What are the tax errors are the most common parents make that cost them money at tax time?
There is more to be a parent at tax time than claim another exemption on your return.
tax professionals still see some timing errors and the time can get parents to pay more tax they should have to.
Take a look at these common tax mistakes and make sure that you are not doing
1. Not knowing who makes the tax benefits a child
Some single parents assume that if their ex takes the dependency exemption, the custodial parent can not take it for earned income credit (EIC) on the basis of this child
this error may cause them to miss out on thousands of dollars per year of EIC potential even beyond the taxes they have paid or had withheld from their wages.
EIC is based in general. on qualifying children you have living with you, regardless of the parent takes the dependency exemption.
It is often questionable taking the dependency exemption for a child where the parents are divorced or separated, or if someone else is supporting the family as a grandparent.
you know you can usually claim an exemption for your dependent children under 19 years living with age. But you must also go through the questions in IRS Publication 17 to see if you can apply for adopted children, stepchildren and grandchildren that you support.
If you have children under 24 and go to school, you may still be able to claim them. (They do not seem to get any cheaper as they age!)
The child usually has to live with you for more than half of the year, but this rule is easier to answer you think.
temporary absences for school or medical reasons do not matter. If you are a non-custodial parent, apply special rules.
misguided 2. Plans Education Savings
Saving for education is a worthwhile goal.
However, savings too, the wrong way, regardless of future ramifications, can do more harm than good.
For example :.
• not to fund the education fund for your child at the expense of your own retirement fund
will miss the tax benefits of funding your retirement plan. Retirement planning is not optional. Do it first.
Do not finance the education fund for your child at the expense of your own retirement fund ( Twitter! )
• Be careful investing in section 529 education savings plans. These plans offer tax advantages federal income and state.
However, they are not the best solution for everyone. In fact, in recent years, some investment companies were reprimanded for incorrectly recommend 529 plans that are not appropriate Section.
fees vary, as well as state laws regarding the tax benefits. Do your homework!
• Do not assume your financial situation will remain the same. For example, you can buy savings bonds of the United States, assuming you can take a few years for the purpose of education and do not pay tax on the interest.
If your income level has increased beyond the levels of elimination, surprise! You will have to pay tax on withdrawals for tuition, after all.
3. Report of a child's income on your return
Do not report wage income of your child when you return.
It may seem like an easy way to deal with a small W-2, but children must report the income earned on their own performance if they are required to file.
You would not declare a W-2 wage income on your return anyway, because your marginal tax rate is certainly higher.
you might be able to declare interest income, dividends and capital gains distributions on your statement of your child.
This saves you from having to file a separate return, and it may be a good idea in some situations.
However, report the income on your return is likely to have more disadvantages, especially as your adjusted gross income will be higher.
your adjusted gross income affects many items on your return, including your ability to claim certain credits and other breaks.
to be sure that you are better tax return of your child on your return or on its own, try both ways and compare the TaxACT. Results
do you talk to your children taxes
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