The holiday decorations are boxed up and the New Year’s confetti has been swept away. Now your mind is swirling with tax questions about 2014. Here are quick answers to the five top questions you may have about your taxes.
“Who can I claim as a dependent?”
So your retired mother-in-law moved in last year and your unemployed adult son attends college locally while living at home. Can you claim them as dependents? Possibly. It is best to check with a tax adviser to see who in your household qualifies as a dependent because there are so many variables, such as your relationship to the dependent and the amount of support provided. Typically, if you are head of household, you get a tax deduction for children who live with you and your spouse. For a more complete list of eligible dependents, visit the Liberty Tax website.
“What is the Earned Income Tax Credit (EITC) and how do I claim it?”
The earned income tax credit was established in 1975 as a tax boost for low- to moderate-income families, especially those with children. Because the EITC is a refundable credit, it can reduce or eliminate tax. To be eligible, you must meet certain criteria. For example, you must have some form of earned income and you must meet certain income limits. For 2014, the adjusted gross income limits are $46,997 ($52,427 married filing jointly) for a family with three or more qualifying children. The maximum credit available for that same family is $6,143. Refer to this EIC Tax Guide for further information.
“Will health care affect my taxes?”
You bet. The Affordable Care Act (ACA), requires that every American or legal resident have health insurance as of January 1, 2014. If you or any of your dependents do not have insurance, you may face a penalty. On the other hand, you may qualify for a coverage exemption. In either case, you will need to submit insurance (or
exemption) information with your tax return.
“What documents do I need when I file my taxes?”
A few key items are listed below, but you can find a more thorough tax preparation checklist on our website.
- W-2 Form. If you worked for an employer who reported your annual wages to the IRS, you should receive a W-2 by the end of January.
- Form 1099. You should receive a 1099 from anyone you worked for as an independent contractor. You will also get one if you have a retirement pension or took a distribution from your 401K plan or received dividends or other investment income.
- Receipts. Make sure you have documentation for every charitable contribution you made, whether it be a cancelled check, statements from your church, bank or credit cards, or acknowledgment letters from organizations to which you’ve given money or goods. The documentation should include your name, the dates and the amounts are listed.
- Form 1095 A, B or C. These forms show proof of health insurance. An exemption certificate number (ECN) will be required if you applied for a health care exemption in the Marketplace.
- Form 1098. If you own a home, you will receive a 1098 for mortgage interest paid.
- Some expenses might be deductible that you didn’t realize. Overlooked tax deductions include job search expenses if you were unemployed for all or part of the tax year, membership in professional organizations related to your work, and unreimbursed employee expenses (such as uniforms).
“I didn’t make much last year; do I need to file a tax return?”
According to the IRS, you must file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and income. There are other variables as well, including whether you’re claimed as a dependent on someone else’s return. Here’s a chart that may be helpful: