You can't do this on your tax return

Here are ten no-no's on your return.

1. Claim head of household filing status when you're married
2. Claim Earned Income Credit for a child that doesn't live with you
3. Claim an exemption for a child that doesn't live with you and you don't have permission from the custodial parent.
4. Claim the standard deduction when your spouse doesn't
5. Claiming deductions for a hobby
6. Claim an exemption for your pets
7. Fail to file a tax return and claim the "taxation without representation"
8. Deducting your home office when your employer provides a work station for you
9. Deducting commuting expenses
10. Deducting depreciation expenses on a vehicle you lease

In addition to the common tax return mistakes written previously, here are 11 more deductions you can't write off .

Do I Have To File a Tax Return?

Yes, you must file a federal income tax return if you are a U.S. citizen. However, there are certain instances where a taxpayer does not have to file a return based on three factors:

• Gross Income
• Filing Status
• Age

You must file a return if your gross income is at least the amount shown for your age and filing status.

Common tax return mistakes

10 things to watch for as you prepare your tax return.

1. Incorrect Social Security numbers or misspelled names
2. Using incorrect forms and schedules
3. Wrong filing status
4. Claiming ineligible dependents
5. Misapplied Earned Income Credit and Child Tax Credit
6. Lack of receipts
7. Failure to report all income
8. Not checking for Alternative Minimum Tax
9. Not signing the return – note the taxpayer and the spouse must sign and date the tax return
10. Not attaching Form W-2 and other forms that indicate taxes withheld during the year

Bonus items:

1. Applying for a Refund Anticipation Loan (RAL) without W-2 Earned Income
2. Omitting the Social Security Number or EIN of your caregiver for the Child and Dependent Care Credit
3. Mailing the tax return to the wrong address. Here is where to mail tax forms.
4. Making your check payable to the IRS. The correct payee on checks and money orders should be the United States Treasury.
5. Misreading the income tax tables
6. Failure to make a copy of the return for the taxpayer's records
7. Computation errors
8. Incorrect bank account numbers for Direct Deposit
9. Insufficient postage on envelopes. Better yet, use registered mail so there is a record that IRS received your tax return especially if you are paying a balance due.

Here are some other suggestions to avoid tax problems.

Refund too high?

Big refund this year? You're not alone. Taxpayers received an average refund of $3,003 last year - up 5% from the average refund of $2,859 taxpayers received in 2009.

The jump was the biggest in years thanks to several tax benefits as part of the American Recovery and Reinvestment Act.

• First-Time Homebuyer
• American Opportunity Credit
• Earned Income Tax Credit increases
• Increase in eligibility for the Child Tax Credit

Take steps now to receive some of that money throughout the year. Submit a new Form W-4 to your employer or a Form W-4P to your pension administrator. If you're eligible for Earned Income Credit, submitting a Form W-5 to your employer will allow to receive the credit throughout the year.

You can use IRS Pub. 919 and IRS Withholding Calculator for additional assistance in calculating your tax withholding.

What's New for your 2010 Income Tax Return

Due Date
Even though April 15 falls on a Friday this year, the deadline for your 2010 Form 1040 is Monday April 18. Emancipation Day is a District of Columbia holiday that falls on April 15 so the tax filing deadline for the whole nation is deferred to April 18 . If your return won't be ready by then, you can extend the deadline all the way out to October 17 by filing Form 4868 on or before April 18.

Personal exemption: $3,650 ($3,800 in 2012, $3,700 in 2011)

Standard deduction:
MFJ/QW $11,400 ($11,900 in 2012, $11,600 in 2011)
HH $8,400 ($8,700 in 2012, $8,500 in 2011, $8,350 in 2009)
Single / MFS $5,700 ($5,950 in 2012, $5,800 in 2011)

Maximum Earned Income Credit
$5,666 if 3 or more qualifying children ($5,891 in 2012, $5,751 in 2011, $5,657 in 2009)
$5,036 if 2 qualifying children (from $5,028 in 2009)
$3,050 if 1 qualifying child (from $3,043 in 2009)
$457 if no qualifying child (same)

Income Limits for Earned Income Credit

• Three or more qualifying children and earn less than $43,352 ($48,362 if MFJ)
• Two qualifying children and earn less than $40,363 ($45,373 if MFJ)
• One qualifying child and earn less than $35,535 ($40,545 if MFJ)
• No qualifying child and earn less than $13,460 ($18,470 if MFJ)

Wages Limit
The maximum amount of wages subject to social security tax is $106,800 (same as 2009).

Are you eligible for Earned Income Credit?

