What’s new with you? Tell your 1040 tax form all about it
But if you ask the simple questions about what happened in your life last year, as the new TV ads for TurboTax suggest, you’re on your way to filling out that 1040.
Sandra Shecter, certified public accountant and principal for Rehmann in Farmington Hills, Mich., often talks with women about their finances and their taxes. Although some women may want to leave the tax duties to the men in their lives, she said women gain better control of the family budget if they have more understanding about tax breaks.
For example, Shecter said it can help working parents to realize that the cost of day camp counts as an expense toward the Child and Dependent Care Credit. The child must be younger than 13.
The credit can be up to 35 percent of your qualifying expenses, depending on your income. No matter how high your income, the minimum credit amount is 20 percent of qualified expenses.
And you can use up to $3,000 of unreimbursed expenses paid in a year for one qualifying individual or up to $6,000 for two or more qualifying individuals to figure the credit.
But if you’re looking for a dependent care tax credit, you might want to choose a day camp, instead of an overnight camp.
“No part of overnight camp counts,” Shecter said.
In that spirit, here are some tax tips for women and families:
Did you get married in 2013? If you are married as of the last day of the year, you need to file either married filing jointly, which is generally the most advantageous tax-wise, or as married filing separately.
Diane Aksten, a certified public accountant at George W. Smith in Southfield, Mich., said it’s very important for women who get married or divorced and change their name to take time to make sure their records are the same. They should go to their local Social Security office to make a name change before filing their tax return.
“Everything must match up between the Social Security Administration and the Internal Revenue Service,” Aksten said.
A federal income tax return could get bounced and not be allowed to file electronically because the new last name won’t match Social Security records.
Gather all the necessary legal documents before heading out to a Social Security office to change your name on your Social Security card. For more information, go to SocialSecurity.gov.
As for same-sex couples, the IRS has announced that it will now accept a married tax filing status for federal returns filed by legally married, same-sex couples. That’s true whether a couple lives in a state that recognizes same-sex marriage or not, according to CCH, part of Wolters Kluwer, a provider of tax information.
“The IRS said it followed other federal agencies by taking a ‘place of celebration’ approach rather than using a couple’s ‘place of domicile’ to determine tax status,” said Mark Luscombe, CCH principal federal tax analyst in a statement.
Now, same-sex married couples generally must file as married filing jointly or married filing separately for the 2013 tax year, Luscombe said.
Luscombe noted that a legally married same-sex couple living in Michigan, meaning that they were legally married in another state, would be required to file as single taxpayers in Michigan and as either joint filers or married filing separately filers for their federal return.
Did you start thinking more seriously about retirement?
What some women might not realize is that if you’re married or divorced, you might not necessarily need a paycheck to contribute to an IRA.
Barbara Weltman, author of “J.K. Lasser’s 1,001 Deductions and Tax Breaks 2014,” said some families with a spouse who stays at home could want to look into what’s called a “spousal IRA.”
Taxpayers can make either a Roth or a traditional IRA contribution of up to $5,500 for 2013 - or up to $6,500 if age 50 or older as of Dec. 31, 2013. A Roth contribution is subject to certain income limitations. Various other rules apply relating to contributions and some taxpayers could even qualify for a tax deduction for traditional IRA contributions, if they meet the income limits and requirements.
A stay-at-home spouse can contribute to his or her own IRA, as long as the working spouse meets the IRA requirements, Weltman said.
Patricia Bojanic, certified public accountant and tax partner at Gordon Advisors in Troy, Mich., said some divorced women or men who receive alimony may not realize they have an IRA option.
Bojanic noted that wages, self-employment income and alimony would count as earned income when it comes to deciding who is eligible to make an IRA contribution.
To qualify to make an IRA contribution, you must have earned income of at least the amount you’d contribute to the IRA.
Did you have a baby in 2013? Several tax breaks are available to taxpayers with children, including the dependency exemption, child tax credit, the Child and Dependent Care Credit and the earned income credit, according to the Tax Institute at H&R Block.
But again, there are many rules for such breaks.
“Many life events - such as change in marital status, children getting older, adoption, cancellation of debt, or foreclosure, or sale or purchase of a house - have tax implications,” said Marshall Hunt, certified public accountant and head of the Accounting Aid Society’s tax assistance program for lower income households.
Saving money on a tax bill is not just about digging for the right receipt that can back up a deduction. Taking time to remember your latest life event can help, too.
ABOUT THE WRITER
Susan Tompor is the personal finance columnist for the Detroit Free Press. She can be reached at stomporfreepress.com
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