When you lose your job, you have a lot on your mind and your taxes may be the last thing you are thinking about. However, losing your job can have a significant impact on your tax return. You need to be aware of the tax consequences to avoid costing yourself money and be able to take advantage of potential tax benefits. Below are a few of the tax consequences and benefits you should be aware of. [Read More...]

Are you a teacher who shells out your own money to pay for books, pens, pencils and basic supplies needed for your classroom? If you are an eligible educator, you may be able to deduct up to $250 of expenses you paid for purchases of books and classroom supplies. These out-of-pocket expenses may lower your tax liabilities, even if you don’t itemize your deductions. [Read More...]

Having a child is another event in life that can significantly impact your tax situation. Unlike some of the other events we will talk about in this series, having a child almost always is beneficial for your tax situation. If you understand and take advantage of the tax benefits of having a child, you will usually be able to reduce the amount of taxes that you owe. Having a child may qualify you to receive a number of tax credits such as, the Earned Income Credit, Child Tax Credit and Dependent and Child Care Expense Credit for your child. Earned Income Credit  The Earned Income Tax Credit is a refundable tax credit for low to moderate income working individuals or families. The maximum earned income tax credit that you can receive in 2012 for three or more qualifying children is $5,891, $5,236 for two qualifying children, $3,169 for one qualifying child, and $475 for no qualifying children. In order to qualify for the credit, you must meet certain requirements and file a tax return, even if you do not owe any taxes or are not required to file a return. To qualify to receive the Earned Income Tax Credit, you must have earned income from employment, self-employment or another source and meet certain rules. Also, you have to either have a child that meets all the qualifying child rules or meet additional rules for workers without a qualifying child. In order for your child to meet the qualifying requirements, they must pass all of the relationship, age, residency, and joint return tests established by the IRS. Child Tax Credit In 2011, if you qualify for the child tax credit, you may be able to reduce the amount of taxes you owe by $1,000 for each qualifying child under the age of 17 at the end of the tax year. A qualifying child must be claimed as your dependent, under the age of 17, must be your son, daughter, adopted child, grandchild, stepchild or eligible foster child, your sibling, stepsibling or their descendant, and is a U.S. citizen or resident alien.  The qualifying child must have lived with you for more than half of the calendar year. Exceptions to the time lived with you requirements are : A child is considered to have lived with you for all of the calendar year if the child was born or died in the calendar year and your home was this child’s home for the entire time he or she was alive. Temporary absences by you or the child for special circumstances, such as school, vacation, business, medical care, military service or detention in a juvenile facility, count as time the child lived with you. There are also exceptions for kidnapped children and children of divorced or separated parts. For details on these exceptions see Form 1040A instructions. You must reduce your child tax credit if either of the below apply: Your modified adjusted gross income is above: $110,000 if married and filing jointly $55,000 married but filing separately $75,000 if single, head of household or a qualifying widow(er) Any income tax you owe as well, as any alternative minimum tax that you may owe, can affect the amount of child tax credit you can claim. If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit. Dependent and Child Care Expenses An individual that pays someone to care for their qualifying child, under the age of 13, or their spouse, or any dependent who is physically and mentally incapable of their own care, while working or looking for work may be able to claim the Child and Dependent Care Expenses Tax Credit. The credit allows you to claim $3,000 in dependent care expenses for one qualifying dependent and $6,000 for two or more qualifying persons. In order to claim the expenses and receive the tax credit, you must fill out Form 2441, Child and Dependent Care Expenses, and either file Form 1040A or Form 1040. Tune in next week as we discuss: "The tax impact of losing your job"

There are many events in life that have a noteworthy tax impact. In this series, we will discuss how simple life changes such as marriage, the birth of a child, divorce or separation, job loss and starting a new career can significantly impact your tax liability or refund. This week we will discuss the tax consequences of a life change like getting married. One of the biggest headaches about getting married and filing your taxes is simply changing your name.  If you changed your name as a result of a recent marriage, you will need to take the necessary steps to ensure that the name on your Social Security Card matches the name on the tax return. A mismatch between the name on your tax return and the name registered with the Social Security Administration can cause problems in the processing of your tax return and can even affect when you receive your refund. If you took your spouse’s last name or both spouses hyphenated their last names, you will need to notify the Social Security Administration. If you do not, when you file your tax return using your new last name, the IRS computers will not be able to match the new name with your social security number. However, the steps to inform the Social Security Administration of a name change are easy. You will need to file a Form SS-5, Application for a Social Security Card at your local SSA office. When you go to fill out this form, it is important to bring a recently issued document, an original marriage certificate, as proof of your legal name change. The new card that the Social Security Administration will administer to you will show your new legal name, but contain your same social security number. If your spouse has a previous tax balance with the IRS, you can prevent your portion of a jointly filed tax refund from being used to offset their remaining tax balance by filing your 1040 along with a Form 8379, Injured Spouse Allocation. The Injured Spouse Allocation form should only be filed if all or part of your portion of the tax refund is expected to be applied to your spouse’s past-due federal tax, state tax, child or spousal support, or a federal nontax debt, such as a student loan.   Tune in next week as we discuss the tax consequences of having a child!