Things to Know About This Upcoming Tax Season
Updated: Feb 26
Tax Filing Season Starts February 12
Although tax season usually starts in late January, this year, the tax filing season is delayed until February 12, 2021. The delayed start date for individual tax return filers allowed the IRS time to do additional programming and testing of IRS systems following the December 27, 2020, tax law changes that provided a second round of Economic Impact Payments and other benefits to many taxpayers. This programming work is critical to ensuring IRS systems run smoothly to minimize refund delays and ensure that eligible people will receive any remaining stimulus money as a Recovery Rebate Credit when they file their 2020 tax return.
File Electronically for Faster Refunds
Last year's average tax refund was more than $2,500. Once again, the IRS anticipates that nine out of 10 taxpayers will receive their refund within 21 days when filing electronically with direct deposit - and there are no issues with their tax return.
More than 150 million tax returns are expected to be filed this year - the majority before the Thursday, April 15 deadline. To speed refunds during the pandemic, the IRS urges taxpayers to file electronically with direct deposit as soon as they have the information they need. To avoid delays in processing, people should avoid filing paper returns wherever possible.
Taxpayers eligible for IRS Free File were able to begin submitting tax returns on January 15, 2021, although the returns will not be transmitted to the IRS until February 12, 2021.
Under the PATH Act, the IRS cannot issue a refund involving the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) before mid-February. The law provides this additional time to help the IRS stop fraudulent refunds and claims from being issued, including to identity thieves.
The IRS anticipates a first week of March refund for many EITC and ACTC taxpayers if they file electronically with direct deposit and there are no issues with their tax returns. This would be the same experience for taxpayers if the filing season opened in late January. Taxpayers will need to check Where's My Refund for their personalized refund date.
Key Dates for Taxpayers Filing a Return
Important dates that taxpayers should keep in mind for this year's filing season include:
January 15. IRS Free File opens. Taxpayers can begin filing returns through Free File partners; tax returns will be transmitted to the IRS starting Feb. 12. Tax software companies also are accepting tax filings in advance.
January 29. Earned Income Tax Credit Awareness Day to raise awareness of valuable tax credits available to many people – including the option to use prior-year income to qualify.
February 12. IRS begins 2021 tax season. Individual tax returns begin being accepted and processing begins.
February 22. Projected date for the IRS.gov Where's My Refund tool being updated for those claiming EITC and ACTC, also referred to as PATH Act returns.
First week of March. Tax refunds begin reaching those claiming EITC and ACTC (PATH Act returns) for those who file electronically with direct deposit and there are no issues with their tax returns.
April 15. Deadline for filing 2020 tax returns.
October 15. Deadline to file for those requesting an extension on their 2020 tax returns.
Help is Just a Phone Call Away
Taxes are more complicated than ever. If you have any questions or concerns regarding tax filing this year, don't hesitate to contact the office.
What's New for 2020 Tax Returns
As always, taxpayers should be aware of several key items involving credits, deductions, and refunds when filing their tax returns. Let's take a look:
1. Recovery Rebate Credit/Economic Impact Payment. In January, the Treasury Department and the IRS began sending the second round of Economic Impact Payments (EIP2) to millions of Americans as part of the implementation of the Coronavirus Response and Relief Supplemental Appropriations Act. As with the first round of Economic Impact Payments (EIP1), taxpayers don't need to take any action to receive these payments.
Taxpayers who didn't receive an advance payment should review the eligibility criteria when they file their 2020 taxes because many people, including recent college graduates, may be eligible for a credit.
Taxpayers who received an Economic Impact Payment should have received Notice 1444, Your Economic Impact Payment, and should keep it with their 2020 tax records.
Individuals who received the full amount for both Economic Impact Payments do not need to complete information about the Recovery Rebate Credit on their 2020 Form 1040 or 1040-SR because they've already received the full amount of the Recovery Rebate Credit as advance payments.
Eligible individuals who did not receive an Economic Impact Payment – either the first or the second payment – can claim a Recovery Rebate Credit when filing their 2020 Form 1040 or 1040-SR this year. They may be eligible to claim the Recovery Rebate Credit on their tax year 2020 federal income tax return if:
they didn't receive an Economic Impact Payment, or
their Economic Impact Payment was less than the full amount of the Economic Impact Payment for which they were eligible.
