Category: Tax Tips and Tricks

Taxes are confusing and cause many taxpayers stress come tax season but PriorTax is here to help. Learn the tax tips and tricks to get you through the preparation process. You could be missing out on more money from the IRS which is why we want to help. We’ll let you know about hidden deductions and rare credits to report on your tax return to maximize your refund. Don’t hesitate to leave a comment on our blog if you have a question about your tax situation. Also, check back here for new tips and tricks throughout the tax season because our team is on the lookout!

Archive for the ‘Tax Tips and Tricks’ Category

How to qualify for the Child Tax Credit?

Posted by Divya Hansraj on June 16, 2017
Last modified: June 16, 2017

Oh, the joys of having children!

Today, it is difficult for parenthood to have its rewards. Children want us to buy them the most expensive toys and clothing and that spending can sometimes feel fruitless. As with struggling to finish a marathon, we strive, hoping there will be a light at the end of the tunnel. Luckily the IRS understands this struggle and gives parents a little something back. The Child Tax Credit and the Additional Child Tax Credit serve as the cushioned shoe inserts that help us finish.

Child Tax Credit (CTC) Facts:

  • You must have a qualifying child.
  • You must have earned greater than $3000 of Income.
  • Each child can receive up to $1000.

 

What is a qualifying child?

In order for your child to be a qualifying child, they must meet the following requirements:

Age: Must be under 17 before December 31.

Dependent: Must be claimed as a dependent on your tax return.

Citizenship: Must be a United States citizen, a national United States citizen, or a green card holder

Residency: Must have lived with you for half the year or more.

Support: Must have been provided more than 50% of their finances by you.

Income: The CTC is determined according to your filing status and Adjusted Gross Income. Thus, the higher your income bracket, the lower the credit.

Relationship: The child must be related to you in one of the followings:

  • Son or daughter
  • Legally adopted son or daughter
  • Stepson or stepdaughter
  • Brother or sister
  • Stepbrother or stepsister
  • Grandchild
  • Niece or nephew
  • Foster son or daughter 

 

Did you answer yes to all of those requirements? Congratulations, you qualify!

 

What causes the Child Tax Credit to decrease?

Based on your Filing Status, if your income exceeds the following thresholds below, the child tax credit decreases $50 for every $1000 above the income threshold.

  • $55,000 for married filing separately
  • $75,000 for single or head of household, qualifying widow or widower filers
  • $110,000 for married couples filing jointly.

Two examples: 

  1. Grace has an AGI of $80,000, has one child and is electing the head of household filing status. Therefore, Grace exceeds this threshold by $5000 since the Head of Household threshold is $75,000.  As a result, her CTC was reduced by $250 so she received $750.
  2. William has an AGI of $53,000, filing two dependents and he is electing the filing married separately. The married filing separately threshold is $55,000. Therefore he falls under the married filing status threshold. As a result, each child qualifies for a total of $1000. He will receive the CTC for $2000.

 

What is the limit of the Child Tax Credit?

The Child Tax Credit is a non-refundable credit which can only reduce your income tax to zero. Furthermore, the Child Tax Credit limits your credit to cover your tax due. Let’s say you qualify for the $1000 CTC but your income tax is $500. The CTC is limited to your tax and you will receive a credit of $500.

 

What happens to the rest of the credit?

The remainder of the credit is the Additional Child Tax Credit (ACTC). This credit is treated as a refundable tax credit. 

Let’s look at an example to see how this credit works.

John and Sally are married filing jointly and have one dependent who is under 17. Although they received a total of $1000 for their child the Child Tax Credit was limited to $500. As a result, the remaining $500 is treated as a refundable ACTC credit.

 

What if I have more than one child?

The more the merrier! If you have more than one qualifying child, then you are eligible to receive up to $1000 per child.

Someone else claimed my Dependent.

Imagine this.

You had taken care of your child all year, provided the world of happiness, bore numerous expenses and then you come to realize that the IRS rejected your return due to this dependent? You have no need to worry. We can help you figure this out.

Can I still get the CTC?

Since the IRS works on a first come first serve basis, we advise that you file your return as soon as possible. If someone else has claimed the exemption and you are confident that this is your qualifying dependent, you can still claim the credit. However, the return must be paper filed. Once you do so, the IRS will provide you with further instructions.

 

Can I get the Child Tax Credit if I did not work?

The IRS only grants a credit if you worked and earned taxable income, whether it is from your job or business. Unfortunately, if you did not earn any income, you cannot receive a tax credit. 

 

How will I know if I met the Requirement for the CTC?

