What Not To Do On Your Taxes According to Experts

Being careful is import when completing your taxes and this year should make you a little bit nervous if you are preparing your taxes yourself. Even professionals are making a lot of mistakes according to the Government Accountability Office.

In a study done in 2014, 10% of preparers did not calculate a normal tax return correctly. The final error rates for tax preparation according to the study was 50% for self-prepared returns and 60% for professionally prepared returns. Of course, the professionals more than likely handle the tough returns. Still, those are alarming numbers.

Some errors are obvious mistakes while others are harder to deduct, keep these difficult areas in mind this tax season: foreign investments, charitable giving, real estate taxes, gambling winnings, and state refunds.

If you have foreign investment accounts or savings accounts, make sure to report them to the IRS. If the IRS is able to discover the account later, you can face a penalty up to $10,000.gaooffice

When making contributions to charity, keep a record so you can prove that you gave to a qualified charity. And when purchasing an item for a charity event, you can only deduct the portion above the value you are receiving.

Real Estate taxes can be a trick if you just purchased the home as some are paid on the closing statement. And an office in the home is a great deduction, but make sure not to claim more space than the office occupies.

If you have gambling winnings during the year, offset those winnings with loses you experienced and documented. You can’t take a lose of gambling, but limiting the amount of your winnings that is taxable is really nice.

Finally state refunds. State refunds on tax return filings are taxable the next year as income on the federal return. Yet federal tax refunds are not taxable, you get to keep the full amount of those funds.

 

 

Saving Money With The Child Tax Credit

Saving Money With The Child Tax Credit

A lot of Canadians have no idea they qualify for the Child Tax Credit or what it is. They think it is for low income families, or they have altogether never heard of this credit. Even if you are okay without the rebate, Turbo Tax 2013 encourages you to make a claim.

English: Pic for WikiProject Political parties...
English: Pic for WikiProject Political parties and politicians in Canada (Photo credit: Wikipedia)

The tax assessor’s office should be aware of any children in your household born before the end of 2012. For every child born into a Canadian household during the fiscal year (even late in December), it is possible to enjoy a rebate on taxes. When you fill out your Turbo Tax 2013 forms, make sure this section is completed thoroughly. For every child in your home you could be receiving a Child Tax Credit which amounts to a hundred or a few hundred dollars every month.

The Child Tax Credit was implemented to help families earning under a certain amount annually. It is not specific to locations: if you live in an area where cost of living is high, meaning wages are also high, this is not part of the calculation.

The Canadian government is simply looking at how much money a single individual earns or the joint income of a family. They automatically decide whether or not to grant a parent or parents this credit based on income. If your earnings have decreased recently, you could see your first tax rebate soon. Keep this in mind if you are currently filling out your Turbo Tax 2013 forms and expect a refund in the mail.

Who Can I Claim as a Dependent on My Tax Return?

Anyone who has ever filed taxes knows how important it is to qualify for as many tax credits, breaks, and deductions as possible. One way to lower your tax obligation and secure a bigger refund is to claim all the dependents that you can. Fortunately for you, the definition of dependent encompasses more than just your young children; dependent qualification guidelines are broken into two categories – qualifying children and qualifying relatives – and if you are the responsible caretaker in any of a number of given situations, then you may be able to claim even more dependents. Who can you claim on your tax return as a dependent? The IRS is very specific about just that. Here are the details:

Qualifying children. There are four conditions your children must meet if they are to qualify as your dependents. First off, they must be your natural or adopted children, your children by way of marriage (step-children), your foster children, your brothers and/or sisters, your nieces and/or nephews, or your grandchildren. Secondly, you must established that the dependent lived with you for at least one half of the tax year you are claiming for. Third, the dependent must meet certain age requirements as follows: eighteen or younger for the entire year, 24 or younger and a full-time student for at least five months out of the year, or any age and permanently and totally disabled. Finally, qualifying children need to have been over 50% financially supported by you during the tax year you are claiming the credit.

Tie-breakers. In the occasion that more than one person tries to claim a dependent child, the IRS will use the following factors for the tie-breaker: the claimant must be a parent; the claimant must be the one who provided more financial support over the course of the year; the dependent must have lived with the claimant for the majority of the year. Finally, if both claimants meet all of those qualifications, then the claimant with the highest incomes will be the one allowed to claim the dependent. This might result in you having to issue an IRS extension 2010 or 2011 form (1040X), depending on the time it takes the process to resolve.

Qualifying relatives. In some circumstances, you cannot claim a qualifying child, but may be able to instead claim a qualifying relative. The guidelines for qualifying a relative as a dependent are as follows: the dependent cannot be a qualified child of another claimant, the dependent must be related to you in certain ways and must have spent at least one half of the year with you, the dependent must be a United States citizen, and you must have financially supported the dependent for at least one half of the year.

As you can see, claiming dependents on your tax return is not as simple as it seems. Follow these guidelines to determine how many dependents you can claim this year.

About the Author: Nolan Cangey works as a tax accountant and spends a great deal of time interviewing his new clients to better understand what they do and how they can benefit from different tax credits and their dependents.