Most people hate doing their taxes. It ranks right up there with getting a root canal. Many people ask me, “How can you do taxes for a living? Do you really enjoy it?”
The part I love about the tax process is the personal aspect of preparing the return. I get to sit down and really learn about each person’s life: their finances, business and families. I get to absorb all their information and figure out how to best minimize their tax liability and plan for the upcoming year.
The tax code is constantly changing and unless you have a very simple return, it’s worth hiring a tax professional. When finding a tax preparer, you should expect that they will ask you lots of questions, so they understand your situation and can dig for legitimate deductions. They should also educate you on what is deductible and how to plan for future years.
Here are some tax tips for parents that every mother and father should be aware of:
Earned Income Tax Credit (EITC): This credit is targeted toward low to moderate earners, especially those with kids. It can give up to $5,751 in credits, depending on your situation. There are specific rules for claiming this credit, as well as rules for who gets to claim it if the children’s parents are not married.
Child Tax Credit: Taxpayers with qualifying children under age 17 can get a tax credit of up to $1,000 per child. This credit is subject to income limitations.
Dependent Care Credit: Taxpayers can claim a credit for a percentage of dependent care expenses, such as daycare and preschool. The maximum qualifying expenses are $3,000 for one dependent and $6,000 for two or more dependents. You must have earned income to qualify for this credit and if married, both spouses must work.
One of the most common issues I see is when two unmarried people have a child. Who gets to claim the child? Typically it is the custodial parent, or the parent with whom the child resides with for the greater number of nights in the calendar year.
I see many situations where both parents want to claim the child. There can be a big difference in tax if you can claim your child. It often means you can file as head of household, giving you a better standard deduction, lower tax rates and an extra exemption. Claiming your child can also qualify you for the EITC. The most challenging situation is when each parent has the child 50% of the time. Who gets to claim the child?
In this case, the child is with both parents equally so the parent with the higher adjusted gross income gets to claim the child. If both parents claim the child, then both parents will get notices from the IRS asking each taxpayer to prove that they are entitled to claim the dependent.
These special child related questions are just some of the more complicated questions a tax professional can help you with. After 19 years of preparing taxes I have seen the difference it can make and totally believe the benefits of professional advice and planning are worth it.
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