IRS TIPS on TAX BREAKS for KIDS

Children may help reduce the amount of taxes owed for the year. If you’re a parent, here are several tax benefits you should look for when you file your federal tax return:

• Dependents.  In most cases, you can claim your child as a dependent. You can deduct $3,950 for each dependent you are entitled to claim. You must reduce this amount if your income is above certain limits. For more on these rules, see Publication 501, Exemptions, Standard Deduction and Filing Information.

• Child Tax Credit.  You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more, see Schedule 8812 and Publication 972, both titled Child Tax Credit.

• Child and Dependent Care Credit.  You may be able to claim this credit if you paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. You must have paid for care so that you could work or could look for work. See Publication 503, Child and Dependent Care Expenses, for more on this credit.

• Earned Income Tax Credit.  You may qualify for EITC if you worked but earned less than $52,427 last year. You can get up to $6,143 in EITC. You may qualify with or without children. Use the 2014 EITC Assistant tool at IRS.gov to find out if you qualify. See Publication 596, Earned Income Tax Credit, to learn more.

• Adoption Credit.  You may be able to claim a tax credit for certain costs you paid to adopt a child. For details see Form 8839, Qualified Adoption Expenses.

• Education tax credits.  An education credit can help you with the cost of higher education.  There are two credits that are available. The American Opportunity Tax Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the credit reduces your tax to less than zero, you may get a refund. Even if you don’t owe any taxes, you still may qualify. You must complete Form 8863, Education Credits, and file a return to claim these credits. Use the Interactive Tax Assistant tool on IRS.gov to see if you can claim them. Visit the IRS’s Education Credits Web page to learn more. Also see Publication 970, Tax Benefits for Education, for more on this topic.

• Student loan interest.  You may be able to deduct interest you paid on a qualified student loan. You can claim this benefit even if you do not itemize your deductions. For more information, see Publication 970.

• Self-employed health insurance deduction.  If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid during the year. This may include the cost to cover your children under age 27, even if they are not your dependent. See Publication 535, Business Expenses, for details. 

IRS Tips on Filing Status

It’s important that you use the correct filing status when you file your tax return. Your status can affect the amount of tax you owe for the year. It may even affect whether you must file a tax return. Keep in mind that your marital status on Dec. 31 is your status for the whole tax year. Sometimes more than one filing status may apply to you. If that happens, choose the one that allows you to pay the lowest tax.

Here’s a list of the five filing statuses:

1. Single.  This status normally applies if you aren’t married. It applies if you are divorced or legally separated under state law.

2. Married Filing Jointly.  If you’re married, you and your spouse can file a joint tax return together. If your spouse died in 2014, you often can file a joint return for that year.

3. Married Filing Separately.  A married couple can choose to file two separate tax returns. This may benefit you if it results in less tax than if you file a joint tax return. It’s a good idea for you to prepare your taxes both ways before you choose. You can also use it if you want to be responsible only for your own tax.

4. Head of Household.  In most cases, this status applies if you are not married, but there are some special rules. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Don’t choose this status by mistake. Be sure to check all the rules before you file.

5. Qualifying Widow(er) with Dependent Child.  This status may apply to you if your spouse died during 2012 or 2013 and you have a dependent child. Certain other conditions also apply.
Note for same-sex married couples. In most cases, you and your spouse must use a married filing status on your federal tax return if you were legally married in a state or foreign country that recognizes same-sex marriage. That’s true even if you now live in a state that doesn’t recognize same-sex marriage.

IRS Affordable Care Act - Quick Glance Form

Health Care Law & Your Tax Return

Affordable Care Act & Taxes - At a Glance

IF YOU…	THEN YOU…
And everyone in your tax household had health coverage for the entire year	Will simply check the box on line 61 of Form 1040,  line 38 of Form 1040-A, or line 11 of Form 1040-EZ
Enrolled in health insurance through the Marketplace	Should receive a Form 1095-A Health Insurance Marketplace Statement from the Marketplace
Received a Form 1095-A, Health Insurance Marketplace Statement, showing you received the benefit of advance payments of the premium tax credit in 2014	Must file a tax return in 2015 and reconcile the advance payments with the amount of the premium tax credit allowed on your return
Need to reconcile the advance payments of the credit with the credit allowed	Make the calculations using IRS Form 8962 Premium Tax Credit (PTC)
Must repay any excess advance payments of the premium tax credit	Must report the information on line 46 Form 1040 or line 29 of Form1040-A, and cannot file Form 1040-EZ
Are claiming the premium tax credit and did not benefit from advance payments of the premium tax credit	Must file a tax return and IRS Form 8962, Premium Tax Credit (PTC)
Did not receive a Form 1095-A, Healthcare Insurance Marketplace Statement, from the Marketplace	Should contact the state or federal Marketplace through which you enrolled
Are claiming an exemption from the requirement to have health coverage for anyone on your tax return	Will complete Form 8965, Health Coverage Exemptions, and submit it with your tax return
Still need to obtain a religious conscience exemption or a hardship exemption that can only be granted by the Marketplace	Should file an application with the Marketplace and follow the instructions below about how to report exemptions from the Marketplace on your tax return
Obtained an exemption from the Marketplace, and received your unique Exemption Certificate Number	Will enter the Exemption Certificate Number in Part I of Form 8965, Health Coverage Exemptions, and submit the form with your return
Applied for an exemption from the Marketplace, but do not currently have an Exemption Certificate Number	Will enter ‘PENDING’ in  Part I of Form 8965 Health Coverage Exemptions, and submit the form with your return
Are claiming an exemption that can be granted only from the IRS	Will not need an Exemption Certificate Number, but will complete Parts II and III of Form 8965, Health Coverage Exemptions, and submit the form with your return
Are able to obtain the exemption from either the IRS or the Marketplace	Should obtain the exemption from the IRS by completing Part II and III of Form 8965,Health Coverage Exemptions, and attach this form to your federal tax return when you file
Are making a shared responsibility payment because you did not have health coverage or qualify for an exemption for any month in 2014	Will enter the payment amount on line 61 of Form 1040, line 38 of Form 1040-A, or line 11 of Form 1040-EZ

