Tag: tax return

Since raising children can come with a heavy tab, the government offers certain financial benefits for parents.  The IRS recently laid out some ways you can save money come tax time if you are a parent.  These benefits come in the form of various tax deductions and credits.

In most cases, your children depend on you for all their basic needs.  Since they are “dependents,” you can receive a slew of tax breaks.  Though there are certain criteria your children must meet to be considered dependents, they are not very restrictive.  As a result, most people raising children will qualify for the benefits.  There are several other instances where your children can reduce your tax bill as well.  For instance, if your child is under the age of 17, you may qualify for a $1,000 Child Tax Credit.  However, you have to fall within a certain income bracket.

Anyone who has worked while raising a child knows it can be a challenge.  The government tries to make that task a little easier by reducing the tax bill for parents who work.  If you are a low to moderate income earner, you may be able to get the Earned Income Tax Credit by filing a W-5 Form.  The credit rewards earning an income while parenting.  Parents sometimes have to hire a helping hand to care for their children while they work.  The government tries to reduce that cost by offering a tax credit if your child is less than 13 years old and you had to hire someone to care for him or her.

As children grow older, parents frequently pay for higher education.  If your child is a student at a college or university, you may be able to receive the American Opportunity Tax Credit.  This is a credit for undergraduate college expenses.  The Lifetime Learning Credit also provides a credit for higher education expenses.  If your child took out a student loan and you pay interest on that loan, you may qualify for an additional tax deduction.

There are other less common instances where parents can save money on taxes due to their kids.  If you adopted a child, you may qualify to receive a credit of $12,150.  This credit is provided to help cover expenses related to the adoption process.  The government also tries to help self-employed parents pay for health insurance.  If your child is under the age of 27, you may be able to deduct premiums you paid for health care coverage.

Lastly, you should be aware that your child might have to file their own tax return in certain circumstances even if they are listed as a dependent.   If your child earned more than $5,700 in income the past year, they will have to file a tax return.  Similarly, if your child earned income from investments, interest, and dividends in excess of $1,900, it may be taxed at your rate.

Sorting through these various tax breaks, credits, and deductions can get confusing.  However, if you are a parent, it might be worth your time to look into the details of these benefits because they can significantly reduce your tax bill.

As most U.S. taxpayers will readily agree, tax time is not very much fun. This is just as true for individual taxpayers as it for businesses, although the potential mounds of paperwork, receives, W9s and the like that many businesses have to wade through make them much less enviable. Even now with the tax season approaching, many people simply do not take appropriate steps to ensure that their tax filing will go smoothly. This leads to needless headaches and a lot of frustration. By simply taking the time to organize your tax information, the task quickly becomes much less difficult.

As you are receiving those W-2s, 1099s and other tax documents, take the time to create a guide to help you prepare for filing taxes.

Organize Your Tax Documents

The following should be included in any basic guide, so take a look at them and consider them important steps on the road to better tax filing preparedness.

1. Get those tax documents organized: It makes sense to get things organized as soon as you can so that you can more easily identify problems and errors in the tax documentation. Most of the documents, including W-2s, 1099s, 1099Bs, 1098s and interest/dividend reports, should have been sent to you in January. Be sure you contact the appropriate company if you have not received them by now. Organization is essential to reducing errors and cutting down the time needed to get tax forms filled out. Additionally, it is a good idea to keep all of your documents together in a designated container or form of storage.
2. You should do relevant tax code research: It is not uncommon to see changes to the tax codes on a yearly basis, including the issuing of different tax credits and other deductions. This makes it important to keep up-to-date on this type of information in order to ensure that you are taking advantage of all of the benefits available to you and that you receive the deductions and credits that you’re eligible for. A good starting point for research is the IRS website.
3. Make an information checklist: Prior to doing your taxes, be sure you have taken the time to put all of the relevant information you have on a checklist in order to ensure that you do not miss any steps in the process. While lists may vary some, here are some of the more common pieces of info you’ll need: your social security number; your bank account numbers and routing numbers; your tax documents (W-2s, 1099s, etc.); additional tax data, such as property taxes, self-employment tax, estimated taxes, interest paid on school loans or mortgage, and so on. You may need EFTPS info if you plan to file electronically.
4. Get help when needed: In some cases, doing your own taxes may simply not be worth it. After all, the tax code is notoriously hard to understand. Few of us want to dig through hefty tax documents to find out what’s necessary to file. Instead, it may be better to contact a tax professional to help you avoid errors and resulting penalties.

Keep Informed

The most important thing to remember is that being properly informed about tax filing will drastically help you when it comes time to file. If you want to be better prepared, then heed some of the instruction presented in this short guide. If you need more help, talk to an expert and enter the tax season with a plan and the confidence to get the process done right.