Category Archives: Education

Maine Educational Opportunity Tax Credit. Are you receiving it?

The Maine Educational Opportunity Tax Credit seemingly, silently began in 2008. I say silently because many people still don’t know about it. The program provides a Maine income tax credit for Maine residents who received an associate’s or bachelor’s degree from an accredited Maine college. You must be working in Maine and repaying student loans. In 2016, the credit expanded to include an associate’s or bachelor’s degree from a non-Maine college. It also now includes graduate degrees obtained from a Maine college after 2015. If your degree is in science, technology, engineering or mathematics (referred to as a “STEM”degree) the credit is refundable. For other degrees, the credit can reduce your tax to zero and any unused portion will carry forward for up to ten years.

In its’ simplest form, the credit works like this:

Maine resident student started college in 2008, received a bachelor’s degree in 2012 from a Maine college and begins paying student loans January of 2013. The individual makes 12 equal loan payments of $342. This amount is coincidently the “benchmark amount” which is the maximum the state allows for the credit. This individual’s credit would be $4,116 (12 x 342). If they obtained a STEM degree this credit would be refundable, meaning if their Maine income tax was zero, they would receive a refund of $4,116. If they did not obtain a STEM degree, still assuming the Maine income tax was zero, the $4,116 would apply to a future Maine income tax liability. Either way this can be a powerful credit.

However, as with any tax credit, it isn’t that simple. The student could have started college before 2008, transferred to a college outside of Maine for a period of time, worked outside of Maine for a period of time, made unequal or sporadic loan payments, all which alter the calculation, perhaps drastically. Let Perry, Fitts, Boulette & Fitton CPAs help you sort out the complexities and variations of the credit to ensure you get the maximum benefit.

About the Author: Lynn Stover  is an integral part of the PFBF CPAs tax team and a valued senior tax specialist. She operates primarily from the mid-coast Bath location, meeting with clients for tax planning and preparation. You can contact her at lynn@pfbf.com or 207-371-8003.

 

WHO SHOULD PREPARE MY TAXES?

If you read my last blog on Getting Organized for Tax Time,  you remember that over 150,000,000 Americans will file a tax return this year. Tax preparers and software vendors will dominate advertising space over the next few months. They want to convince you that using their product or service will net you the largest refund, or make filing your taxes easy. Recent ads suggest that you would have to be an idiot to not be able to figure out how to file your return. To top it off, most products even advertise Free filing.

To get a better feel for “Free” tax filing, I logged on to a number of online tax services and found that “Free” is only for the very simplest of returns 1040EZ/A. Once on their website you generally find that they offer other, not so free, products that “Maximize” deductions or guarantee accuracy. (Understand that they guarantee the accuracy of the calculations that their software provides and not the accuracy of your input.) Many online products offer audit defense insurance at a price that is just as expensive as the tax filing fee. I suggest that you weigh your risk of audit and the likelihood that changes could be made against the additional cost of defense insurance before clicking that box.

If after preparing your returns online you are still anxious, don’t feel alone. Each year I have a handful of clients who ask me to check over their self-filed returns. The majority need some tweaking, not because the people are not smart but because they do not understand the tax code and do not know what the outcome should look like. They check a box here or there and click “Next” without really understanding the underlying tax code. If this fits your description, I suggest that you schedule an appointment with a Volunteer Income Tax Assistance program (VITA) or professional tax preparer.

By professional, I mean someone who is credentialed as an Attorney, CPA or EA. These people have passed rigorous exams to practice before the IRS and have annual education requirements to give them a better understanding of the tax code. Never engage a person to prepare your return who guarantees you a refund or who is not willing to sign it.

How do you find a professional that will be a good fit for you? Do a little homework before scheduling an appointment; visit a few websites, ask your attorney, banker or investment advisor who they suggest. Finally, set up an appointment to make sure that the relationship will be a good fit for you. A good preparer should have years of experience with your personal situation and be willing to give you an estimate of their fees before you make a commitment.

A good professional understands your personal situation and the tax code, and should be able to help you to pay the lowest amount of tax allowed under the law without sleepless nights worrying about the IRS.

Jamie Boulette, CPA has 30 years of tax experience and is managing director of Perry, Fitts, Boulette & Fitton CPAs with offices in Bath and Oakland. He can be reached at jboulette@pfbf.com or 207-873-1603.

Tax Planning as a Family?

Yes, there are many tax breaks available to families, and at PFBF CPAs, we know that planning ahead can save taxes and teach children the value of earning and saving money. Whether you find yourself balancing caring for aging parents and funding your children’s educations, or you just want to have a plan in place so you’re not surprised at tax time, we can guide you with your needs in mind.

In addition to the child tax credits that reduce your tax bill dollar-for-dollar, there are other tax-advantaged savings opportunities. Continue reading Tax Planning as a Family?