2. Option to Use Prior Year Income Amounts. Also new this year is the option to use prior year income amounts (2019) when computing the Earned Income Tax Credit and the Additional Child Tax Credit.
3. Interest on Refunds is Taxable. Taxpayers who received a federal tax refund in 2020 may have been paid interest. Refund interest payments are taxable and must be reported on federal income tax returns. In January 2021, the IRS will send Form 1099-INT, Interest Income to anyone who received interest totaling $10 or more.
4. Charitable Deductions. In 2020, taxpayers who don't itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations. Please note that this amount applies whether filing individual or joint returns. In 2021, this amount increases to $600 for joint filers ($300 for single filers).
5. Virtual Currency. If in 2020, you engaged in a transaction involving virtual currency, you will need to answer the question on page 1 of Form 1040 or 1040-SR. In 2019, this question was on Schedule 1.
6. Form 1099-NEC. Individuals may receive Form 1099-NEC, Nonemployee Compensation, rather than Form 1099-MISC, Miscellaneous Income, if they performed certain services for and received payments from a business in 2020.
Don't hesitate to contact the office with any questions or concerns about these and other tax changes related to the pandemic.
Employer Tax Credit Extended for Payroll Workers
The Taxpayer Certainty and Disaster Tax Relief Act of 2020, enacted December 27, 2020, made several changes to employee retention tax credits. These tax credits were previously made available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The most notable change was the modification of the Employee Retention Credit (ERC). Several of the changes apply only to 2021, while others apply to both 2020 and 2021. As such, employers can take advantage of the newly-extended employee retention credit, designed to make it easier for businesses that choose to keep their employees on the payroll - despite challenges posed by COVID-19.
Claiming the Refundable Tax Credit
Eligible employers can now claim a refundable tax credit against the employer share of Social Security tax equal to 70% of the qualified wages they pay to employees after December 31, 2020, through June 30, 2021. Qualified wages are limited to $10,000 per employee per calendar quarter in 2021. Thus, the maximum ERC amount available is $7,000 per employee per calendar quarter, for a total of $14,000 in 2021.
Employers can access the ERC for the 1st and 2nd quarters of 2021 prior to filing their employment tax returns by reducing employment tax deposits. Small employers (i.e., employers with an average of 500 or fewer full-time employees in 2019) may request advance payment of the credit (subject to certain limits) on Form 7200, Advance of Employer Credits Due to Covid-19, after reducing deposits. In 2021, advances are not available for employers larger than this.
Effective January 1, 2021:
Employers are eligible if they operate a trade or business during January 1, 2021, through June 30, 2021, and experience either:
A full or partial suspension of the operation of their trade or business during this period because of governmental orders limiting commerce, travel, or group meetings due to COVID-19, or
A decline in gross receipts in a calendar quarter in 2021 where the gross receipts of that calendar quarter are less than 80% of the gross receipts in the same calendar quarter in 2019 (to be eligible based on a decline in gross receipts in 2020 the gross receipts were required to be less than 50%).
Employers that did not exist in 2019 can use the corresponding quarter in 2020 to measure the decline in their gross receipts.
For the first and second calendar quarters in 2021, employers may elect to measure the decline in their gross receipts using the immediately preceding calendar quarter (i.e., the fourth calendar quarter of 2020 and first calendar quarter of 2021, respectively) compared to the same calendar quarter in 2019.
The manner in which this is carried out is not yet available but will be provided in future IRS guidance.
The definition of qualified wages was also changed:
For an employer that averaged more than 500 full-time employees in 2019, qualified wages are generally those wages paid to employees that are not providing services because operations were fully or partially suspended or due to the decline in gross receipts.
For an employer that averaged 500 or fewer full-time employees in 2019, qualified wages are generally those paid to employees during a period that operations were fully or partially suspended or during the quarter that the employer had a decline in gross receipts regardless of whether the employees are providing services.
Retroactive to March 27, 2020:
With the enactment of the CARES Act, the law now allows employers who received Paycheck Protection Program (PPP) loans to claim the ERC for qualified wages that are not treated as payroll costs in obtaining forgiveness of the PPP loan.
Help is Just a Phone Call Away
For more information about these and other pandemic-related tax changes, please call the office.
Social Security Benefits and Taxes: The Facts
Social Security benefits include monthly retirement, survivor, and disability benefits; they do not include Supplemental Security Income (SSI) payments, which are not taxable.
