When filling out your tax return this year, you may have questions about dependents – such as who can be claimed on your return. Claiming a dependent can have a significant impact on your return, including increasing exemptions and possibly increasing certain credits like the Earned Income Credit and various others. The IRS recently published Tax Tip 2016-08, which lists ten facts about dependents and exemptions. Below is the list of facts, along with some additional information that I’ve included (my comments are in italics): Exemptions and Dependents: TopTen Tax Facts Most people can claim an exemption on their tax return. It can lower your taxable income. In most cases, that reduces the amount of tax you owe for the year. Here are the top 10 tax facts about exemptions to help you file your tax return. E-file Your Tax Return. Easy does it! Use IRS E-file to file a complete […]
income tax credit
5 Tax Credits You Don’t Want to Miss
As individuals begin to file their tax returns for 2015 here are some tax credits that some individuals may qualify for to help reduce, if not eliminate their tax liability. Child Tax Credit. This credit may be worth up to $1,000 per child, depending on income. The child must be under age 17 at the end of 2015, as well as be a dependent and a US citizen. Additional information can be found in Publication 972. The American Opportunity Tax Credit. This tax credit for education expenses is allowed for parents for up to the first four years of post-secondary (college) education. The benefit of this credit is that it is a “per student” credit. This means the credit can be taken for multiple children in college. The maximum credit per student is $2,500. Additional information can be found here. The Lifetime Learning Credit. Like the AOTC, this credit can […]
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Tips for Tax Time
Given that it the start of tax season and individuals will be gathering and preparing their 2015 tax return information, I’d thought I’d put together some basic tax tips. Individuals may consider thinking about these items in order to have a smooth and (hopefully) stress-free 2015 tax season. Additionally, I’ve included a link to our 2015 Tax organizer. Please feel free to use it at your convenience to get your “tax ducks in a row”. Furthermore, please let us know if you’d like us to prepare and file your taxes for you. Many current clients have found Blankenship Financial to be cost effective and efficient compared to other big-named tax preparation services. As Enrolled Agents both Jim and I are well qualified to handle most tax matters and returns. And now with the tax tips… Beware the non-tax man cometh! Each year we field calls from clients and prospective clients […]
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What the Health Care Law Means to You
Since the Affordable Care Act has been in place for over a year now, it’s important to understand what affects the health care law will have on you and your tax situation. Recently the IRS issued a Health Care Tax Tip (HCTT-2015-06) which details how the health care law can effect you. The actual text of the Tip is reproduced below:
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New For 2014 Taxes: Health Premium Tax Credit
We knew when Obamacare went into place that there would be new requirements for income tax filing, and one of the first to deal with is the health premium tax credit. This will require the use of a new form, Form 8962. Health Premium Tax Credit For this tax credit you will need to reconcile your advance credits that you have received in the form of reduced subsidized healthcare premiums.
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Education Tax Benefits
Going to college can be a stressful time for students and parents. Some of the costs of your education can be offset by tax credits and reductions to income. These credits and reductions can be complicated, so it takes a bit of coordination to keep things straight. More than one education tax benefit may be taken in one year, but generally the expenses must be segregated from one another in your reporting. In other words, you couldn’t take two tax benefits based upon the exact same education expenses, with some exceptions. For example, you can use most qualified expenses for the tax credits and apply the expense toward eliminating the 10% penalty on IRA distributions at the same time. Generally though, most tax benefits for education can only be applied once to each expense. Only one of the following credits may be used per student in any given year: American […]
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Penalty for Having No Health Insurance
Note: this provision has been repealed beginning with tax year 2019. As you may already be aware, individuals are required to carry health insurance on themselves and their dependents, as of January 1, 2014. This is the mandate set forth in the Affordable Care Act – and of course it’s an important part of making the whole Act work. Small businesses (less than 50 employees) have a similar mandate to provide coverage for employees beginning in 2015, or face penalties themselves. Without mandating insurance coverage for everyone, the system can’t sustain the lower-cost options for folks who desperately need the medical coverage. This includes folks who are not covered by any other means (employer, Medicare, Medicaid or individually-purchased policies) and who have medical problems that require costly care. With the mandate, healthier individuals will also have to pony up and purchase health insurance, so that the overall cost is spread […]
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Charitable Donations
This time of year many people find it in their hearts to give. They’ll give to friends, family, loved ones and charitable organizations that can help maximize the gift such as a church, charity, or foundation. Last week I had written about the law of reciprocity and giving, and this week I’d like to mention how you can make your giving work in favor when tax season rolls around. As of this writing there are about 11 days left in 2013. Some individuals will be looking to see how much they can give or how much more they can give in order to receive the biggest tax deduction they can for charitable giving. Of course, gifts to friends and family are not deductible, but there are times when gifts or donations are completely deductible and may be to the tax advantage of the person giving or donating the gift. According to […]
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You’re Running Out of Time If You Want to Use These 13 Tax Provisions
Every year we say goodbye to certain things that we’ve come to know and love, and certain provisions of the tax law are not excluded from this treatment. Portions of the tax law are intentionally added with short life-spans, and others are retired from time to time as their intended use has either changed or been eliminated. Listed below are the tax provisions (according to the Joint Committee on Taxation) that will be expiring at the end of the year – some we’ll be glad to see go, others we’ll wish would stay around a while. Some will be extended by Congress, either at the last moment or on into the new year, as has happened in the past. Note: This article is aimed toward individual taxpayers rather than businesses, so I’ve only listed those provisions that will have impact on individuals. There are quite a few provisions expiring that […]