Earned Income Credit (EIC) is a tax credit for taxpayers who work and have earned income less than the following limits:

• Three or more qualifying children: $43,352 ($48,362 if MFJ)
• Two qualifying children: $40,363 ($45,373 if MFJ)
• One qualifying child: $35,535 ($40,545 if MFJ)
• No qualifying children: $13,460 ($18,470 if MFJ)

A qualifying child under Earned Income Credit must meet the following requirements.

• Relationship – must be a son, daughter, stepchild, foster child or descendant of any of them.
  Note: child does not have to be your dependent
• Residency – child must live with you in the United States for more than half the year. Special circumstances such as school and business do not count against this requirement.
• Age – must be either (1) under age 19 years old at the end of the year; (2) under age 24 and a full-time student; or (3) totally and permanently disabled at any time during the year.

Income Tax Benefits increase in 2011.

The IRS announced last week the increases to deductions and limits for the 2011 year. These amounts are revised every year due to inflation. Typically, the IRS announces these increases in October but waited until after the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 became law on December 17, 2010.

Increased personal exemption is $3,700 ($3,800 in 2012, $3,650 in 2010 and 2009, $3,500 in 2008).

Increased Standard Deduction:

• Married filing Joint / Qualifying Widower: $11,600 ($11,900 in 2012, $11,400 in 2010 and 2009)
• Head of Household: $8,500 ($8,700 in 2012, $8,400 in 2010, $8,350 in 2009)
  
• Single / Married filing Separate: $5,800 ($5,950 in 2012, $5,700 in 2010 and 2009)
• The additional standard deduction for blind people and senior citizens is $1,150 for married individuals, up $50, and $1,450 for singles and heads of household, also up $50.

Tax bracket thresholds have increased. For example, a married couple filing a joint return reaches the 25% bracket with $69,000 ($70,700 in 2012) in taxable income compared to $68,000 in 2010.

Earned Income Tax Credit amounts have increased. The maximum credit for taxpayers with three eligible children rises to $5,751, up from $5,666 in 2010 and $5,657 in 2009. The maximum income limit rises to $49,078, up from $48,362 in 2010 and $48,279 in 2009. The ability to claim three qualifying children for Earned Income Tax Credit was originally only available for 2009 and 2010 tax years under the 2009 American Recovery and Reinvestment Act (ARRA). Last week's tax bill extended this provision for the 2011 and 2012 tax years.

Modified Gross Income for the lifetime learning credit increases to $102,000 for joint filers, up from $100,000 and $51,000 for singles and heads of household filing statuses, up from $50,000.

Please note the following for the 2011 tax year:

• The $400 ($800 if married filing jointly) Making Work Pay Credit will expire,
• The Social Security payroll tax rate will decrease by 2%, as will Self-Employment Tax for self-employed taxpayers, and
• The estate tax will return with a rate of 35% and a lifetime exclusion of $5 million for 2011 and 2012.

Recovery Act Recap

The Obama stimulus plan, also known as ARRA - the 2009 American Recovery and Reinvestment Act, is over a year old. Here's a summary of all the tax code changes:

March 3 Did you receive an Economic Recovery Payment?
Feb. 8 You could owe the IRS this year
Jan. 24 Don't forget to take the Making Work Pay Credit
Dec. 28 Make home improvements & lower your tax bill
Dec. 26 Tax break for the unemployed
Dec. 24 Bought a car? Don't forget Sales Taxes
Dec. 22 More Eligible for Child Tax Credit
Dec. 20 Earned Income Tax Credit going up
Dec. 19 Higher credit for college students
Dec. 17 I'm a First-Time Homebuyer. What can I claim on my taxes?

In addition, the ARRA included:

• Extension of AMT relief for 2009
• Increased Transportation Subsidy
• Health Coverage Tax Credit

Earned Income Tax Credit going up

Earned Income Tax Credit (EITC) is a benefit for taxpayers who work and have earned income. The credit reported on From 1040 line 64 and is treated as a tax payment to be added to any federal income tax withholding. The amount of EITC depends on, earned income, adjusted Gross Income, filing Status, and number of qualifying children (either none, one, or two).

American Recovery and Reinvestment Act (ARRA) has adjusted the EITC for 2009 and 2010 to

• cover three children
• increase benefits 5% on the first $12,570 of earned income
• increase the beginning of the phase out range for the credit for all married couples

The maximum credit for 2009 is $5,657 compared to $4,824 in 2008:

• $5,657 - three or more qualifying children (N/A in 2008)
• $5,028 - two qualifying children ($4,824 in 2008)
• $3,043 - one qualifying child ($2,917 in 2008)
• $457 - no qualifying child ($438 in 2008)

EITC is disallowed if the taxpayer's investment income is more than $3,100 ($2,950 was the maximum in 2008).