By: Rebecca Herman
Now that January is well under way, people are beginning to think about filing their taxes, but some still have questions about what to collect and what can be considered a deduction, especially when a person has had a change in their life or when new laws go into effect.
The first item that taxpayers will need in order to complete their 2014 tax return is social security numbers for each person who is filing and for each dependent that is being claimed. Without this information the IRS will deny the personal exemption of $3,950 for each dependent and the $1,000 child tax credit for each child under the age of 17. If the taxpayer is divorced, it is important to remember that only one parent can claim children as dependents. This is an area where the IRS has been keeping a close eye on in the past few years.
Taxpayers need to provide documentation of their earnings. This document may come as a W-2 or a 1099; employers are required to have these documents sent out to employees by February 2. If a person has not received said document by February 2, one should contact their employer immediately. Along with employment documents, taxpayers should also bring any other tax related documents that they receive in the mail or through email, even if the documents do not seem important. Once the documents have been gathered, now the work can begin. This part of the tax return can be tricky because there are so many itemizations, deductions, and now possible penalties for not obtaining medical insurance.
You can save money by itemizing, especially if you are self-employed, own a home, or live in a high-tax area. It is worth looking into itemizing when your qualified expenses add up to more than the 2014 standard deduction of $6,200 for singles and $12, 400 for married couples filing jointly. Many deductions such as mortgage interest and charitable donations are well known, but taxpayers sometimes overlook miscellaneous expenses. These can be deductible if the combined amount adds up to more than two percent of your adjusted gross income. Tax-preparation fees, job-hunting expenses, business car expenses and professional dues may be considered a deduction.
Along with these deductions, there are also medical deductions that can be applied. You can also deduct the portion of medical expenses that exceed 10 percent of your adjusted gross income.
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