File with our website, and we automatically determine whether you qualify for the Child Tax Credit, you do not need to pull out the calculator to determine your credit amount. Our website will conveniently calculate the credit for you. Our staff is ready to answer any additional questions you may have. Feel free to contact us for any additional questions or clarifications.

Child Tax Credit

Unfiled tax returns have you drowning?

Posted by admin on June 6, 2017
Last modified: June 16, 2017

Overwhelmed With Prior Year Unfiled Tax Returns?

While most Americans finish or have finished their current year taxes, others have stacks of unfiled tax returns from previous years. You may feel swamped with the pressures of work and within a blink of an eye, you wake up to find an IRS notice in the mailbox. Let’s face it, life gets busy. Nevertheless, you have forgotten about those prior year tax returns, but the IRS hasn’t. Here are some common questions for those taxpayers who are stuck in the mud with unfiled tax returns:

Should I file my Unfiled tax returns?

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20 Facts About Filing an Amended Prior Year Tax Return

Posted by admin on February 7, 2017
Last modified: February 7, 2017

Did you take the wrong step with your tax return? Don’t be too hard on yourself.

Mistakes happen. If you filed your tax return with incorrect or missing information, the IRS will give you a chance to fix your mishap. Before insisting you 100% need to amend your return, though, take a look at our list of when you should, when you shouldn’t, and other need-to-know info about doing so.

 

What it is and where to file

1.Another name for an amended tax return is 1040X.

2.If you are amending multiple tax returns at once, you will need a prepared 1040X for each one. They will also need to be mailed in separate envelopes to the IRS.

3.You can prepare your amended tax return with PriorTax whether you filed your original return with us or a different tax preparer.

4.The address to mail your amended tax return is:

Department of the Treasury

Internal Revenue Service

Austin, Texas 73301-0215

Or if you are using a private delivery service:

Internal Revenue Service

3651 South I-H 35, Stop 6055 AUSC

Austin, Texas 78741

 

Fixing Information VS. Adding Additional Information

5.You don’t need to file an amended return for calculation mistakes. The IRS has calculators of their own which will update the information automatically on your return. (more…)

Someone Used My Social Security Number to File Taxes – What Should I Do?

Posted by admin on January 10, 2017
Last modified: January 25, 2017

Victim of identity theft? Don’t let panic get the best of you.

After entering your tax information, you finally hit the e-file button, only to have your return rejected by the IRS. The reason; a tax return has already been filed with your social security number!

There’s a sinking feeling in your gut and an enveloping sense of dread. What do you do? How will you ever get your refund money now? Remain Calm. You’ll get through this.

 

Here’s what you should do now

Step #1

The first thing to do is double check all of the information on your return, especially your name and Social Security number and those of your spouse and dependents. Sometimes this error can be caused by a simple typo. (more…)

What Does Being Audited By The IRS Mean?

Posted by Michelle O'Brien on December 23, 2016
Last modified: December 23, 2016

Feel like the IRS has all eyes on you?

Think of filing your taxes as going through security at an airport. Your tax return is you. The security checkpoint is the IRS. Just like you can be stopped while going through security, your tax return can be stopped by the IRS. With a security checkpoint, you’re either stopped because you were the lucky number of the hour or because something triggered suspicion. The same goes for your tax return and the next step is an IRS audit.

 

What is an audit?

An audit is simply an examination of the information you reported on the tax return you filed for a specific year. Contrary to popular belief, the IRS is not employed with millions of accountants checking each return that comes through their doors. In fact, much of the processing is computerized now. You can imagine how technology can be manipulated a bit by fraud accounts and identity theft. Audits are necessary to help stop that from occurring as well.

 

What triggers your return for an audit?

Just like at the airport security check, the IRS can stop a tax return randomly or for suspicious activity. Here is a list of the most common audit triggers we’ve come across: (more…)

Filing Taxes in Two States: Working in NY & Living in NJ

Posted by admin on October 20, 2016
Last modified: November 2, 2016

If you’re living and working in different states, plan on filing taxes in two states.

For many, working and living in different states can save you a lot of money. This is especially true if you work in an expensive city like New York City.

The commute from New Jersey to the Big Apple may be much more attractive to you, especially if you’re looking for more space, lower costs and fewer people.

However, you’ll want to keep in mind that those who work and live in different states are required to file taxes in both states.

In other words, you’ll need to file both a New Jersey and New York state tax return.

File a nonresident NY state tax return and a resident NJ state return

If you’re working in a different state than you live in, you’re required tofile:

  • a non-resident state return to the state you work in
  • a resident state return to the state you live in
  • a federal tax return (more…)

The IRS Address to File Taxes

Posted by admin on October 18, 2016
Last modified: December 21, 2016

Mailing your tax return to the IRS? Don’t forget the stamp!

It’s 2016 and we are well into the era of e-file. In fact, the vast majority of taxpayers now send their return into the IRS electronically. However, there are some people out there who prefer to kick it old school and snail mail a paper copy of their return to the IRS. Alternately, if you are filing a late return from a prior year, snail mail is the only option.

So after you complete your return and breathe a big sigh of relief, make sure you know where you’re mailing your return. There’s nothing worse than scrambling to find out where to mail your return as the clock ticks down the final hours of the tax season.

Here is a list of each IRS address based on the state where you live. The list is complete with addresses of the IRS processing centers where you can mail your return whether you include a check or money order. (more…)

How to File Taxes without a W-2

Posted by admin on October 18, 2016
Last modified: November 2, 2016

It’s easy to lose your W-2 and just as simple to file without it.

E-filing your tax return these days is pretty straightforward. You just plug in the numbers on your W-2 to the online  tax application, take the credits and deductions you’re entitled to, and VOILA! Couldn’t be simpler.

But what happens if you don’t have a W-2? Suddenly things get a lot more complicated. Don’t worry. There are steps to take to make sure you get your tax return to the IRS.

Contact your employer

First thing’s first. Make every attempt to get the actual document itself. If your employer didn’t send you one, or sent you one that was incorrect, contact them and request that they send you the right one.

Employers are required to have W-2 forms issued to their employees by January 31. If you still don’t have it by then, it’s time to take additional action. At this point you should call the IRS at 1-800-829-1040 and tell them about your missing W-2. They will call your employer and tell them to send you the W-2.

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How to Get a Copy of Your W-2 Form for Prior Years

Posted by admin on October 18, 2016
Last modified: January 13, 2017

Ready to file your tax return but can’t find your W-2 form?

If you realized you lost a prior year W-2, there’s still hope. The process to get a copy of a W-2 can be fairly simple. In order to receive a copy of your prior year W-2, you have three options. After requesting the W-2 , create an account and start preparing your late tax return on Prior Tax.

Option #1: Get your W-2 from previous employer.

The easiest way to get a copy of a lost W-2, is to contact the employer who issued it.  The payroll department of your employer (or former employer) should be saving important tax information, such as W-2s. Ask for the W-2 to be sent to you.  This process is pretty simple and shouldn’t take much time.

Option #2: Get your W-2 from employer’s payroll provider.

Have you asked your employer for your W-2 and noticed that he mentally added the task to the very bottom of his To-Do list? If you know that your employer (or past employer) uses a payroll provider instead of calculating payroll in-office, skip the middleman and give the company a call yourself. When you call, be prepared to verify your SSN or employee number as they may ask for it. While speaking to the payroll provider, you may want to confirm the following:

  • Specify the year of the W-2 form that you need sent to you.
  • Verify the address they have on file for you. This is the address they will mail your W-2 to.
  • Ask how long it will take for them to mail your W-2 form.

Option #3: Get your W-2 from the IRS.

For an actual copy of your W-2 form, you will need to file form 4506 to the IRS with a $50 payment. This gets you a copy of your tax return along with your W-2. If you only need the federal information that was reported on your W-2 (not an actual copy), then you’ll file form 4506-T to the IRS for free. This provides you with a transcript of your tax return too. This alternative may be more time-consuming than reaching out to an employer. However, it requires NO hunting down of past employers to get them to spare a nano-second of their time.

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What Are Allowances on a W-4?

Posted by admin on October 18, 2016
Last modified: November 2, 2016

You must pay tax to the IRS but your W-4 form lets you decide when to pay it.

When beginning a new job, you may remember your employer handing over a W-4 form (along with the pile of other paperwork) to fill out. Your W-4 form determines how much tax is withheld from your income based on how many allowances you claim.
You can claim a certain number of allowances depending on your life situation. Allowances conclude how little or how much your employer will withhold from your paychecks throughout the year for taxes. In other words, the size of your tax refund or tax due to the IRS after filing your taxesYou can claim as little as zero allowances or as many as apply to you and your tax situation. The ideal situation is to break even; no tax owed and no tax refund.

How many allowances should you claim?

The details to your specific situation (such as your filing status, number of children, etc.) will determine how you complete your W-4.

If your parents claim you: 

If you’re being claimed as a dependent on someone else’s tax return, you’ll most likely want to claim zero allowances. This is because your parents are claiming you as an exemption, rather than you claiming yourself.

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