I’ve been doing 2014 tax returns for the last 6 weeks as an IRS certified volunteer and I thought I’d share with you some tax items that some people are missing.
- Education Credits. These are a tax credit (better than an income deduction) available to a self-supporting student or a parent assisting with educational expenses. The American Opportunity Credit offers up to $2,500 per student per year covering tuition, required enrollment fees and course materials. The Lifetime Learning Credit offers up to $2,000 credit per “return” and can be even be used for just picking up an educational course not related to any specific degree.
- Child and Dependent Care Credit. If you pay someone to watch your children (under age 13) or for a spouse or dependant who can’t care for themselves so that you can work you can qualify for a Credit. You’ll need either a tax ID or the social security number of the person you paid for these services.
- Married Filing Separately. This is a really lousy tax filing status and will be costly to both parties. Even filing as “Single” may result in lower tax burdens. The best situation if you are married as of the last day of 2014, is to agree to file a joint return and just split any taxes due or refund.
- Not understanding who must or should file. Parents are often unsure if their dependents should file their own taxes. In general if the dependent is under age 65 and had earned income over $6,200 they must file a federal tax return. From a practical point of view if they worked any job that withheld any tax from their pay, they should file just to get this back.
- You can’t negotiate a dependent. I’ve seen parents say that they had a young adult son or daughter still living with them, they paid for ½ of their expenses but say they will allow the son or daughter to claim themselves as a dependent. Sorry it doesn’t work that way, if your son or daughter “can be” claimed by you, they cannot claim themselves on their own return.
Taxpayers who do their homework ahead of time may be able to save money be either getting a larger refund or owe less tax.