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IRS Helps You Out When Your Boss Doesn’t Pay You Back For Expenses Related to Your Job
Employee Transfer (Photo credit: Wikipedia) When you have to pay for certain expenses in order to do your job, sometimes (if you’ve got a good employer!) your company will reimburse you for those expenses. On the other hand, sometimes they don’t reimburse you for those expenses. Did you know that you can deduct those expenses (to a certain extent) from your income when you file your tax return? And in some cases, when your employer reimburses you, you still need to fill out additional tax forms in order to keep from being taxed on the reimbursements. The IRS recently published their Tax Tip 2012-54, which details how to go about deducting these expenses, and what expenses are qualified for deduction. Below is the text of the Tax Tip in its entirety. Employee Business Expenses Some employees may be able to deduct certain work-related expenses. The following facts from the IRS […]
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Tax Credits That Can Increase Your Refund
The IRS recently issued their Tax Tip 2012-41, which lists out some of the tax credits that are refundable. Most tax credits are not refundable, meaning that if the amount of the credit is more than your tax for the year, the credit is limited only to the amount of your tax. For example, if you had tax payable of $1,500 and then had Education Credits, Energy Credits, and/or Foreign Tax Credits amounting to more than $1,500. Your credits will be limited to $1,500 since that’s your tax payable and the credits are not refundable. On the other hand, there are a few credits that are refundable, as listed below in the actual text from Tax Tip 2012-41. Four Tax Credits that Can Boost Your Refund A tax credit is a dollar-for-dollar reduction of taxes owed. Some tax credits are refundable meaning if you are eligible and claim one, you […]
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11 Facts About the Child Tax Credit (2011)
Image via Wikipedia The IRS recently issued their Tax Tip 2012-29, which provides some key points about the Child Tax Credit. Below is the text of the tip: The Child Tax Credit is available to eligible taxpayers with qualifying children under age 17. The IRS would like you to know these eleven facts about the Child Tax Credit. Amount With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under age 17. Qualification A qualifying child for this credit is someone who meets the qualifying criteria of seven tests: age, relationship, support, dependent, joint return, citizenship and residence. Age Test To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2011. Relationship Test To claim a child for purposes of the Child Tax Credit, the child must […]
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What Changed About the Earned Income Credit?
Image by didbygraham via Flickr I’ve received a lot of questions about this. Apparently as folks file their returns for the year, they are finding a difference in the amount of refund that they are due to receive this year versus last year. And as they look for answers, they often focus on the Earned Income Credit (EIC) and wonder if something changed. The answer is – very little changed. Certainly nothing that would have a significant impact on your income tax refund. There was one significant change, in that beginning in 2011 there was no advance payment of the EIC – in years past it was an option available for the taxpayer to receive his or her EIC in advance payments throughout the year rather than waiting until the tax return has been filed. Beginning with 2011, you have to wait to receive the EIC payment. Other than that, […]
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Do You Need to File a Tax Return This Year?
Image via Wikipedia Have you ever wondered if it was actually necessary to file a tax return? Perhaps your income is relatively low, and so you wonder if it’s really required of you to file a return. Often it’s not entirely a case of a return being required, but rather it might be in your best interest to file a return in order to receive certain credits against your income. Recently the IRS issued their TAX TIP 2012-02 which goes over some of the things you need to be aware of when considering if it’s necessary or in your best interest to file a return. Portions of this TIP are listed below, with additional information added. Do I Need to File a Tax Return This Year? You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing […]
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Expiring Tax Provisions for 2011
Image by polapix via Flickr There are quite a few tax provisions that will be expiring at the end of 2011 – nowhere near the number of provisions that were set to expire at the end of 2010 (many of which were subsequently extended), but still there are quite a few sun-setting this year. Listed below are some of the major provisions that will expire at the end of 2011 that will affect individual taxpayers. Charitable Contributions from IRA The provision that allows an IRA owner, subject to Required Minimum Distributions (RMDs) and over age 70½ to make a Qualified Charitable Distribution (QCD) directly to a charity from his IRA will expire as of 12/31/2011. This provision allows the IRA owner to make this charitable contribution without having to recognize the income – which could have a profound effect on the taxpayer’s return. Remember, this one expired once before, at […]
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2012 Income Tax by the Numbers
Recently, the IRS released the updated figures as they apply to 2012 income tax rates and schedules, via Revenue Procedure 2011-52. Below is a summary of the key information from this procedure document. Adoption Assistance The credit for adoption expenses was changed by the Patient Protection and Affordable Care Act of 2010 (and others) such that this credit was increased to $13,170, and the credit became refundable. This provision will expire at the end of calendar year 2011, which will cause the credit to fall back to an amount of $10,000. This amount is then adjusted for inflation, such that the limit for 2012 is $12,650, and remains non-refundable. The limit for adopting a special needs child is the same at $12,650 for 2012. We’ll see if any changes come through to make any changes to the refundability. The modified AGI limits for the phase-out of adoption credit assistance is […]
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Earned Income Credit and Due Diligence
Image via Wikipedia For those familiar with the Earned Income Tax Credit (EITC), you (hopefully) are familiar with the preparer’s due diligence checklist. This is a checklist that the preparer uses to help determine if the taxpayer’s circumstances are in keeping with the conditions that are required to be met in order to be eligible for the credit. In the past, this checklist has been filled out by the preparer and kept in the preparer’s files. Recently this fact has changed a bit – the IRS changed the requirements, such that now the due diligence checklist must be filed along with the return. This filing requirement is the only thing that has changed, the due diligence is the same as before. The checklist Here’s what the checklist asks: Is the taxpayer’s status Married Filing Separately? (if this question is answered “Yes”, the taxpayer is not allowed to file for EITC) […]
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