it reduces the amount of tax you owe. A deduction reduces the level of your income that is subject to tax.

One particular credit to be concerned about is the Making Work Pay credit, which was included as a benefit under the stimulus bill passed by Congress last year. Married couples or individuals holding down more than one job might have to pay some of the credit back. But if you are a low- or moderate-income worker, you could have even more money coming back to you. You will need to file Schedule M to claim the credit.

Part 4: Some financial help

New credits and deductions abound, all with the goal of helping the economy rebound.

To help bring the auto industry off its knees, there's a new deduction for sales and excise taxes you paid if you bought a new car.

The first-time homebuyer tax credit was expanded to allow for a reduced credit for long-time homeowners who purchase and move to another residence.

The Making Work Pay tax credit was put in place last spring. At the time, it was meant to give consumers a bit more money to spend or save. Unfortunately, now that tax season is at hand, it may actually end up with some people owing more in taxes, or cutting the amount of refund that they were hoping for. You will need to use the new form, Schedule M, to claim this credit.

Part 5: Standard deduction

If you are only claiming the standard deduction, here are some numbers to remember. For the current filing season, it is $5,700 for individuals, $11,400 for married couples filing jointly. It is $8,350 for those who file as head of household.

The standard deduction is larger for people who are blind or age 65 or older.

Tax law changes passed by Congress last year give some taxpayers the ability to increase the standard deduction even more, by adding property taxes paid, as well as sales or excise taxes on the purchase of a new car.

Add to that the amount of net federal disaster losses and one expert says "there's nothing standard about the standard deduction any more."

Part 6: Scams and taxes

Some bad folks seize upon tax season to perpetrate scams.

Unfortunately, these rip-offs involve imitations of IRS or U.S. Treasury Department communications that are just good enough to separate some people from their money.

This is something that you need to guard against.

Keep in mind, the IRS does not send unsolicited e-mails and never uses e-mail to communicate regarding sensitive financial information. The scammers, on the other hand, would like nothing better than for you to send bank account, Social Security or credit card information, so they can drain your account.

Another way you can get hurt is by clicking on a link in your e-mail that sends you to a phony Web site. In some of these cases, the user unwittingly downloads malicious software onto their computer that can take over a hard drive, or even worse, look for potentially valuable passwords on your computer that will allow them to gain access to other important information.

Part 7: If you bought a new car

If you bought a new car last year after Feb. 16, you may be in the driver's seat when it comes to tax savings.

And that's aside from any bargain you got under the Cash for Clunkers program.

If the vehicle cost less than $49,500, the sales or excise tax paid on the purchase of a new car, truck, motorcycle, or even a motor home can be added to your standard deduction.

If you itemize your deductions, the sales tax is in addition to a deduction you claim for regular state and local income taxes you might have paid.

The deduction begins phasing out for individuals with incomes above $125,000 or joint filers earning more than $250,000.

Unfortunately, the deduction does not apply to purchases of used cars, or where vehicles are leased.

What's more, you may qualify for any of the five alternative motor vehicle tax credits available for both personal and business vehicles.

Part 8: Homebuyer tax credit

As Washington looks to give the housing market a dose of medicine, taxpayers get a new tax credit to consider.

The homebuyer tax credits have helped to increase sales of both new and previously owned homes.

There are three variations. For first-time homebuyers in 2008, the credit worked as a long-term loan that must be paid back over 15 years. In 2009 it was just a tax credit that did not have to be repaid. And for long-time homeowners who purchased a home on Nov. 6 or later, there's a smaller credit that might apply.

All of the credits are scheduled to expire on April 30. But if you have a binding sales contact in place by that deadline, you can claim the credit so long as the deal closes by the end of June this year.

Part 9: Tax preparers put on notice

If you pay to have your taxes done, or are a professional preparer yourself, there are some changes you need to know about.

This could be the last tax-filing season where paid tax preparers are not registered with the government.

It is estimated that a million people are offering tax preparation services, and the IRS wants to do a better job policing the industry.

So it hopes to get all paid tax professionals registered before the 2011 filing season. These professional tax preparers will be required to complete annual training and testing, and may be subject to penalties for improper conduct.

