The Filing Five

February 13, 2015

The status you use when filing your taxes is one of the most important decisions you will make at tax time. Your filing status determines what benefits you are eligible for, in addition to tax rates and the different amounts you can deduct. Your filing status is determined by your marital status as of December 31st of the tax year, as well as whether or not you have dependents to claim. (more…)

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Getting an education isn’t cheap, and far too many people have a hard time paying for their education. Thankfully, the federal government has developed two different tax credits that can help decrease the amount owed at tax time. These credits, The American Opportunity Credit and the Lifetime Learning Credit help taxpayers who incurred education related expenses, such as tuition, fees, supplies, books, and other necessary equipment. Any personal expenses, like fees, transportation costs, and insurance do not qualify as an eligible expense for the purpose of either tax credit. (more…)

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Donating for Dollars

February 11, 2015

When you donate to a recognized charity, many times your donations are tax deductible. This affords you the opportunity to get a little extra back for items you aren’t going to use anyway. You need to make sure you keep an accurate list of all the items you donate, because you’ll have to report your donation to the IRS.

Currently, all items donated to charity must be in good condition or better. Under the old tax laws, you could receive a tax benefit for items donated in fair condition, simply because they had some sort of value. However, today the standard is set that all items are in decent condition and able to be reused. (more…)

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Dependent Benefits

February 10, 2015

One of the easiest way to increase your tax benefits at tax time is to claim a child or eligible adult relative as a dependent. You are entitled to a personal exemption for each qualifying dependent that you claim, which helps put a little extra cash back in your pocket. You may even be able to save some on the amount of tax you owe, as some dependents or a certain age and relationship can reduce your tax liability. By claiming dependents, you may be able to claim the Child Tax Credit, Earned Income Credit, and the Child and Dependent Care Credit. If you are unmarried, but can claim a child as a dependent, you may be eligible to file your return using the Head of Household status, which can be beneficial in many ways. (more…)

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You like to be there for your friends, especially when they need a little help getting on their feet. For those friends who have become non-rent paying roommates and are spending nights on your couch, you may be able to get a tax benefit by claiming those friends as a dependent.

Many people think only children and relatives can be claimed as dependents on tax returns. However, if you are supporting your unrelated friends, you may be able to claim them as a dependent, especially if you are providing shelter for them. The theory behind this allowance is that often these friends don’t file their own tax returns, meaning they don’t claim a personal exemption. It’s also thought that you will share your return with them. (more…)

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Caring for Your Dependents

February 8, 2015

Many taxpayers require a little extra help when it comes to taking care of their dependents. Those who hire professional care for their disabled relatives or childcare for their children younger than 13 so they can work may be eligible to recoup their expenses through the Child and Dependent Care Credit. This tax credit is worth up to 35% of qualifying expenses incurred due to the care of a dependent while you are at work. (more…)

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Child Care Tax Credit

February 7, 2015

Finding someone to care for your child while you work or during school holiday can tie up a large portion of your budget. Sending your kids off to school can account for a much of your childcare needs, but if your children are younger than school age, or if they are on summer vacation, you’re likely to pay more money for childcare. The government wants to help parents offset the cost of childcare expenses incurred for children under thirteen by offering a tax credit. The child for whom the care is rendered must be the taxpayer’s dependent, and separate rules apply to parents who are divorced or separated.

There are different type of child care that qualify for the tax credit. It’s important to be aware of the qualifying care so you can maximize your benefits and cut back your expenses at tax time. (more…)

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Let’s Make Amends

February 6, 2015

If you’ve found errors on your tax return after it’s been filed, you may need to file an amended return, depending on the type of error and the circumstances of the return. However, determining when to file an amended return can be a complicated process.

In some cases, taxpayers may notice that their previous year dividend income has changed after they received their statement from their financial institution. If the change is a minimal amount, despite being enough to warrant a small refund, many financial counselors recommend ignoring the difference. Often, it’d cost more to file the updated return than it’d be worth. (more…)

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Party Like It’s 1099

February 5, 2015

You can’t escape the IRS. No matter what your job, even if you’re an independent contractor, the IRS wants you to pay your taxes, and they will find a way to make sure they get their money. Thanks to the Form 1099-MISC, independent contractors can file their taxes and avoid scrutiny from the IRS. The IRS receives the form from your client, and matches it with the information you send.

Independent contractors who receive more than $600 of compensation throughout the tax year from a single client will need to file a 1099-MISC. If you fail to receive the form by mail, you should contact the client and have them resend a form. It is your responsibility to make sure you file your 1099-MISC, as the IRS will find out. Some clients may not know they have to send the form, so you should always take a proactive approach when it comes to your 1099-MISC. (more…)

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