Homemade Gifts Made Easy May. A short word with many meanings. It's the name of the fifth month of the year. Here in the Norther Hemisphere, it's when springtime comes in fully. That's fitting, since its name comes from Maia, the Greek goddess of spring and growth. The Oxford English Dictionary also says the word is a verb that expresses possibility, as in "that may be true," or permission, as in "may I ask a few questions?" When it comes to taxes, I like to combine the meanings. May is a time of growth and renewal and the possibility of... Read more →
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Photo by Elisa Ventur on Unsplash When you make a mistake on your Form 1040, the best thing that could happen is the Internal Revenue Service will catch your relatively insignificant error, fix it, and send you a notice about the change. A worse outcome is the IRS changes reduce and/or delay the refund you're expecting. And the absolute worst tax error outcome is that your mistake isn't a minor one, and the IRS decides to take a longer, closer look at your filing. The only way to avoid these situations is to double check your return to ensure it's... Read more →
Blinders may work for horses, but they're terrible for taxpayers who might miss out on some tax savings. (Photo by Graham Ruttan on Unsplash) The Tax Cuts and Jobs Act's expansion of the standard deduction amounts means even more taxpayers are using that filing method. Most think that since they don't itemize, they don't need to worry about tax breaks. They're wrong. There are the above-the-line deductions, officially known as adjustments to income, that anyone can take (if they qualify), regardless of whether they take the standard deduction or use Schedule A. Then there are some tax credits, again available... Read more →
Photo by Kris Gonzalez via Flickr CC Parenting presents many challenges. One of them is finding quality child care. The tax code can help a bit here if you, and your spouse if you're married, both work. The Child and Dependent Care Credit offsets some child care expenses. Since it's a tax credit, it does that by reducing your tax liability dollar-for-dollar. But if you're a working mom or dad who enjoyed the pandemic-prompted enhancements to the child care credit last year, get ready to be disappointed when you file your 2022 return. The tax break afforded by the Child... Read more →
The Earned Income Tax Credit, or EITC, is one of the most beneficial tax breaks for lower- and moderate-income workers. It's also one of the most under-claimed. The reasons are many, starting with its complexity. You have to work to be able to claim the EITC. But if you make too much money, you're ineligible. Your marital status comes in the calculation of the final credit, as does the size of your family. And many single people ignore the EITC because they think it's only available to filers with dependent children. "This is an extremely important tax credit that helps... Read more →
Photo by Polina Zimmerman While millions are debating when to file their tax return, others are asking a more elemental question. Do I have to file a 1040 at all? It's a good question. The short answer is probably. But there are some situations where the Internal Revenue Service doesn't demand individuals file. Here's a look at just who is off the tax filing hook. Filing requirements for most of us: Generally, if you are a U.S. citizen or resident you must consider three things when determining whether you have to file a tax return: your age, your filing status,... Read more →
Every filing season, eager taxpayers, most of them expecting a refund, send their returns to the Internal Revenue Service as soon as they can. For most it works out OK. Others, however, discover on their own, or learn from the IRS, something just not quite right, and costly, on their Form 1040. It works the other way, too. In some instances, folks submit a return without claiming a tax break that would have saved them dollars. The IRS isn't going to tell you about that! The best way to make sure you enter all the data that the IRS wants,... Read more →
Plus a look at how higher costs of living affect capital gains, youngsters' investment earnings, gifts, and more. Image via Giphy Them that got, are them that get. Not only is that a lyric (and theme) from a fabulous Ray Charles song, it's a good synopsis of the current estate tax law, especially with 2023 inflation adjustments. Many of the current wealth-related tax provisions help the richest among us stay that way. But some of them can help all of us, regardless of our income level, increase our relative wealth. And, as reviewed in this Part 6 of the ol'... Read more →
Very few of us share the same tax circumstances. However, there is one thing every taxpayer can agree on. We all want to pay the least amount of federal tax as possible. Deductions, like the standard amounts discussed in Part 2 of the ol' blogs annual tax inflation series, are a major way of reducing our annual tax bill. But wait. There's more. There are the adjustments to income, listed on Form 1040 Schedule 1 and still known as above-the-line deductions. You can claim all of these 25 tax breaks regardless of whether you itemize or take the standard deduction.... Read more →
Following these youngsters' example could pay off in more money from Uncle Sam. The IRS is notifying individuals and families who didn't have to file a 2021 tax return to take another look and consider submitting one by Nov. 17 to claim valuable tax breaks, like the enhanced Child Tax Credit, that they missed. The Internal Revenue Service is still trying to distribute tax benefits to 9 million families that have yet to claim them. The yet-to-be-collected tax breaks are COVID-19 economic impact payments available as the Recovery Rebate Credit (RRC), the Child Tax Credit (CTC), and the Earned Income... Read more →
