Some examples are listed below:

• Federal Refundable Credits

• Federal Nonrefundable Credits

Child Tax Credit - This credit can be as much as $1,000 per qualifying child, defined as your son, daughter, stepchild, grandchild or adopted child who is a resident of the U.S. or a legal citizen. The child must also qualify as your dependent. If you provided more than one-half of their annual support and no one else claims them as a dependent, and they are age 17 or younger by year-end, then they qualify as a dependent. The credit is limited if your modified adjusted gross income is above a certain amount.

Child and Dependent Care Credit - If you paid someone to care for your children or a dependent as defined above so that you could work, you can claim this credit to reduce your overall federal income tax. Qualifying expenses are typically fees/charges paid to either a day care center, preschool center, or an individual. The credit is available for the care of a child under the age of 13 and who is classified as your dependent. The credit can also be claimed for the care of a spouse or dependent of any age who is physically or mentally incapable of self-care. The credit is a percentage of the amount of expenses paid over the year for child care, and can range from 20-35 percent depending on the adjusted gross income. The dollar amounts allowed must be reduced by the amount of any dependent care benefits provided by your employer that you excluded from your salary income.

Earned Income Tax Credit -This credit is designed for low-income workers who could benefit from the credit to help feed their families, improve their standard of living through improved housing, invest in education, utilize transportation to get to work, or save for the future. It's also designed to offset the burden of Social Security taxes and to provide an incentive to work. Learn More About EITC

Two Tax Credits to Help Pay Higher Education Costs

There are two federal tax credits available to help you offset the costs of higher education for yourself or your dependents. These are the American Opportunity Credit and the Lifetime Learning Credit.

To qualify for either credit, you must pay postsecondary tuition and fees for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. If the student was claimed as a dependent, the student cannot file for the credit.

For each student, you can choose to claim only one of the credits in a single tax year. You cannot claim the American Opportunity Credit to pay for part of your daughter's tuition charges and then claim the Lifetime Learning Credit for $2,000 more of her school costs.

However, if you pay college expenses for two or more students in the same year, you can choose to take credits on a per-student, per-year basis. You can claim the American Opportunity Credit for your sophomore daughter and the Lifetime Learning Credit for your senior son.

Here are some key facts the IRS wants you to know about these valuable education credits:

1. The American Opportunity Credit

The credit can be up to $2,500 per eligible student.
It is available for the first four years of post-secondary education.
Forty percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.
The student must be pursuing an undergraduate degree or other recognized educational credential.
The student must be enrolled at least half time for at least one academic period.
Qualified expenses include tuition and fees, coursed related books supplies and equipment.
The full credit is generally available to eligible taxpayers who make less than $80,000 or $160,000 for married couples filing a joint return.

2. Lifetime Learning Credit

The credit can be up to $2,000 per eligible student.
It is available for all years of postsecondary education and for courses to acquire or improve job skills.
The maximum credited is limited to the amount of tax you must pay on your return.
The student does not need to be pursuing a degree or other recognized education credential.
Qualified expenses include tuition and fees, course related books, supplies and equipment.
The full credit is generally available to eligible taxpayers who make less than $60,000 or $120,000 for married couples filing a joint return.
You cannot claim the tuition and fees tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit. You must choose to either take the credit or the deduction and should consider which is more beneficial for you.

For more information about these credits see IRS Publication 970, Tax Benefits for Education available at http://www.irs.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

Making Work Pay Credit

Many working taxpayers are eligible for the Making Work Pay Tax Credit in 2010. The credit is based on earned income and is claimed on your 2010 tax return when you file your taxes in 2011.

Here are five things the IRS wants you to know about this tax credit to ensure you receive the entire amount for which you are eligible.

The Making Work Pay Credit provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.
Most workers received the benefit of the Making Work Pay Credit through larger paychecks, reflecting reduced federal income tax withholding during 2010.

The Benefit Bank uses Schedule M to help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.

Visit http://www.irs.gov/recovery for more information about the Making Work Pay Credit.

1. Your marital status on the last day of the year determines your marital status for the entire year.
2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.
3. Single filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.
4. A married couple may file a joint return together. The couple’s filing status would be Married Filing Jointly.
5. If your spouse died during the year and you did not remarry during 2010, usually you may still file a joint return with that spouse for the year of death.
6. A married couple may elect to file their returns separately. Each person’s filing status would generally be Married Filing Separately.
7. Head of Household generally applies to taxpayers who are unmarried. You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.
8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2009 or 2010, you have a dependent child and you meet certain other conditions.

1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,650 on your 2010 tax return.
2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.
3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the social security number of any dependent for whom you claim an exemption.
4. If someone else claims you as a dependent, you may still be required to file your own tax return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and any advance Earned Income Tax Credit payments you received.
5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own tax return.
6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent.
   
   Source: IRS

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   PIN - Personal Identification Number. A PIN number is used to verify your identity. It is a secret number that you use to access your accounts.
   

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   RAL- Refund Anticipation Loans are short term cash advances offered by commercial tax preparation services against a customer's anticipated income tax refund. The problem is that these short term loans are at extremely high interest rates and taxpayers end up paying high fees to borrow their own refund money.. Consumer rights groups view these loans as predatory and say they cost the working poor more than $500 million a year.
   

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   Self Employed

   Tax Tips for Self-employed Individuals

   If you are in business for yourself, or carry on a trade or business as a sole proprietor or an independent contractor, you generally would consider yourself self-employed and you would file IRS Schedule C, Profit or Loss From Business or Schedule C-EZ, Net Profit From Business with your Form 1040.

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   self-employment

   Self-employment can include work in addition to your regular full-time business activities, such as part-time work you do at home or in addition to your regular job.
   If you are self-employed you generally have to pay Self-employment Tax. Self-employment tax is a social security and Medicare tax primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. You figure SE tax yourself using a Form 1040 Schedule SE. Also, you can deduct half of your self-employment tax in figuring your adjusted gross income.
   If you are self-employed you generally have to make estimated tax payments. This applies even if you also have a full-time or part-time job and your employer withholds taxes from your wages. Estimated tax is the method used to pay tax on income that is not subject to withholding. If you don’t make quarterly payments you may be penalized for underpayment at the end of the tax year.
   You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year.
   To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.