Eventually, taxpayers will be able to check the background of preparers on a public IRS database.

The government, of course, wants to collect all of the tax money it is due. So even though the new regulations on paid tax preparers aren't yet in place, the IRS is stepping up tax enforcement this season to try to get these preparers to do a better job. It will begin sending out notices to 10,000 preparers who are known to have made frequent errors.

Lawyers, CPA's and enrolled agents who prepare returns are not affected by the new rules.

Part 10: Electronic filing

The IRS says if you have a tax refund coming your way, they could get it deposited into your bank account in as few as 10 days, if you file electronically.

The alternative, filing a paper return, could take up to six weeks for a refund.

While the IRS is encouraging electronic filing in almost every circumstance, those people who have taken advantage of the expanded homebuyer tax credits, approved by Congress late last year, will have to file those old-fashioned paper returns. That's because of the additional paperwork required to prove eligibility.

For individuals or families with less than $57,000 in income, the IRS offers Free File computer software programs that allow preparation with no additional charge.

If your income level is above that $57,000 minimum, Free File fillable forms are available online at www.irs.gov.

Part 11: Audit chances

Making a lot of money can be a good thing. But for Americans filing federal income tax returns, it also carries a higher risk of being audited by the IRS.

If you make less than $200,000 a year, there's only a 1 percent chance of being audited.

For returns showing income of $200,000 to $1 million dollars a year, there's a nearly 3 percent chance. And that level of risk rises to more than 6 percent if your return has earnings of a million or more.

Among the more than 1.4 million audits of individual returns done over 12 months time, the vast majority are done through correspondence with the taxpayer. The remainder are done in dreaded face-to-face meetings with IRS auditors.

Part 12: New credit, new form

The government is requiring use of a new form if you are claiming the first-time homebuyer's tax credit. This is the credit put in place with the goal of rejuvenating the housing market.

Originally slated to expire at the end of last November, Congress extended it until the end of April of this year.

Here's what you need to know: Form 5405 is required. You will not be able to file your federal return electronically. You're going to have to file the old-fashioned paper form.

Among the documents you will need to send to the IRS in order to qualify for the credit is a copy of your settlement statement, including the names of all the parties involved with the sale, as well as signatures, sales price and the date of purchase.

For a newly built home where a settlement statement isn't available, a copy of the certificate of occupancy will do.

Part 13: Setting things right

It can happen to anyone. You file your income tax return and realize later that you made a relatively simple mistake.

Maybe you forgot to add a small amount of income from a source you'd forgotten about. And there is always the risk of a math error, particularly if you are filing a paper return.

So, what do you do to make things right? If it is a simple mistake, there's a good chance the IRS will catch the mistake and correct it as it processes the return. You really don't have to do anything more.

However, if you failed to report all of your income or failed to claim a tax credit that is appropriate, that's when you should file an amended return. For federal income taxes, Form 1040X is what you'll want to use.

Part 14: Helping Haiti

The earthquake that devastated Haiti in January has been given special status for immediate income tax relief.

Taxpayers who itemize their deductions can claim the donations they have made if they meet certain requirements. These cash contributions must be given to qualified charities and have to have been made after Jan. 11 and before March 1 of this year. And you'll need to have a record of any such donation that you made.

That includes contributions made by text message, check, credit or debit card.

To get the tax benefit, taxpayers must itemize on Schedule A.

There's an option of deducting the contributions to qualified charities on either 2009 or 2010 federal income tax returns.

Part 15: Defining charity for taxes

To itemize your charitable donations, you must give to a so-called qualified charity. That's the government's way of making sure that you don't claim unjustified gifts.

There are five types of organizations that can generally qualify for a tax deductible donation. Those include certain corporations, community chests, trusts, funds or foundations chartered under federal or state law.

The easiest way to find out if your donations have gone to a recognized charity is to check IRS Publication 78, which is available at many local libraries as well as online. You can also call the IRS to find out whether an organization is qualified.

If you contribute property, like used clothing, the amount of your contribution is usually the fair market value of the stuff you donate. That's usually less than the original amount paid for the item when it was new.

(Copyright 2010 by The Associated Press.  All Rights Reserved.)