Generally, you pay federal income taxes on your Social Security benefits only if you have other substantial income in addition to your benefits. Examples include wages, self-employment, interest, dividends, and other taxable income that must be reported on your tax return.
Your income and filing status affect whether you must pay taxes on your Social Security. An easy method of determining whether any of your benefits might be taxable is to add one-half of your Social Security benefits to all of your other income, including any tax-exempt interest.
If you receive Social Security benefits you should receive Form SSA-1099, Social Security Benefit Statement, showing the amount.
Next, compare this total to the base amounts below. If your total is more than the base amount for your filing status, then some of your benefits may be taxable. In 2020, the three base amounts are:
$25,000 - for single, head of household, qualifying widow or widower with a dependent child or married individuals filing separate returns who did not live with their spouse at any time during the year
$32,000 - for married couples filing jointly
$0 - for married persons filing separately who lived together at any time during the year
Taxpayers filing an individual federal tax return:
If your combined income (adjusted gross income + nontaxable interest + 1/2 of your Social Security benefits) is between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
If it is more than $34,000, up to 85 percent of your benefits may be taxable.
Taxpayers filing a joint federal tax return:
If you and your spouse have a combined income ((adjusted gross income + nontaxable interest + 1/2 of your Social Security benefits) that is between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits.
If it is more than $44,000, up to 85 percent of your benefits may be taxable.
Married taxpayers filing separate tax returns generally pay taxes on benefits.
Thirteen states tax social security income as well including Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia.
Retirement income is generally not taxed by other countries. As a U.S. citizen retiring abroad who receives Social Security, for instance, you may owe U.S. taxes on that income but may not be liable for tax in the country where you're spending your retirement years.
If Social Security is your only income, then your benefits may not be taxable, and you may not need to file a federal income tax return. However, if you receive income from other sources (either U.S. or country of retirement) as well, from a part-time job or self-employment, for example, you may have to pay U.S. taxes on some of your benefits - the same as if you were still living in the U.S.
You may also be required to report and pay taxes on any income earned in the country where you retired. Each country is different, so consult a local tax professional specializing in expatriate tax services.
Even if you retire abroad, you may still owe state taxes--unless you established residency in a no-tax state before you moved overseas. Also, some states honor the provisions of U.S. tax treaties; however, some states do not. Therefore, it is prudent to consult a tax professional.
If you receive Social Security, a tax professional can help you determine if some - or all - of your benefits are taxable.
Taxable vs. Nontaxable Income
Are you wondering if there's a hard and fast rule about what income is taxable and what income is not taxable? The quick answer is that all income is taxable unless the law specifically excludes it. But as you might have guessed, there's more to it than that.
Taxable income includes any money you receive, such as wages, tips, and unemployment compensation. It can also include noncash income from property or services. For example, both parties in a barter exchange must include the fair market value of goods or services received as income on their tax return.
Here are some types of income that are usually not taxable:
Gifts and inheritances
Child support payments
Damage awards for physical injury or sickness
Cash rebates from a dealer or manufacturer for an item you buy
Reimbursements for qualified adoption expenses
In addition, some types of income are not taxable except under certain conditions, including:
Life insurance proceeds paid to you are usually not taxable. But if you redeem a life insurance policy for cash, any amount that is more than the cost of the policy is taxable.
Income from a qualified scholarship is normally not taxable; that is, amounts you use for certain costs, such as tuition and required books, are not taxable. However, amounts used for room and board are taxable.
If you received a state or local income tax refund, the amount might be taxable. You should have received a 2020 Form 1099-G from the agency that made the payment to you. If you didn't get it by mail, the agency might have provided the form electronically. Contact them to find out how to get the form. Be sure to report any taxable refund you received even if you did not receive Form 1099-G.
Important Reminders about Tip Income
If you get tips from customers, that income is subject to taxes. Here's what you should keep in mind:
1. Tips are taxable. You must pay federal income tax on any tips you receive. The value of noncash tips, such as tickets, passes or other items of value are also subject to income tax.
2. Include all tips on your income tax return. You must include the total of all tips you received during the year on your income tax return, such as tips received directly from customers, tips added to credit cards, and your share of tips received under a tip-splitting agreement with other employees.
