Dependent and Exeptions, Explained in Plain English!

There are a few tax rules that affect everyone who files a federal income tax return. This includes the rules for dependents and exemptions. Here are some facts on these rules to help you file your taxes.

Exemptions cut income.  There are two types of exemptions: personal exemptions and exemptions for dependents. You can usually deduct $3,900 for each exemption you claim on your 2013 tax return.

Personal exemptions.  You can usually claim an exemption for yourself. If you’re married and file a joint return you can also claim one for your spouse. If you file a separate return, you can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer.

Exemptions for dependents.  You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative that meets certain tests. You can’t claim your spouse as a dependent. You must list the Social Security number of each dependent you claim. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information, for rules that apply to people who don’t have an SSN.

Some people don’t qualify.  You generally may not claim married persons as dependents if they file a joint return with their spouse. There are some exceptions to this rule.

Dependents may have to file.  People that you can claim as your dependent may have to file their own federal tax return. This depends on many things, including the amount of their income, their marital status and if they owe certain taxes.

No exemption on dependent’s return.  If you can claim a person as a dependent, that person can’t claim a personal exemption on his or her own tax return. This is true even if you don’t actually claim that person as a dependent on your tax return. The rule applies because you have to right to claim that person.

Exemption phase-out.  The $3,900 per exemption is subject to income limits. This rule may reduce or eliminate the amount depending on your income.

Are Your Social Security Benefits Taxable?

Some people must pay taxes on part of their Social Security benefits. Others find that their benefits aren’t taxable. If you get Social Security, the IRS can help you determine if some of your benefits are taxable.

Here are some tips about how Social Security affects your taxes:

If you received these benefits in 2013, you should have received a Form SSA-1099, Social Security Benefit Statement, showing the amount.

If Social Security was your only source of income in 2013, your benefits may not be taxable. You also may not need to file a federal income tax return.

If you get income from other sources, then you may have to pay taxes on some of your benefits.

Your income and filing status affect whether you must pay taxes on your Social Security.

A quick way to find out if any of your benefits may be taxable is to add one-half of your Social Security benefits to all your other income, including any tax-exempt interest. Next, compare this total to the base amounts below. If your total is more than the base amount for your filing status, then some of your benefits may be taxable. The three base amounts are:

• $25,000 - for single, head of household, qualifying widow or widower with a dependent child or married individuals filing separately who did not live with their spouse at any time during the year
• $32,000 -for married couples filing jointly
• $0 - for married persons filing separately who lived together at any time during the year

The Child Tax Credit May Cut Your Tax Bill

If you have a child under age 17, the Child Tax Credit may save you money at tax time. Here are some key facts the IRS wants you to know about the credit.

• Amount.  The non-refundable Child Tax Credit may help cut your federal income tax by up to $1,000 for each qualifying child you claim on your tax return.

• Qualifications.  A child must pass seven tests to qualify for this credit:

1. Age test. The child was under age 17 at the end of 2013.

2. Relationship test. The child is your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. A child can also be a descendant of any of these persons. For example, your grandchild, niece or nephew will meet this test. Adopted children also qualify. An adopted child includes a child lawfully placed with you for legal adoption.

3. Support test. The child did not provide more than half of his or her own support for 2013.

4. Dependent test. You claim the child as a dependent on your 2013 federal income tax return.

5. Joint return test. A married child can’t file a joint return with their spouse they are filing jointly only to claim a tax refund.

6. Citizenship test. The child must be a U.S. citizen, U.S. national or U.S. resident alien. For more see Publication 519, U.S. Tax Guide for Aliens.

7. Residence test. In most cases, the child must have lived with you for more than half of 2013.

• Limitations. Your filing status and income may reduce or eliminate the credit.

• Additional Child Tax Credit.  If you get less than the full Child Tax Credit, you may qualify for the refundable Additional Child Tax Credit. This means you could get a refund even if you owe no tax.

• Schedule 8812.  If you qualify to claim the Child Tax Credit, make sure to check whether you must file Schedule 8812, Child Tax Credit, with your return. If you qualify to claim the Additional Child Tax Credit, you must complete and attach Schedule 8812.

• Interactive Tax Assistant Tool.  You can use the ITA tool at IRS.gov to see if you can claim the credit. The tool can answer many of your tax questions.

Beware of Fake IRS Emails and Phone Calls

Tax scams that use email and phone calls that appear to come from the IRS are common these days.

