|Follow these tips prior to filing online or with your preparer this year and get to know the law before hastily completing the process.
With the start of the new year, it's time to start thinking about filing your tax return. Shortly you will be receiving in your postal mail box tax-related forms that will be needed to prepare your return. Get a shoe box out and dump all these tax forms in that special box as they come in. Don't even think about opening the envelopes until you are ready to prepare the return yourself or until you are ready to visit your accountant.
Some of these forms are so hazardous to your health that they may actually make you sick to your stomach or give you a migraine. If you use a tax professional – just bring the entire box to her or him. Definitely don't send your tax preparer information in installments. If you do send the information in piecemeal, your tax accountant is going to tell you he or she is missing something and you will swear you already sent it.
It's important to note that many tax forms are now sent electronically. So check your email. Some financial institutions now even require you to download your year-end information from their website. Failure to include all information on your tax return is the number one reason why taxpayers receive those scary notices of adjustment from the Internal Revenue Service. Remember – everything you receive in the mail the IRS also will be receiving.
Do not rush to file your tax return early. Many taxpayers are anxious to receive their refund check. However, if you rush to file your return and later receive another tax form in the mail, you will likely be required to file an amended return. You may even be required to return your refund with penalties. Most forms should be provided to you by February 15. However, if you are a shareholder in an S Corporation, an investor in publicly traded partnerships, a partner or LLC member or a beneficiary of an estate or trust, you will need to wait to receive form K-1 from those entities.
If you are recently divorced or married – your filing status is determined by the last day of the year. Same-sex couples, legally married in jurisdictions that recognize their marriages, will now be treated as married for federal tax purposes. This applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage. If you are married and you want to file separately, you cannot file as single.
A dependency deduction on a specific individual can only be claimed by one person. Divorced and separated couples with children should have a clear understanding as to which parent is claiming the dependency deduction of which child. Parents with working teenagers and children in college need to advise their children that they cannot claim themselves as a dependent on their own return. In fact, parents should tell their kids that they need to wait till their parents file their return first before filing their own tax return.
Many children today are anxious to file so they can receive their refund. As a result, they file their own returns online without understanding the tax laws. Since all returns are now filed electronically, a child claiming their own dependency deduction and filing before their parents' return is filed will jeopardize the parents' ability to file electronically while claiming their child as a dependent on their return. This will also jeopardize the parents' ability to claim credits which includes the higher education college credits, costing the parents thousands of dollars of lost refunds.