Check out tax breaks now for savings later

And you thought you could have the summer off with no tax issues to think about. Fuhgeddaboutit.

In many cases, however, some summertime moves could land you some welcome tax breaks.

For example, working teenagers or college students should be careful how they fill out their W-4 forms for their summer jobs to avoid having too much tax withheld. No point in them giving their money to the government when I know they could use it now.

Here’s the deal. You may be exempt from tax withholding if you can be claimed as a dependent (usually on a parent’s return), your total 2006 income will not be over $5,150, unearned income (interest, dividends, etc.) will not exceed $300, and you had no income tax owed for 2005, according to IRS spokesman Jim Dupree.

“This is the time to be mindful of your child’s tax situation and fix it so taxes aren’t taken out,” Dupree said.

To claim exemption from withholding, you generally would need to have had no tax liability the previous year and expect none in the current year.

However – and isn’t there always one with the IRS? – your child will still have to pay Social Security and Medicare taxes.

To make sure your child doesn’t have taxes withheld that don’t need to be withheld, have him or her read the W-4 carefully before filling it out.

Actually, it’s better to sit down with your child before he or she starts work to go over how to fill out the form. Go online to www.irs.gov. Then search for Form W-4, “Employee’s Withholding Allowance Certificate.” You will see that if your child is exempt, only lines 1, 2, 3, 4 and 7 need to be filled out.

This might be a good time to also have a conversation about reporting all taxable income. If your child earns tips in his or her summer job, those tips are taxable and must be reported.

If you’re getting married this summer, you might want to fill out a new W-4 form. That change in your martial status could mean more money in your paycheck.

Don’t forget that if you send your child or children (under age 13) to summer camp, the cost may count as an expense toward the Child and Dependent Care Credit.

You can claim the credit if you have to put your child or children in summer camp programs so that you (and your spouse if filing a joint return) can go to work or look for work. This is no different than when you pay for child care during the school year so you can work. It doesn’t matter if the kid is having more fun in the summer. Your fun is getting the tax benefit if you qualify.

“Make sure you get receipts from the camp,” Dupree said.

You will also need to get the correct name and address of the camp provider and the organization’s or business’s tax identification number.

Moving this summer because of a change in your job location or for a new job?

If so, don’t forget that your moving expenses may be deductible.

College graduates pay close attention.

To qualify for the moving expense deduction, you must meet a distance and time test, unless you are a member of the armed forces and your move was caused by a permanent change of station.

Let’s look at the distance test first. Your move will meet the distance test if your new job is least 50 miles farther from your former home than your old job location.

To determine this, the IRS says, first figure the distance between your old home and your new job and then subtract the distance between that residence and your old job. If the result is 50 miles or more, you have met the distance test.

The second test is time. You have to work full time for at least 39 weeks (it doesn’t have to be the same job) during the 12 months right after you move, according to the IRS. If you are self-employed, you must work full time for at least 39 weeks during the first 12 months and for a total of at least 78 weeks during the first 24 months after you move.

There are exceptions to the time test such as disability.

You can also deduct the expenses of traveling to your new home, including your lodging expenses. You cannot, however, deduct meals.

And don’t try to get slick about this deduction. No double-dipping on this deduction. You cannot deduct moving expenses that were reimbursed by your employer. In fact, some moving expenses reimbursed by your employer may be taxable income.

For more specifics about what moving expense are deductible refer to IRS Publication 521, “Moving Expenses.”

All these tips are just a midyear reminder that you should be mindful of the many things that can help you save on your taxes.

Washington Post Writers Group

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