3. Report tips to your employer. If you receive $20 or more in tips in any one month from any one job, you must report your tips for that month to your employer. The report should only include cash, check, debit, and credit card tips you receive. Your employer is required to withhold federal income, Social Security, and Medicare taxes on the reported tips. Do not report the value of any noncash tips to your employer.
4. Keep a daily log of tips. Use the Employee's Daily Record of Tips and Report to Employer (IRS Publication 1244) to record your tips.
Bartering Income is Taxable
Bartering is the trading of one product or service for another. Small businesses sometimes barter to get products or services they need. For example, a plumber might trade plumbing work with a dentist for dental services. Typically, there is no exchange of cash.
If you barter, the value of products or services from bartering is taxable income. Here are four facts about bartering that you should be aware of:
1. Barter exchanges. A barter exchange is an organized marketplace where members barter products or services. Some exchanges operate out of an office and others over the Internet. All barter exchanges are required to issue Form 1099-B, Proceeds from Broker and Barter Exchange Transactions. The exchange must give a copy of the form to members who barter and file a copy with the IRS.
2. Bartering income. Barter and trade dollars are the same as real dollars for tax purposes and must be reported on a tax return. Both parties must report as income the fair market value of the product or service they get.
3. Tax implications. Bartering is taxable in the year it occurs. The tax rules may vary based on the type of bartering that takes place. Barterers may owe income taxes, self-employment taxes, employment taxes, or excise taxes on their bartering income.
4. Reporting rules. How you report bartering on a tax return varies. If you are in a trade or business, you normally report it on Form 1040, Schedule C, Profit or Loss from Business.
If you have any questions about taxable and nontaxable income, don't hesitate to contact the office today.
Do You Need To File a 2020 Tax Return?
Most people file a tax return because they have to, but even if you don't, there are times when you should - because you might be eligible for a tax refund and not know it. The tax tips below should help you determine whether you're one of them.
General Filing Rules
Whether you need to file a tax return this year depends on several factors. In most cases, the amount of your income, your filing status, and your age determine whether you must file a tax return. For example, if you're single and 24 years old, you must file if your income was at least $12,400. If you are age 65 or older, income thresholds are higher ($14,050 in 2020 for single filers). If you're self-employed (see below) or a dependent of another person, other tax rules may apply.
Tax Withheld or Paid
Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year, and have it applied to this year's tax? If you answered "yes" to any of these questions, you could be due a refund, but you have to file a tax return to receive the refund.
Eligibility for Certain Tax Credits
1. Premium Tax Credit. If you, your spouse, or a dependent was enrolled in healthcare coverage purchased from the Marketplace in 2020, you might be eligible for the Premium Tax Credit - but only if you chose to have advance payments of the premium tax credit sent directly to your insurer during the year. However, you must file a federal tax return and reconcile any advance payments with the allowable premium tax credit.
2. Earned Income Tax Credit. Did you work and earn less than $56,844 last year? You could receive EITC as a tax refund if you qualify with or without a qualifying child. You may be eligible for up to $6,660. If you qualify, file a tax return to claim it.
You may elect to use your 2019 earned income to figure your EITC if your 2019 earned income is more than your 2020 earned income.
3. Additional Child Tax Credit. Do you have at least one child that qualifies for the Child Tax Credit? If you don't get the full credit amount, you may qualify for the Additional Child Tax Credit and receive a refund even if you do not owe any tax.
4. American Opportunity Tax Credit. The AOTC (up to $2,500 per eligible student) is available for four years of post-secondary education. You or your dependent must have been a student enrolled at least half-time for at least one academic period. Even if you don't owe any taxes, you still may qualify; however, you must complete Form 8863, Education Credits, and file a return to claim the credit.
5. Health Coverage Tax Credit. If you, your spouse, or a dependent received advance payments of the health coverage tax credit, you will need to file a 2020 tax return. Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments, shows the amount of the advance payments.
You must file a return in other situations as well, including, but not limited to the following situations:
You owe special taxes such as the alternative minimum tax (AMT), additional tax on qualified plans such as an individual retirement arrangement (IRA), or another tax-favored account, or household employment taxes. However, if you are filing a return only because you owe these taxes, you can file Schedule H, Household Employment Taxes, by itself.
You (or your spouse, if filing jointly) received Archer MSA, Medicare Advantage MSA, or health savings account distributions.
You had net earnings from self-employment of at least $400.
You had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes.
If you have any questions about whether you should file a return, please contact the office.
