Please ensure that the names written below match exactly with your Social Security name. And for eFiling purposes, birthdates are required as well.
If you are an existing client, you do not have to detail your contact information. Only provide additions or changes if necessary.
Numerous tax benefits are related to claiming a dependent on a tax return. An additional personal exemption for each dependent can be claimed if the dependent in question meets the definition of being a qualifying child or a qualifying relative – but not both.
The qualifying child criteria always takes precedence over the qualifying relative criteria when testing for dependency eligibility. The dependent can be claimed by only one taxpayer for that year.
Qualifying Child Criteria:
Relationship: the taxpayer’s child or stepchild (whether by blood or adoption), foster child, sibling or step-sibling, or a descendant of one of these.
Residence: has the same principal residence as the taxpayer for more than half the tax year. Exceptions apply, in certain cases, for children of divorced or separated parents, temporary absences, and for children who were born or died during the year.
Age: must be under the age of 19 at the end of the tax year, or under the age of 24 if a full-time student for at least five months of the year, or be permanently and totally disabled at any time during the year.
Support: did not provide more than one-half of his/her own support for the year. In other words, the taxpayer provided more than 50% of the dependent’s sustenance.
Joint Return: the child cannot file a joint return for the tax year unless the filing is solely to claim a refund.
Qualifying Relative Criteria:
Not a Qualifying Child: the relative cannot meet the criteria to be your qualifying child or the qualifying child of another taxpayer.
Member of Household or Relationship Test: a person lives with you all year as a member of your household or is related to you in the following ways: child, stepchild, eligible foster child, siblings, parents, grandparents, grandchildren, aunts, uncles, nieces, nephews, and in-laws. The relationship cannot violate local laws.
Gross Income Test: the person’s gross income for the year must be less than $4,200.
Support Test: you must provide more than half of the person’s total support for the tax year.
The Two Year Comparison follows your Tax Return Summary, and is right before the start of Form 1040 (your tax return). In true comparison fashion, these two pages have three columns- where you were, where you are, and the difference. Review these pages, and pay particular attention to these lines-
Line Tax Item
Line 1 Salaries and Wages (did you forget to send a W2?)
Line 2,4 Investment Income (missing a 1099?)
Line 8 Business Income
Line 13 Rental Income (if $0, then perhaps you are phased out due to high income
Line 14, 15 S Corp, Partnership or Trust Income
Line 21 Moving Expenses
Line 28 Student Loan Interest (max $2,500, might phase out due to income.
Line 34 Charitable Donations and Contributions
Line 39 Itemized or Standard Deductions (Schedule A is discussed later)
Line 59 Estimated Tax Payments (did you make some, and forget to tell us?)
Line 67 Tax Due or Refund (negative signs are good signs.. refunds)
Line 70, 71 Effective and Marginal Tax Rates
Line Tax Item
Line 6c Dependents (only children 16 and younger qualify for child tax credit)
Line 7 Salaries and Wages (did you forget to send a W2?)
Line 8,9 Investment Income (missing a 1099?)
Line 12 Business Income
Line 17 Rental Income (if $0, phased out due to high income?)
Line 17 S Corp, Partnership or Trust Income
Line 26 Moving Expenses
Line 33 Student Loan Interest (max $2,500, phased out due to income?)
Line 40 Itemized or Standard Deductions (Schedule A is discussed later)
Line 45 Alternative Minimum Tax (AMT is discussed later)
Line 61 Affordable Car Act tax or penalty for health care coverage
Line 65 Estimated Tax Payments (did you make some, and forget to tell us?)
Line 76 Tax Refund
Line 76b,d Routing and Account Numbers for Direct Deposit
Line 78 Tax Due
Line Tax Item
Line 4 Medical Expense Deduction (must go over 7.5% or 10% of income threshold)
Line 6 Real Estate Taxes
Line 7 Personal Property Taxes (tax on auto registrations?)
Line 10 Mortgage Interest
Line 12 Mortgage Points
Line 13 Private Mortgage Insurance, PMI (income phaseouts start at $100,000)
Line 19 Charitable Donations and Contributions
Line 21 Job Related Expenses, such as Pilot, Flight Attendant, Nurse
Line 22 Tax Preparation Fees you paid for last year’s tax return
Line 23 Investment Expenses (custodial fees, safe deposit box, advisory fees)
Line 29 Total Itemized Deductions, same as Line 40 of Form 1040
Many people have businesses or partnerships where a K-1 is issued. A K-1 describes the money earned or lost with a partnership or investment, and must be reported on your tax return. There are some provisions within the tax code describing how this form is to be handled, especially losses.
With K-1s specifically, if you are an active member then losses might be deducted on the current year tax return. However, if you are an inactive member (such as the increasingly popular investment partnership) these losses cannot be deducted in the current tax year, yet are carried forward to offset future gains. More discussion might be required.
Lastly, many K-1s especially investment partnerships require a separate state tax return (where the partnership resides).
Please use our online submit forms to detail this information.
Medical expenses such as co-pays, prescriptions and out-of-pockets payments may be deducted. In addition, there are some things that are strictly not deductible such as diet pills or food, non-prescription medications, vitamins and imported drugs not approved by the FDA.
However, there are some shades of gray- dental procedures are a great example. There might be situations where a procedure such as tooth veneers could be considered both cosmetic and health-related (gingivitis prevention, toothache, etc.). More discussion would be required.
Please note that health insurance premiums (including vision and dental) generally do not qualify since these are already paid pre-tax giving you an instant tax savings. To deduct them again would be double-dipping. On rare occasions (such as business owners), your health insurance premiums might be deductible.
The 2014 tax year with Affordable Care Act will be a completely different story- contact us if you need some guidance.
Lastly, only those medical expenses that exceed 10.0% (or 7.5% if you are 65 or older) of your adjusted gross income are deductible. For example, if you earn $30,000 your medical expenses must exceed $3,000, and only that portion which exceeds $3,000 is deductible.
We understand that the issue of medical benefits and expenses is a sore spot for most clients, and the information above probably doesn’t help alleviate the bad taste. Unfortunately it is the current tax code.
A credit for child and dependent care expenses is available if you have to pay someone to care for your child or other dependents so you can work or look for work. You must have earnings from a job or self-employment during the year.
The child must be your dependent, age 12 or younger. If your child is age 13 or older, the child must be physically or mentally unable to care for herself or himself. You may also might be able to claim adult daycare expenses for a dependent age 13 or older or for a spouse, if that person is physically or mentally unable to care for himself or herself.
You must provide a home for the dependent, and pay over half the costs of maintaining a home for your dependent. You cannot claim childcare or adult daycare expenses for someone who does not live with you.
Here are some additional considerations-
Care Outside Your Home: You can count the cost of care provided outside your home if the care is for your dependent under age 13, or any other qualifying person who regularly spends at least 8 hours each day in your home.
Dependent Care Center: You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations, if any, that apply to these centers. A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center is not run for profit.
Camp: The cost of sending your child to an overnight camp is not considered a work-related expense. The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. The cost of sending your child to an overnight camp is not considered a work-related expense. The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer.
This can be very confusing- we will help you dissect the various portions of these expenses.
