New parents have a lot to contend with when growing their families. Suddenly, besides having to figure out how to adjust their lives, they also have several matters to take care of that will help them meet their legal and social obligations. One of those obligations includes getting the new baby a Social Security number. If you’re a new parent, having that Social Security number means that you can claim the baby as a dependent on your tax return. Having the Social Security in place affords a growing family child tax credits and deductions that can be very useful at this stage of family life.

While a deduction reduces the amount of income the government gets to tax, there are exemptions and credits that the IRS extends to growing families. These include the dependency exemption and the Child Credit. Similar to a tax deduction, a dependent exemption reduces your taxable income. The exemption allows you to claim your son or daughter as a dependent and will shelter a significant portion of your income from taxes, which saves you money in your tax bracket. For 2015 tax returns filed in 2016, the exemption amount will rise to $4,000. Adding another exemption for your dependent increases the number of exemptions you can claim. This exemption can be claimed until the age of 19, or if the child is a student under the age of 24, or permanently and totally disabled at any time during the year. More detailed explanations about deducting a child’s exemptions can be found in Publication 17 “Federal Income Tax” and Publication 501 “Exemptions, Standard Deduction and Filing Information.”

(By the way, there are certain requirements that change for dependents when they need to file their own federal tax returns. Be sure to review Publication 929 “Tax Rules for Children and Dependents” to understand when a child or dependent is required to file their own tax return.)

What A New Baby Means

A new baby also means that you qualify for a $1,000 child tax credit every year until your child turns 17. There are some exceptions depending on which tax bracket you fall under. The Child Tax Credit is explained in detail in Publication 972 “Child Tax Credit.” The publication discusses limits on the credit as well as additional child tax credits for certain individuals who get less than the full amount of the child tax credit. In order to claim the credit, be sure to fill out Form 1040, 1040A or 1040NR.

Always Consider Childcare Expenses

Additionally, if you end up paying for child care, there is a Child and Dependent Care Credit that is helpful to parents. The size of the credit is based on how much you spend for child and dependent care, as well as your income. Some of the costs associated with summer day camp may qualify as well. Under the Child Tax Credit, your income does have to fall into certain parameters to claim the credit, although it does not have to in order to claim the Child and Dependent Care Tax Credit. If you determine that you qualify for the Child Care credit, based on reviewing Publication 503 “Child and Dependent Care Expenses” then complete Form 2441 “Child and Dependent Care Expenses” and attach it to your 1040 or 1040A. You cannot use the Form 1040EZ and claim this credit. This Child and Dependent Care Tax Credit can reduce your tax bill considerably. Remember to review all the qualifying expenses and to check if your state offers their own version of the Child and Dependent Care Tax Credit.

Child Adoption Tax Credits

There is also a credit if you adopt a child, in which case you review the instructions for Form 8839 “Qualified Adoption Expenses” and attach the completed form to your tax forms upon completion. You can also review Publication 17 “Your Federal Income Tax – Chapter 38, Other Credits.” The adoption tax credit is to help offset the cost of adopting a child.

Also, don’t forget to change your withholdings at work, because it will boost your take-home pay. Review your Earned Income Credit, because for a couple without children, the chance to claim the credit is lower. However, when you have a child, depending on your income, the income cutoff is higher and you may qualify for the Earned Income Credit, saving you money.

If you decide to start a child-care reimbursement account (a flexible spending account) at work, you may end up having a more tax-friendly way to pay your child-care bills than the Child and Dependent Care Credit. You are allowed to divert up to $5,000 a year of your salary into a special account that you can tap into to pay for your child care. Since the money you divert into the account avoids both federal and state income taxes, as well as Social Security and Medicare taxes, you can easily save more than the value of the Child and Dependent Care Credit.

If you are a single parent, check to see if you qualify to file as ‘head of household’ rather than ‘single.’ IRS Publication 501 “Exemptions, Standard Deduction, and Filing Information” explains the qualifications. The change in filing status increases your standard deduction and comes with higher income limits for various tax breaks, such as the Child Credit.

Making sure that you receive the appropriate tax breaks that new parents are entitled to permits you to take advantage of the opportunity to better manage your money as a growing family. As your child grows, you might consider looking into other tax benefits that are available for saving for college (529 plans or Coverdell Education Savings Accounts), kid IRAs (instructions for Form 5329), nanny taxes and kiddie taxes. In the meantime, make sure that you gain the benefit of tax breaks that are available to you today. We’d be happy to help you at any stage and you can rest assured that we understand how to serve your family’s needs and secure for you the deductions and credits you earned.

When we sit down to do our taxes, sometimes we choose to do them expediently. This can serve you well if you have few deductions and few financial requirements to report. However, it’s worth considering that many taxpayers neglect to claim deductions that are available to them that can save them money.

1) Itemized Deductions from State / Local Income Taxes

If you itemize your deductions on Schedule A and file a Form 1040, you have the option of claiming either state and local income taxes or your state and local sales taxes. The IRS doesn’t permit you to claim both. Planning ahead is pretty essential, because you’ll need all of your saved receipts throughout the year. Add up the total amount of your sales taxes you actually paid and claim that amount. If you don’t have your receipts, you can fill out a worksheet and depend on the optional general sales tax tables provided in the instructions for Schedule A. Additionally, the IRS offers a sales tax deduction calculator to figure the amount of optional general sales tax you are eligible to claim.

2) Job Hunting Costs

Job hunters have costs associated with their search that the IRS considers deductible. Keep track of your job-search expenses so that you can reconstruct them at tax time. There is a requirement. You need to understand that the IRS allows you to deduct expenses on a job search in your current occupation. You can’t deduct them if you’re in appliance repair and are making a career change to become a school counselor. When you itemize, you total these as miscellaneous expenses. In order for them to be deducted, they need to exceed 2% of your adjusted gross income. There is a list of deductible costs that you can find in the official Publication 529 for the applicable tax year. Briefly, you can include ordinary, reasonable and necessary expenses. These include: mailing resumes and preparing them, creating websites and maintaining them, and having business cards made. If an employment agency charges a fee, you can deduct that fee. You can also include travel expenses. None of this is applicable if you are hunting for your first job however.

3) Self-Employed Medicare Premiums

A lot of self-employed taxpayers can receive Medicare and are able to deduct all of the Medicare insurance premiums. After 2010, the IRS decided that all forms of Medical are deductible (Parts A, B, C, and D). If you are a sole proprietor, partner in a partnership, limited liability company member, or S corporation shareholder who owns more than 2% of the company stock, then you can use this deduction. In fact, if you’ve been paying the Medicare insurance premium for the past several years, you can amend your return up to three years after the date you filed your original return for the year. To amend your return, you file Form 1040X, Amended US Individual Income Tax Return.

4) Expenses from Hobbies that Earn Income

If you earn income from a hobby, you may be allowed to deduct ordinary and necessary hobby expense with limitations. A hobby is not entitled to the same tax deductions that business people can claim. The IRS usually allows you to deduct your hobby expenses up to the amount of your hobby income. The IRS considers any expenses that exceed your hobby income as personal losses that are not deductible. The IRS requires that you itemize your deductions on your tax return. There are different categories that the IRS uses when it comes to distinguishing between hobbies and businesses.  When you review the tax categories and find that what you thought was a side business is really a hobby that generates income but not profit, you can deduct hobby expenses. Make sure that you follow the IRS categories of expenses in order and only to the maximum allowed. The IRS considers that when you show consistent losses year after year on a hobby, and conduct your hobby in a businesslike fashion, that they can view it as a hobby.

5) Moving Expenses

Moving expenses can be deducted if your move is closely related to the start of work and you meet certain distance and time requirements. However, a lot of people don’t know you can include the cost to move your pets.

6) Losses from Wagers

The IRS considers losses from any type of wager that a taxpayer makes deductible. They require that once you report your gambling winnings on your tax form, that if you want to deduct gambling losses, then you have to keep an accurate diary or similar record of your losses and winnings. The diary must include specific information so that the IRS can assess the legitimacy of the claims. There is a limit however. You cannot deduct an amount for losses that is greater than your wager earnings. If you won $1,000, then you can’t deduct $1,500 in wager losses. Often times, if you have won more than $600 at a casino or gambling facility, then you should receive a form W-2G and so does the IRS. If you’re a casual gambler, the IRS permits you to record your net win or net loss amount for a gambling session and report those sum total of wins and losses in the appropriate boxes on your tax forms and supporting documents.

7) Work Uniform and Upkeep Costs

The IRS recommends that you deduct the cost and upkeep of work clothes if you must wear them as a condition of your employment and the clothes aren’t suitable for everyday wear. A uniform is often required in jobs like firefighters, health care workers, delivery workers, letter carriers, transportation workers and law enforcement officers. You can deduct the cost of protective clothing required in your work. If you are on full-time active duty in the armed forces, you generally cannot deduct the cost of your uniforms, however, you can deduct the unreimbursed cost of your uniform if you are a reservist if military regulations restrict you from wearing them off-duty.

8) Friendly Loan Non-Repayment Capital Loss

If you made a legitimate loan to a friend or family member and they never pay it back, the IRS allows you to deduct it as a short-term capital loss as long as you meet certain requirements. It has to be a legitimate loan, not a gift. To prove that it is a debt, you should have a written promissory note signed by the borrower. The IRS considers that you must also have taken steps to collect the debt and have charged interest on the loan, so that you aren’t treating it as a gift. In order for it to be considered a nonbusiness bad debt deduction, you must have actually loaned cash to someone who does not repay it and the entire debt is uncollectible. That does not mean that you have to file a lawsuit to collect or wait until the entire debt is overdue to determine whether it is unrecoverable. You simply need to show that there is no longer any chance that the loan will be repaid. The bad debt is deductible in the year that it became valueless, but you must file within 7 years from the date your original return for that year had to be filed.  There are two kinds of bad debts: business and nonbusiness. Refer to IRS Publication 550 “Investment Income and Expenses” and Publication 535 “Business Expenses” in order to understand the differences and the specific requirements to claim this deduction.

If you’re like most people, you don’t like to haggle and don’t feel like negotiating gets you that far, because you’re convinced that generally speaking many established companies or government agencies don’t really budge. It can be extremely stressful to consider that you’re stuck with a bargain that is either not very possible for you to achieve or that seems inflexible when you’re willing to comply, but need to discuss some mercy. Sometimes, taxpayers have legitimate doubts about their tax debt.

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Each day includes hiking and games. World Town Planning Day presents an superb opportunity to check at planning from a worldwide perspective, and APA encourages its members to think about planning challenges and options around the world on this day. Because of this, it’s important to devote time on picking the firm. In countries throughout the Earth, including the USA and also the uk, the day increases people’s awareness of and concern for health issues in their communities. Education afternoon is one of the best segments of this fair! It happens on the Friday of the fair and runs for about three hours. National Education Day can be seen to increase the caliber of education given to pupils in the nation.

Among the key reasons why it attracts a number of the degree-seekers is that it doesn’t induce the students to attend courses. A requirement for society Instruction is critical for society. The value of education can be summed up under. Top Choices of Education Day Baby bath tips may help you with the ideal approach to keep to keep your kid clean and hygienic. As long because there are new baby’s being born everyday, the pipeline of possible will remain full. Women and men become parents regular and because of this, children’s franchises are a really good company prospect.

How parents can assist with homework there are plenty of ways that parents can assist their children with their homework. Most parents wish to supply their children with a great birthday encounter and hiring somebody to deal with the details takes some of the strain away from the circumstance. If you’re a pre-adoptive parent, and aren’t yet acquainted with the adoption procedure, you’d gain from attending our How to Adopt semina

There are many reasons that individuals or businesses find themselves needing to ask the IRS for an offer in compromise. An offer in compromise (OIC) is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Filling out necessary forms is part of the process. However, before you start filling out the necessary forms to have the IRS consider your offer, there are a few useful tips that may help you in your pursuit of a compromise with the IRS.

The IRS considers applicants eligible when a taxpayer isn’t able to pay the full amount in a reasonable time. This is decided after reviewing a taxpayer’s assets and income. The documentation is extensive and includes every detail of your financial life so that the IRS can feel justified in accepting your OIC. This assessment is called your “reasonable collection potential.” Taxpayers fill out Form 433-A (OIC) “Collection Information Statement” or a Form 433-B (OIC) and submit it along with a Form 656 “Offer in Compromise” request for an OIC.

Here are the top 8 useful tips on getting your OIC accepted:

Tip 1- Realizable Value of Assets + Income

The amount of your offer has to equal a “realizable value” of your assets plus the future amount of money the IRS could take from your potential income. Additionally, the IRS under its expanded Fresh Start Initiatives now only looks at one year instead of four years of your future income for offers that can be paid in five or fewer months. If the offer can be paid in six to 24 months, then the IRS only looks at two years instead of five years of your future income. Fresh Start softened qualification criteria and allowed for lower offer amounts and has increased the number of OICs accepted.

Tip 2 – File All Back Tax Returns

Before you submit your offer, you must file all tax returns that you are legally required to fill out. All the programs including the OIC are restricted to people who actually filed returns.

Tip 3 – Don’t Try and DIY

Although a lot of people figure that since they’ve done their taxes using the official booklets and forms that the IRS provides previously, they should use the DIY approach in making an offer in compromise to the IRS, DON’T. Here’s why. Basically, the IRS continually trains their offer examiners to look out for the best interests of the government. The IRS is very good at pressuring taxpayers and it really helps to have an experienced tax advisor that deals with the IRS regularly. They are less easily intimidated and they also are familiar with ways to deal with these tactics. A tax professional protects the taxpayers’ rights and gets them the best settlement and resolution possible knowing full well that the IRS is not going to make it easy for a taxpayer to wipe away a large fraction of your tax debt. They are charged with collecting by law.

Tip 4 – Don’t Accumulate More Tax Debt

While the IRS reviews your OIC, make sure you do not accumulate more tax debt. Some taxpayers put everything on hold during the collection process, but that’s not a good idea. If you need to pay a quarterly estimated tax, pay it, and don’t wait until you receive an approval or rejection of your OIC. While the offer is pending, the IRS does not take too kindly to taxpayers who add more tax debt and it may wreck your offer.

Tip 5 – Do Due Diligence

Always do your due diligence first before you submit an offer. If you submit a frivolous settlement amount by low balling numbers on your forms, don’t expect the IRS to accept it. Every number you put on your form needs to be supported and these supporting documents must accompany your forms. The IRS requires 3 months of documentation. You have to do the settlement offer correctly the first time, because the IRS will reject it otherwise. Then, you will have to restart the settlement process with a new application fee and another down payment.

Tip 6 – Provide Non-Refundable Payment with Application

You are required to provide an initial non-refundable payment along with your application. Don’t forget! These payments and application fees will be applied directly to your tax liability. You can specify which tax year and debt.

Tip 7 – Don’t Stall with Money

Some people wait to ask for an offer in compromise because they want to have more money at the time. It’s not a good idea, because many tax professionals know that the best offer in compromise a taxpayer can submit will be when the settlement petitioner has the least amount of assets and income. Consider borrowing money from family or friends. Remember the IRS can change the terms of the agreement if there is a sudden increase in income or there is an inheritance. Most importantly, it’s not a good idea to stall even if there is an income increase down the road.

Tip 8 – Have a Good Reason

Since the IRS wants to know why you believe you will not be able to pay off the entire balance, the IRS isn’t going to take just any reason. Good reasons do not include that just because we are in a recession you’re losing big clients. They are trained to evaluate claims based on future possibilities, so it’s possible that your business may increase and you don’t know this at the moment, so there might be a revenue stream that the IRS can collect against. They consider disability, substance abuse problems, huge balance amounts, dependent care, limited income potential as a result of advanced age, or serious health matters as good reasons.

In their policy statements on an Offer in Compromise, the IRS accepts an OIC when it is unlikely that the tax liability can be collected in full and the amount offered reasonably reflects collection potential. It’s considered a legitimate alternative to declaring a case as currently not collectible or a protracted installment agreement. They only have the authority to accept compromises in full settlement of a tax debt because of tax code, which provides two grounds for such compromises. One is “doubt as to liability” and the other is “doubt as to collectability.” If you have a doubt as to liability rather than collectability, then it is evaluated differently. If you have a legitimate doubt that you owe part or all of the tax debt, you need to complete Form 656-L “Offer in Compromise (Doubt as to Liability).” This allows you to dispute the amount of the tax debt not on the basis of collectability and ability to pay, but because you believe that you do not owe part or all of the tax debt.

While the Fresh Start Initiative has increased the number of OICs that the IRS extends to taxpayers based on legitimate reviews, taxpayers need to know that the evaluation of OICs takes time and a considerable amount of accuracy and expertise. Since the IRS examiners are there to protect the government’s interest in collecting taxes, you should confront this matter with professional help and all the supporting documents you need to present the best possible case to give your OIC the best chance of being accepted.

Introducing the new Instant Tax Attorney blog! We’ll be diving deep into a wide variety of financial subjects, to help you live a happier and more financially secure life.

We’ll dive into subjects such as:

  • Personal Finance
  • Tax Issues
  • IRS Compliance and Programs
  • Savings on Taxes
  • Much more…

We hope that these articles will be insightful, helpful and will help you to be more financially secure.

Each article has been thoroughly researched by our expert tax professionals, and will provide knowledgeable and actionable tips for you and your family.

So we hope that you can get as much out of these articles as we are putting in them, and that they will help brighten the financial future and security of you and your family.

If you have any feedback or suggestions on post that we should do, or just want to get in touch, you can contact us either through the contact form, or by phone at (619) 867-0855.