Relief for Taxpayers Struggling With Tax Debts
While there have always been payment options available from the IRS to help taxpayers struggling to pay tax debts, the new IRS Taxpayer Relief Initiative was put into place to expand these options and offer relief during the pandemic. These revised COVID-related collection procedures will help taxpayers, especially those who have a record of filing their returns and paying their taxes on time.
These types of relief are not automatic. Taxpayers need to request payment relief by contacting the number on their balance due notice or responding in writing.
Highlights of the Taxpayer Relief Initiative
Taxpayers who qualify for a short-term payment plan may now have up to 180 days to resolve their tax liabilities instead of 120 days.
The IRS is offering flexibility for some taxpayers who are temporarily unable to meet the payment terms of an accepted Offer in Compromise.
The IRS will automatically add certain new tax balances to existing Installment Agreements for individual and business taxpayers who have gone out of business.
Certain qualified individual taxpayers who owe less than $250,000 may set up Installment Agreements without providing a financial statement if their monthly payment proposal is sufficient.
Some individual taxpayers who only owe for the 2019 tax year and owe less than $250,000 may qualify to set up an Installment Agreement without a notice of federal tax lien filed by the IRS.
Qualified taxpayers with existing Direct Debit Installment Agreements may be able to use the Online Payment Agreement system to propose lower monthly payment amounts and change their payment due dates.
If you owe taxes to the IRS, don't hesitate to contact the office about your options. Help is just a phone call away.
Five Tax Tips for Older Americans
Everyone wants to save money on their taxes, and older Americans are no exception. If you're age 50 or older, here are five tax tips that could help you do just that.
1. Standard Deduction for Seniors. If you and/or your spouse are 65 years old or older and do not itemize your deductions, you can take advantage of a higher standard deduction amount. There is an additional increase in the standard deduction if either you or your spouse is blind.
2. Credit for the Elderly or Disabled. If you and/or your spouse are either 65 years or older--or under age 65 years old and are permanently and totally disabled--you may be able to take the Credit for Elderly or Disabled. If you are under age 65, you must have your physician complete a statement certifying that you had a permanent and total disability on the date you retired. You must also have taxable disability income that meets certain requirements. The Credit is based on your age, filing status, and income.
You may only take the credit if you meet the following:
In 2020, your adjusted gross income (AGI) on Form 1040 (or Form 1040-SR) line 11 must be less than $17,500 ($20,000 if married filing jointly and only one spouse qualifies), $25,000 (married filing jointly and both qualify), or $12,500 (married filing separately and lived apart from your spouse for the entire year).
The nontaxable part of your Social Security or other nontaxable pensions, annuities, or disability income is less than $5,000 (single, head of household, or qualifying widow/er with dependent child); $5,000 (married filing jointly and only one spouse qualifies); $7,500 (married filing jointly and both qualify); or $3,750 (married filing separately and lived apart from your spouse the entire year).
3. Retirement Account Limits Increase. Once you reach age 50, you are eligible to contribute (and defer paying tax on) up to $26,000 in 2020 (and in 2021). The amount includes the additional $6,500 "catch up" contribution (2020 and 2021) for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan.
4. Early Withdrawal Penalty Eliminated. If you withdraw money from an IRA account before age 59 1/2, you generally must pay a 10 percent penalty (there are exceptions - call for details); however, once you reach age 59 1/2, there is no longer a penalty for early withdrawal. Furthermore, if you leave or are terminated from your job at age 55 or older (age 50 for public safety employees), you may withdraw money from a 401(k) without penalty. You will, however, still have to pay tax on the additional income.
5. Higher Income Tax Filing Threshold. Taxpayers who are 65 and older are allowed an income of $1,650 more ($2,600 married filing jointly) in 2020 before they need to file an income tax return. In other words, older taxpayers age 65 and older with income of $14,050 ($27,400 married filing jointly)in 2020 or less may not need to file a tax return.
Don't hesitate to call if you have any questions about these and other tax deductions and credits available for older Americans.
New Year, New Withholding?
Whether you are starting a new job or reassessing your financial situation, a new year often means a fresh start. Why not get the new tax year off to a good start as well?
One way people can do this is by checking their federal income tax withholding using the Tax Withholding Estimator on IRS.gov. This online tool is useful because it helps employees avoid having too much or too little tax withheld from their wages. It also helps self-employed people make accurate estimated tax payments. Having too little withheld can result in an unexpected tax bill or even a penalty at tax time, while having too much withheld results in less money in your pocket.