Top Ten Facts about Exemptions and Dependents from the IRS!

Nearly everyone can claim an exemption on their tax return. It usually lowers your taxable income. In most cases, that reduces the amount of tax you owe for the year. Here are the top 10 tax facts about exemptions from the IRS to help you file your tax return.
1. E-file your tax return.  Filing electronically is the easiest way to file a complete and accurate tax return. The software that you use to e-file will help you determine the number of exemptions that you can claim. E-file options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.
2. Exemptions cut income.  There are two types of exemptions. The first type is a personal exemption. The second type is an exemption for a dependent. You can usually deduct $3,950 for each exemption you claim on your 2014 tax return.
3. Personal exemptions.  You can usually claim an exemption for yourself. If you’re married and file a joint return, you can claim one for your spouse, too. 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 tax return, and
• was not the dependent of another taxpayer.
4. Exemptions for dependents.  You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative who meets a set of tests. You can’t claim your spouse as a dependent. You must list the Social Security number of each dependent you claim on your tax return. For more on these rules, see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. You can get Publication 501 on IRS.gov. Just click on the “Forms & Pubs” tab on the home page.
5. Report health care coverage. The health care law requires you to report certain health insurance information for you and your family. The individual shared responsibility provision requires you and each member of your family to either:
• Have qualifying health insurance, called minimum essential coverage, or
• Have an exemption from this coverage requirement, or
• Make a shared responsibility payment when you file your 2014 tax return.
Visit IRS.gov/ACA for more on these rules.
6. Some people don’t qualify.  You normally may not claim married persons as dependents if they file a joint return with their spouse. There are some exceptions to this rule.
7. Dependents may have to file.  A person who you can claim as your dependent may have to file their own tax return. This depends on certain factors, like the amount of their income, whether they are married and if they owe certain taxes.
8. 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 on your tax return. This rule applies because you can claim that person is your dependent.
9. Exemption phase-out.  The $3,950 per exemption is subject to income limits. This rule may reduce or eliminate the amount you can claim based on the amount of your income. See Publication 501 for details.
10. Try the IRS online tool.  Use the Interactive Tax Assistant tool on IRS.gov to see if a person qualifies as your dependent.

IRS warns about opening fake emails

The Internal Revenue Service today warned taxpayers to watch out for fake emails or websites looking to steal personal information. These “phishing” schemes continue to be on the annual IRS list of “Dirty Dozen” tax scams for the 2015 filing season.

"The IRS won’t send you an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS that takes you by surprise,” said IRS Commissioner John Koskinen. “I urge taxpayers to be wary of clicking on strange emails and websites. They may be scams to steal your personal information.”

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or find people to help with their taxes.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

Stop and Think before Clicking

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

TIPS FROM IRS ON WHY YOU SHOULD EFILE YOUR 2014 TAX RETURNS!

Are you still using the old school method of doing your taxes? Do you still mail paper forms to the IRS? If so, make this the year you switch to a much faster and safer way of filing your taxes. Join the nearly 126 million taxpayers who used IRS e-file to file their taxes last year. Here are the top five reasons why you should file electronically too:

Accurate and easy.  IRS e-file is the best way to file an accurate tax return. The tax software that you use to e-file helps avoid mistakes by doing the math for you. It guides you every step of the way as you do your taxes. IRS e-file can also help with the new health care law tax provisions. The bottom line is that e-file is much easier than doing your taxes by hand and mailing paper tax forms.

Convenient options.  You can buy commercial tax software to e-file or ask your tax preparer to e-file your tax return. You can also e-file through IRS Free File, the free tax preparation and e-file program available only on IRS.gov. You may qualify to have your taxes filed through the IRS Volunteer Income Tax Assistance or Tax Counseling for the Elderly programs. In general, VITA offers free tax preparation and e-file if you earned $53,000 or less. TCE offers help primarily to people who are age 60 or older.

Safe and secure.  IRS e-file meets strict security guidelines. It uses secure encryption technology to protect your tax return. The IRS has safely and securely processed more than 1.3 billion e-filed tax returns from individuals since the program began.

Faster refunds.  In most cases you get your refund faster when you e-file. That’s because there is nothing to mail and your return is virtually free of mistakes. The fastest way to get your refund is to combine e-file with direct deposit into your bank account. The IRS issues most refunds in less than 21 days.

Payment flexibility.  If you owe taxes, you can e-file early and set up an automatic payment on any day until the April 15 due date. You can pay electronically from your bank account. You can also pay by check, money order, debit or credit card.