According to the calendar, spring has technically arrived. Along with the promise of temperate weather and more hours of daylight, it also means that tax day is just around the corner. Are you among the nearly one third of Americans who wait until the last two weeks to file their returns?
I wonder if there has ever been a study to see if the people who wait until the last minute to file their taxes are the same ones who do their holiday shopping on Christmas Eve? Whether you're a procrastinator, a denier or just anxious, here are tips for parents and families to remember now and suggestions to make subsequent filing years a little less stressful.
- Life Changes: If you got married, bought or sold a home, had a baby, sent a child to college or retired, your taxes will likely be impacted. Let your tax preparer know about these life changes which could mean additional tax breaks or changes to your tax return.
- Child Care Credit: Unlike a deduction, a credit reduces your tax bill on an even dollar for dollar. In the 25% bracket, each dollar of deductions is worth a quarter; each dollar of credits is worth a full 100%. You may qualify for a tax credit worth up to 35% of what you pay for child care while you work.
- Student Loan Interest Paid by Parents: Previously, if parents paid back a student loan for their children, no one got a tax break. To get a deduction, the law said that you had to be both liable for the debt and actually pay it yourself. This has changed -- if parents repay the loan, the IRS treats it as though they gave the money to their child, who then paid the debt. This means that a child who's not claimed as a dependent can qualify to deduct up to $2,500 of student loan interest paid by Mom and Dad.
- State Sales Tax: Did you buy a family-safe car (or other vehicle) to replace the sports car from your single years -- or any other reason? If so, you get to add the state sales tax you paid to the amount shown in IRS tables for your state, to the extent the sales tax rate you paid doesn't exceed the state's general sales tax rate. The same goes for home building materials. The IRS has a calculator on its web site to help you figure this out.
- Military Reservists' Travel Expenses: If you or your spouse are among the great Americans who are members of the National Guard or military reserve, you may write off the cost of travel to drills or meetings. You must travel more than 100 miles from home and be away from home overnight. If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus an allowance for driving your own car to get to and from drills. You deserve it! Thank you for your service.
- Moving Expenses For Your Kid to Take That First Job: Job-hunting expenses incurred while your child looks for the first job are not deductible, but moving expenses to get that first job are! If your kid moved more than 50 miles, they can deduct 23 cents per mile of the cost of getting them and their belongings to the new area (plus parking and tolls). That may not sound like much but Miami to Chicago is 1377 miles - nearly $317!
There are real incentives to do your taxes sooner. The more time you allow yourself, the more time you'll have to get things ready and deal with problems of the missing paperwork to figure out how to take all the deductions available to you. The sooner you file, the sooner you get your refund. And, in the event you have to pay extra taxes, you will have more time to budget.
Even if you think it's too late to avoid the stress this year, don't beat yourself up over it. Don't look at paying taxes as Uncle Sam reaching into our purses and taking from us. We are privileged to be able to share and contribute. Always be aware of the tax message you teach your kids.
- Never think of your salary as "Gross" -- but always net. Make sure that you really live on that net amount of money.
- Really live below your means.
- Set aside tax money each month and don't touch it.
- Have your employer automatically deduct money from your paycheck so you never see it. Mark "0" Deductions. If you have "over-saved," that's great -- you can put that money into savings.
- Take a look at the IRS website so you know what you have to keep track of for next near.
- Consult a financial specialist to help you make a plan.
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