Some of you filed your taxes the moment you could lay hands on your W-2s. Good for you! But millions of Americans -- many of them overextended parents, is my guess -- wait until the last minute. So I'm here with a little inspiration for tax-frazzled folks everywhere. Nothing soothes your nerves like an error-free, money-back return!
Did you say, "I do" -- or "I don't, anymore?"
Now that fewer people use handwritten forms -- three-quarters of Americans file electronically -- math flubs aren't as common. But you still need to enter your information correctly -- particularly your name and Social Security number. If you tied the knot or got divorced and changed your name without reporting it to Social Security, your return won't be accepted.
Check those figures!
Confirm all your numbers -- a few extra minutes now could save you hours and hours later! Even money professionals get a headache cutting through IRS red tape. "I had a difference with the IRS regarding my own 2010 income tax return, over a very simple issue, and it was finally resolved this week -- almost one year after filing the original return!" says Theodore Sarenski, a CPA and the CEO of Blue Ocean Strategic Capital, an independent financial advisory company.
Deduct, deduct, deduct
Many parents overlook deductions that can really add up! The easiest write-offs to miss include medical and dental expenses, and charitable donations.
If you itemize, rather than take the standard deduction, you can deduct medical expenses that exceeded 7.5 percent of your adjusted gross income. If your income last year was $50,000, for example, your medical expenses would have to total at least $3,750 in order to deduct any expenses beyond that amount. Does that sound like a lot? You'll meet that threshold faster than you think!
A few deductions you may not have thought of (see IRS Publication 502 for the full list):
- an air conditioner for allergy or asthma relief
- birth control pills
- eyeglasses and contact lenses
- home modifications for a handicap
- lead paint removal
- programs to stop smoking (but not patches or gum!)
- transportation costs to and from doctors
- cost of insurance and co-pays
- and last, but not least, childbirth costs (including breastfeeding supplies!)
We're not supposed to toot our own horns when we give, but change that way of thinking when it's tax time. Take credit for doing good! Don't forget to count the cost of driving to and from the place you volunteer, and don't undervalue that bag of clothes you donated to Goodwill. (See IRS Publication 526 for guidelines on how to value donated items, and be sure to ask for a receipt from organizations to which you give.)
You deserve credit
You spent money on your kids all year. Now get a little of it back. Here are a few credits you don't want to miss:
- Child Care Credit: You can claim up to 35 percent of the money you spent on childcare while at your job or looking for work. To get credit, you have to pay your sitter totally by the book -- including required employment taxes. (See IRS Publication 503.)
- Child Tax Credit: Each kid you have under age 17 may be worth up to $1,000 to Uncle Sam. The credit phases out for parents with higher incomes. (See IRS Publication 972.)
- Earned Income Tax Credit: This is a special tax break for individuals and families with low to moderate incomes, but some families assume they don't qualify when they actually do. A family with three children can earn up to $49,078 and still get the credit! (Check the "Can I Claim It?" EITC page on the IRS website.)
- Adoption Credit: If you adopted a child in 2011, you can get a credit for up to $13,360 of certain adoption expenses. This credit also phases out for parents with higher incomes. (See IRS Topic 607.)
Now is the time to think about next year!
Once you've filed, the LAST thing you want to do is look at one more piece of paper. You just spent days (or months!) going through old shoeboxes and even helter-skelter piles. But think how much easier next year will be if you start NOW, so that your tax season is "not a scavenger hunt," says Sarenski.
Buy an inexpensive accordion file, slap a few labels on it (e.g., business expenses, child care, medical), and put it somewhere handy so you'll actually stash your receipts in there during the year. Think of it as your "peace of mind" file. Less time spent worrying about taxes means more time to spend with your family. That's one tax credit worth filing for every year.
Beth Kobliner is a personal finance commentator and journalist, the author of the New York Times bestseller Get a Financial Life: Personal Finance in Your Twenties and Thirties, and a member of the President's Advisory Council on Financial Capability. Visit her at bethkobliner.com, follow her on Twitter, and like her on Facebook.
This post was originally published on Mint.com.
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