The 5 most asked tax questions
Tax season is in full swing, and with it comes a wide range of tax questions from filers. Whether they’re questions about if you can claim your parent as a dependent or if you can deduct your books for college, I have answered them all.
So what are the most common tax questions from taxpayers? Here is a quick snapshot of this tax season’s top five frequently asked tax questions and answers:
1. What documents do I need to do my taxes?
There are two common tax forms that taxpayers receive in the mail: a W-2 from your employer or a 1099-INT for bank interest from a savings account. There are also other pieces of supporting information you should have in front of you when you sit down to do your taxes, such as the correct Social Security numbers for yourself, your spouse and anyone you are claiming as a dependent. Also, if you made a charitable contribution within the last year, be sure to gather receipts of your donations to turn your good will into tax-time savings.
2. I didn’t make much money last year — do I still need to file my taxes?
Americans should file a 2013 federal income tax return even if their total income is below the internal revenue service filing requirement ($10,000 for individuals or $20,000 for married filing jointly under age 65). You need to file the return to get a refund on any withheld federal income tax and especially if you’re eligible for refundable tax credits like the earned income tax credit. Every year, money is left on the table because people don’t think they need to file. The average unclaimed tax refund is more than $600, and it’s important to know that the IRS places a three-year window on claiming these past refunds.
3. Who can I claim as a dependent?
This question has stumped taxpayers for years and is one of the most frequently asked questions I hear during tax season. Most of us know you can deduct your children on your tax return, but many people forget they might be able to deduct elderly parents, significant others or other relatives who also qualify as a dependent. Do you have a relative or significant other you’ve been supporting or a friend who’s been sleeping on your couch? They may turn out to be a tax deduction if they can be claimed as a “qualifying relative.” They’ll have to meet certain requirements to qualify, but for each dependent you can deduct $3,900, which is likely to reduce your taxes.
4. What tax deductions and credits are available for parents?
Did you have a baby last year? A child means you may receive a dependent exemption of $3,900, which reduces your taxable income by that amount. Even if your baby was born on Dec. 31, 2013, you are still eligible for this deduction.
— Child and dependent care tax credit: If you paid for child care you may be eligible for a tax credit worth up to $1,050 for your child.
— Earned income tax credit: This refundable tax credit is advantageous and available to low- to middle-income working Americans. The credit could be as much as $6,044 for someone with three or more children.
— Child tax credit: Do you have a big family? This credit may be worth $1,000 for each of your children under age 17.
5. What tax benefits are available for college students?
To help alleviate the ever-increasing cost of a college education, the tax code provides some relief options, which are available via education tax credits and deductions. Knowing the types of items you can deduct can save you money on college expenses because you may be able to deduct things like tuition or fees, books and supplies for you, your spouse and your dependents. Some education deductions and credits include:
— The American Opportunity Tax Credit: Helps parents and students pay for college education by giving them a credit up to $2,500 per student for tuition and fees, books, supplies and equipment.
— Lifetime Learning Credit: Taxpayers may be able to claim a credit up to $2,000 per tax return for college tuition, fees and supplies paid directly to the educational institution.
— Tuition and fees deduction: An education benefit which allows you to deduct up to $4,000 from your taxable income for college expenses.
Lisa Greene-Lewis is a certified public accountant and TurboTax tax expert. She has more than 15 years of experience in tax preparation, including positions as a public auditor, controller and operations manager.
Credit to: http://finance.yahoo.com/news/5-most-asked-tax-questions-142204917.html