The Child Tax Credit (CTC) has always been a popular tax break for families. During the COVID-19 pandemic, millions of taxpayers with children came to depend on it even more. Now, some parents who usually don't have to file a tax return can still get this tax break, which could be as much as $3,600 per child. But they must act by Nov. 15. Pandemic pumped-up credit: The CTC was enhanced as part of 2021's American Rescue Plan Act coronavirus relief legislation. It upped the usual $2,000 per child credit for qualifying youngsters. For the 2021 tax year, the CTC... Read more →
Photo by Vidal Balielo Jr. The Child Tax Credit was expanded in 2021 to help families coping with the adverse economic effects of the COVID-19. During the height of the pandemic, the American Rescue Plan Act (ARPA) temporarily bumped up the amount available via the already popular CTC. It went from $2,000 per qualifying child to $3,600 a year for children younger than age 6, and $3,000 per child for youngsters ages 6 to 17. The credit amounts were phased out once tax-filing families hit certain income levels. More of the increased CTC also was refundable, meaning that if the... Read more →
Photo by Vlada Karpovich Immediately after the U.S. Supreme Court overturn the constitutional right to abortion, talk turned to the longer-term ramifications of the Dobbs v. Jackson Women's Health Organization ruling. The ending of the 49-year-old federal right to an abortion means states now can determine under what circumstances the medical procedure is allowed. Most that have enacted anti-abortion laws or reinstated pre-Roe statutes do not allow or severely limit the time frame in which it can be performed. Some even have granted an unborn fetus personhood, or have introduced legislation to ban abortion by establishing fetal personhood, according to... Read more →
Photo by William Fortunato Being a parent is a challenge, even with the best of children. It's also expensive, especially for parents of infants. And the costs have increased thanks to the recent inflation spike. "Most parents are the poorest they'll ever be in their kid's life on the day their kid is born," Kathryn Edwards, an economist with the RAND Corporation, recently told Boston's NPR news station WBUR. "That's what makes something like the cost of diapers hit really hard, is that you're hitting people who in 10 years probably have absolutely no problem affording diapers. It’s just really... Read more →
Families in Puerto Rico who haven't filed to claim the enhanced 2021 tax year Child Tax Credit should do so, preferably by using the tax break's special online simplified filing tool. (Image from IRS Publication 5649) The Internal Revenue Service is still trying to deliver 2021 tax year Child Tax Credit money, this time focusing on families in Puerto Rico. The tax break amount was increased last tax year to a potential maximum of $3,600 for each child ages 5 and younger, and up to $3,000 for youngsters ages 6 through 17. It's also a fully refundable tax credit for... Read more →
If you live in one of them, the state tax break is a nice add-on to the federal Child Tax Credit, which this year reverted to its lower, pre-COVID amounts. Child tax credits, at the federal level and in 10 states, can have the parents of these youngsters jumping for joy, too. (Photo by Guduru Ajay bhargav) The expanded federal Child Tax Credit (CTC) helped millions of households cope with finances stretched thin due to COVID-19 layoffs and even total business closures. During the height of the pandemic, the already popular CTC of $2,000 per qualifying child was increased. The... Read more →
The Child Tax Credit (CTC), already a popular tax break, was enhanced for the 2021 tax year. In addition to being larger — up to $3,600 for each child younger 6 and up to $3,000 for each youngster age 6 through 17 instead up the usual $2,000 per qualifying child — it was available to more families. Most eligible households got half of their qualifying CTC amount last year as monthly advance payments. They were sent automatically to taxpayers who had filed returns in prior years. Families who didn't have to file, usually because they earned less than the amount... Read more →
Taxes don't typically prompt celebrations like that of these school children welcoming May with a traditional Maypole dance. But thinking about tax moves this month can help you avoid costly faux pas. (Photo by Paul Barnett via Wikimedia Commons) May is supposed to be the month full of flowers from the previous month's showers. Unfortunately, this year the month is starting off on a decidedly unmerry note. In the wake of the devastating Kansas tornadoes, forecasters are warning of multiple rounds this week of severe thunderstorms, including tornadoes, across the Plains, Midwest, and South. That's why heeding weather warnings and... Read more →
Photo by Vidal Balielo Jr. via Pexels Filing status is one of those tax matters that seems so simple, but which often trips up taxpayers in real life. As noted (shameless plug warning) in my 5 filing status choices item for the April Tax Tips page, most folks' status stays the same from tax year to tax year. But a change (or two, or more) in your personal situation could mean you need to revisit how you file your return. The head of household (HoH) status is a frequent source of confusion. Here, an unmarried person takes care of the... Read more →
Do check out these following related — and legitimate — tax write-offs Sometimes your home is indeed located at the intersection of favorable tax breaks. Sometimes it's not. Below is a look at the difference between some questionable and acceptable residential (and more!) write-offs. Every tax-filing season, the great quest by filers is to find the most tax breaks. But there are some deductions and credits you should steer clear of. These expenses that don't meet Internal Revenue Service guidelines mean the agency will stop processing your tax return to give it second (or third, or …) look. At best,... Read more →