The IRS reports that one out of five eligible workers don't claim it. They're leaving lots of money on the table. The average credit received by Marylanders last year was $2,121.
A credit reduces your tax bill dollar for dollar. But this one is refundable, which means that if you don't owe any taxes, you get the credit as a refund.
Plus, Marylanders claiming the federal credit are entitled to the state's earned income tax credit, which is worth half of the federal credit.
And if you don't owe Maryland taxes, the state credit also is refundable. The refundable credit, though, is worth 25 percent of the federal credit. (A bill recently introduced in the Maryland legislature would increase that to 30 percent.)
Mileage reimbursements If you deduct mileage for business purposes, be aware that the rate changed in mid-2011.
For the first half, the rate was 51 cents per mile, rising to 551/2 cents for the rest of the year.
If you used your vehicle for medical purposes, such as visits to the doctor, the rate was 19 cents for the first six months, and 231/2 cents thereafter.
"I have heard from return preparers that when this happens, people claim all their mileage was in the last six months of the year," says Mark Luscombe, principal analyst with CCH, a provider of tax information.
But tax experts warn you must keep an accurate, detailed log of your mileage if you don't want to run afoul of the IRS.
New forms Since last year, the IRS has been phasing in a requirement that investment firms report the cost basis — the purchase price of securities — once they're sold. Apparently, some investors haven't been accurately reporting this, costing Uncle Sam billions of dollars in lost revenue.
As part of this effort, investors who sold securities will have to fill out a new form, 8949. Investors won't have to report much more information to the IRS than before, but it will be spread across more forms, Luscombe says. It's possible, he says, that investors might have to fill out as many as three 8949s.
"That seems to be confusing people a lot," Perlman says. "Hopefully, you're doing this with software."
Maryland tax returns also have a new form, 502B, to claim dependents. It's part of fraud prevention, and the form will be used to verify dependents' Social Security numbers.
Ways to save The average federal refund last year was $2,913, while the typical Maryland refund was $1,124. To encourage savings, the IRS and Maryland will split a refund and directly deposit it in up to three accounts.
One of those accounts includes the Maryland College Investment Plan, a state-sponsored college savings plan. Go to collegesavingsmd.org for information on directly depositing refunds into the plan. To have refunds deposited in Maryland's prepaid tuition plan, call for instructions at 888-463-4723.