These scams often use the IRS name and logo or fake websites that look real.
Scammers often send an email or call to lure victims to give up their personal and financial information. The crooks then use this information to commit identity theft or steal your money. Some call their victims to demand payment on a pre-paid debit card or by wire transfer. But the IRS will not initiate contact with you to ask for this information by phone or email.

If you get this type of ‘phishing’ email, the IRS offers this advice:

• Don’t reply to the message.
• Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.
• Don’t give out your personal or financial information.
• Forward the email to phishing@irs.gov. Then delete it.

If you get an unexpected phone call from someone claiming to be from the IRS:

• Ask for a call back number and an employee badge number.
• If you think you may owe taxes, call the IRS at 800-829-1040. IRS employees can help you.
• If you don’t owe taxes or have no reason to think that you do, call the Treasury Inspector General for Tax Administration at 800-366-4484 to report the incident.
• You should also report it to the Federal Trade Commission by using their “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" to the comments of your complaint.

Be alert to scams that use the IRS as a lure. The IRS will not initiate contact with you through social media or text to ask for your personal or financial information.

Why you should use Direct Deposit for IRS Tax Refunds!!!

Would you choose direct deposit this year if you knew it’s the most popular way to get a federal tax refund? What if you learned it’s safe and easy, and combined with e-file, the fastest way to get a tax refund? The fact is almost 84 million taxpayers chose direct deposit in 2013.

Still not sure it’s for you? Here are four good reasons to choose direct deposit:

1. Convenience.  With direct deposit, your refund goes directly into your bank account. There’s no need to make a trip to the bank to deposit a check.

2. Security.  Since your refund goes directly into your account, there’s no risk of your refund check being stolen or lost in the mail.

3. Ease.  Choosing direct deposit is easy. When you do your taxes, just follow the instructions in the tax software or with your tax forms. Be sure to enter the correct bank account and routing number.

4. Options.  You can split your refund among up to three financial accounts. Checking, savings and certain retirement, health and education accounts may qualify. Use IRS Form 8888, Allocation of Refund (Including Savings Bond Purchases), to split your refund. Don’t use Form 8888 to designate part of your refund to pay your tax preparer.

You should deposit your refund directly into accounts that are in your own name, your spouse’s name or both. Don’t deposit it in accounts owned by others. Some banks require both spouses’ names on the account to deposit a tax refund from a joint return. Check with your bank for their direct deposit requirements.

2014 Tax Filing Stats as of 2/14/14

The IRS today announced that tax filings in 2014 have outpaced filings for the same time last year. As of Feb. 7, the IRS received 27.3 million returns, up 2.5 percent compared to the same time last year. Electronically filed returns account for almost 96 percent of those filed so far this year.

Taxpayers, either through tax preparers or from their home computers, have e-filed more than 26 million returns so far this year, up almost 4 percent compared to the same time last year. As of Feb. 7, taxpayers have filed more than 13 million returns from home computers, an increase of 14.7 percent compared to the same period last year.

Refunds are up for 2014, with almost 19.5 million issued this year, an increase of more than 18 percent compared to the same time last year. The average refund as of Feb. 7 is $3,317, up 4.6 percent compared to the same time last year. (Refund averages generally have higher dollar values early in the filing season than later in the year.)

Most refunds are directly deposited into taxpayer accounts; just over 87 percent of all refunds issued were directly deposited as of Feb. 7. 2014.

2014 FILING SEASON STATISTICS
Cumulative statistics comparing 2/8/13 and 2/7/14
Individual Income Tax Returns:	2013		2014		% Change
Total Receipts	26,589,000		27,249,000		2.5
Total Processed	18,811,000		26,945,000		43.2
E-filing Receipts:
TOTAL	25,121,000		26,081,000		3.8
Tax Professionals	13,456,000		12,699,000		-5.6
Self-prepared	11,665,000		13,382,000		14.7
Web Usage:
Visits to IRS.gov	90,706,865		89,683,640		-1.1
Total Refunds:
Number	16,424,000		19,459,000		18.5
Amount	$52.059 billion		$64.546 billion		24
Average refund	$3,170		$3,317		4.6
Direct Deposit Refunds:
Number	15,457,000		16,976,000		9.8
Amount	$50.214 billion		$55.815 billion		11.2
Average refund	$3,249		$3,288		1.2