Ask the Experts: “Tax Tips” Answers from Money Crashers
We’re just one month away from the official tax deadline. Have you filed your taxes yet? Filing is inevitable, so don’t wait. Get started today with help from tax experts at Money Crashers and file early so you can focus on doing MORE of what’s important to you.
Did you know there are several free smartphone apps to help you organize and file taxes this year? Hate the hassle of always having to transfer data from your W-2? Put your smartphone to good use and transfer it all with the snap of a pic using TurboTax and H&R Block apps. Keep reading for MORE tips & resources from the tax pros!
What should I do if I accidentally miss the tax deadline?
Well, you’ve got a month, so if you think you won’t finish in time, file a request for an extension now! It’s free, and if you end up submitting your taxes in time, there’s no penalty for having requested an extension you didn’t use. If you get to Tax Day and haven’t filed, just try to file as soon as possible.
Is there an age limit on claiming my child as a dependent?
There is no age limit, but you have to have provided more than 50% of their support (rent, food, clothing, etc) and they can’t have made more than $3,900 during the year. However, as your relative, they don’t necessarily have to have lived with you in order for you to claim them as a dependent.
What should I do if I made a mistake on my federal return that I have already filed?
You should file a 1040X, or an amended tax return, as soon as you can. When completing a 1040X, you’ll basically complete your taxes again (correctly), then fill in both the original amount and the corrected amount.
I retired last year, and started receiving social security payments. Do I have to pay taxes on my social security benefits?
The short answer is that if Social Security is the only money you’re living on, you do not have to pay taxes. If you receive other money, from another pension, a job, or another source, you may have to pay taxes on part of your Social Security benefits. Your Social Security benefits will never be fully taxed, but you could be paying tax on up to 85% of those checks if you have a good deal of other income.
Are there free smartphone apps or online tools to help me file and organize my taxes?
TurboTax and H&R Block both have apps which let you take a picture of your W-2 instead of typing in the data. TurboTax also has a great deduction organizer, which you can use to enter charitable deductions as they occur during the year – just import them at tax time and find your receipts!
What are some common tax filing mistakes I should be aware of and avoid?
The best way to avoid many filing mistakes is to use tax software to prepare your taxes. Completing taxes on paper can lead to numbers that aren’t written very clearly (or subtracted correctly!) Then, make sure that all Social Security numbers are correct, all names are correct, and you’re eligible to claim all the dependents you’ve claimed. If someone else claims your dependent first, and files their taxes first, your filing will be rejected.
I’m in college; can I deduct any of my school expenses?
Yes – if you paid those expenses. If your school expenses were actually paid by a parent, then only the parent can deduct them. But if you paid for them yourself, deduct away! There are several different ways to get a deduction or credit for college expenses.
I support my girlfriend and she has lived with me for over 3 years. Can I claim her on my tax return?
Only if she made less than $3,900 during the entire year, and you paid for more than 50% of her living expenses. However, if she received money from unemployment, disability, or relatives, that could be tough to prove. If she had no other source of income and you paid all her expenses, you are almost certainly able to claim her as a dependent.
I only had a part-time job for 3 months, do I still need to pay and file taxes?
This depends on your filing status – but I’m guessing that you didn’t make enough to be REQUIRED to file. BUT – you would also probably get back all the taxes you paid and perhaps even get an Earned Income Tax Credit on top of that. So I’d check out one of the free tax filing services and see if you can’t get those taxes back.
What are some good investments I can make with my tax refund? Anything that can lower my taxes for next year?
I can’t speak to the actual investments you could make, but the best way to invest and lower next year’s tax bill at the same time is to sock that refund into a traditional IRA. You can put in up to $5,500 if you’re younger than 65, or up to $6,500 if you’re 65 or older. Fidelity and Vanguard offer great, low-fee traditional IRAs with a variety of investment options.
Plus, if you have a fairly low income but stupendous saving power, you could even qualify to get a tax credit just for saving money in a retirement account.
About Money Crashers
Money Crashers is a financial education and lifestyle website dedicated to providing its readers with better and more efficient ways to manage their money and lives. The topics covered include consumer-related topics like how to save for retirement, managing credit card debt, finding cheap cell phone plans, and saving money on travel. Money Crashers is guided by it 11 Indispensable Principles – three of which are to always spend less than you make, save money for the unexpected, and if you achieve financial success, give back.