Taxpayers can use the results from the Tax Withholding Estimator to determine if they should:
Complete a new Form W-4, Employee's Withholding Allowance Certificate and submit it to their employer.
Complete a new Form W-4P, Withholding Certificate for Pension or Annuity Payments and submit it to their payer.
Make an additional or estimated tax payment to the IRS.
The Tax Withholding Estimator asks taxpayers to estimate:
Their 2021 income.
The number of children to be claimed for the child tax credit and earned income tax credit.
Other items that will affect their 2021 taxes.
The Tax Withholding Estimator does not ask for personally identifiable information, such as a name, Social Security number, address, and bank account numbers. Also, the IRS doesn't save or record the information entered in the Estimator.
Before using the Estimator, taxpayers should gather their 2019 tax return, most recent pay stubs, and any income documents. These documents will help taxpayers estimate 2021 income and answer other questions asked during the process.
Most income is taxable, including unemployment compensation, refund interest, and income from the gig economy and virtual currencies. Therefore, taxpayers should also gather any documents from these types of earnings, such as W-2s, Forms 1099 from banks and other payers, and Form 1099-NEC. Forms 1095-A, Health Insurance Marketplace Statement may also be useful for those claiming the premium tax credit.
As a reminder, the Tax Withholding Estimator results will only be as accurate as the information entered by the taxpayer. People with more complex tax situations, including taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends, should consult a qualified tax professional.
Who Qualifies for the Earned Income Credit
The earned income tax credit can give qualifying workers with low-to-moderate income a substantial financial boost. The credit not only reduces the amount of tax someone owes but may give them a refund even if they don't owe any taxes or aren't required to file a return. If you lost your job in 2020 or your earnings were significantly lower, you may qualify for the earned income tax credit; however, taxpayers must meet certain requirements and file a federal tax return in order to receive this credit. Here's what you need to know:
There's a new rule this tax season to help people impacted by a job loss or change in income in 2020. Taxpayers can use their 2019 earned income to figure your EITC, if their 2019 earned income was more than their 2020 earned income. The same is true for the additional child tax credit.
Taxpayers qualify based on their income and the filing status they use on their tax return. The credit can be more if they have one or more children who live with them for more than half the year and meet other requirements. As such, a taxpayer's eligibility for the credit may change from year to year and can be affected by major life changes such as:
A new job or loss of a job
A change in income
A change in marital status
The birth or death of a child
A change in a spouse's employment situation
Taxpayers who are married filing separately can't claim EITC.
Those who are working and earned less than these amounts in 2020 may qualify for the EITC:
Married filing jointly:
Zero children: $21,710
One child: $47,646
Two children: $53,330
Three or more children: $56,844
Head of household and single:
Zero children: $15,820
One child: $41,756
Two children: $47,440
Three or more children: $50,954
The maximum credit amounts are based on whether the taxpayer can claim a child for the credit and the number of children claimed. For example, the maximum credit for one child is $3,584 and for two children is $5,920.
For more information about this and other tax credits and deductions you might qualify for when you file your tax return this year, please call the office.
SHOULD YOU ITEMIZE OR TAKE THE STANDARD DEDUCTION?
If your single you need over 13K of mortgage interest, real estate taxes, medical and charitables. You need over 19K for Head of Household and a WHOPPING 25K if your Married Joint. The actual standard numbers are a bit lower, but it isn't worth getting a letter from the IRS (or paying your tax pro extra) if you only saved a little bit of money. So if your not close to these numbers save yourself some time and don't worry about gathering the information. If your close......consider the "Leap Frog" method of itemizing. Pay your real estate taxes twice in one year, make a couple of payments ahead on the mortgage. Purchase that big ticket item with sales taxes (for Florida residents), and give to your charities. Then the following year try to do none of those expenses.
Very Smart Tax Idea:
Be sure to fill up your tax-free bucket of money each year if you have an IRA or other sources of income you can take. We see a lot of clients that could be taking extra money out of their IRAs and not pay ANY taxes...or very little. Otherwise that money stays in the IRA and may get taxed to someone at some point....or consider rolling some into a Roth, that way it never gets taxed again.
We have many other great ideas. You will have to become a client of ours to get more. Thanks for reading....there WILL be a test on this information when we see you.