(Just wanted to get that out of the way.)
Sorry to be a “downer,” but this time of year always grinds me down a little bit. With the near-constantly gray, winter weather I tend to feel a little more empty. And then there’s tax season, and tax preparation. Yes, after the first of the year we start to get all those reminders (in the mail, on TV, in our email inbox, etc.) about getting our taxes prepared.
Tax Preparation. Nagging at us.
We know it needs to be done, but many of us look at it like our kids look at a big test or term paper – we try to duck it as long as possible, because we think it will be too big and scary and take too long to finish. And it spoils all the fun of the “right now!”
Tax preparation for single moms doesn’t have to be difficult. It doesn’t have to loom over your head like a term paper. Start to get organized, stay organized during the year, and tax preparation will be no big deal. First, how to organize your paperwork and receipts.
Organize Your Paperwork for Easier Tax Preparation
Set up a system at the beginning of the year to keep track of papers, receipts, etc. I have a “Taxes” file folder I keep in the top tray of my desk’s stack tray, along with my “To Be Paid” folder and my “To Be Filed” folder. Learn more about streamlining paperwork here: Organizing a Home Filing System. When I come across a form, receipt, etc. I will need for my tax preparation, I put it into the “Taxes” folder. I don’t have a great deal of tax paperwork to keep track of each year, so a file folder works just fine for me. If you have more paperwork to wrangle, use an expanding file or accordion file with several folders/sections. Divide your sections/folders into things like medical receipts, donations, W-2’s or 1099’s, etc.
Here are some categories for tax paperwork:
- Earnings (W-2’s, 1099’s, Dividends, etc.)
- Medical/Dental receipts
- Dependent Information and Forms
- Home Ownership (property tax receipts, mortgage interest statements, receipts for energy-saving home improvements, etc.)
- Health Insurance Forms
- Childcare Expenses
- Educational Expenses
- Job Expenses and Tax Prep Fees
- State and Local Taxes/Sales Tax
- Retirement and Other Savings (IRA/HSA, etc.)
You may not need to use all these categories. This is just a basic list; it is by no means comprehensive. But this should at least get you headed in the right direction.
Consider adding a checklist to the inside of the folder to help you round up paperwork/receipts during the month of January. List the types of forms/receipts and check them off when you put them in the folder. Then you will know at a glance if you have all the necessary forms/papers in one place. And you won’t get halfway through your tax preparation and find that you’re missing a vital piece of information.
You can go to the H&R Block website to create your own checklist. Just answer a few questions, and you get a handy checklist of items you will need to gather to make sure you pay only what you owe, and get the biggest refund possible.
My taxes are done by my family’s accountant (I have to have them done that way, since I am a shareholder in the farm – my personal taxes are tied up in the farm’s taxes), so I need to have all my paperwork pulled together, ready to submit to the accountant. Knowing what I need, and being able to lay my hands on it, are crucial during tax preparation time.
Here are some more tips for making sure you get the maximum deductions and tax advantages
File as Head of Household – this should give you a lower tax rate than if you filed as single or married filing separately. It also allows for a higher standard deduction. In order to qualify to file as Head of Household you must be unmarried on the last day of the year. You must also contribute more that 50% toward the financial support of your home, and your child(ren) must live with you for more than six months of the year. For 2016, the standard head of household deduction is $9,300.
Establish Qualifying Dependents – The Internal Revenue Service uses the custodial residency test, in most cases, to determine if you can claim your child as a dependent. However, if there’s a non-custodial father, the IRS can grant him the right to claim your child as a dependent if all these conditions apply:
- You and your child’s father, whether married or not, lived apart for the last six months or are legally divorced or separated.
- The child received at least half of his support from the parents for at least half of the year.
- You and/or the child’s father have legal custody of him.
- Either you provide a written waiver to not claim the child as your dependent or a pre-1984 legal agreement exists that allows the non-custodial father to claim the child as a dependent
Don’t forget – you can claim yourself as a dependent, as long as you can’t be claimed by anybody else as their dependent.
Claim the Dependent Exemption – The IRS allows a tax exemption to reduce the burden of caring for a child. Claiming an exemption for each child can greatly reduce your taxable income, and (in some cases) give you a bigger refund. But once your adjusted gross income exceeds a certain amount, the deduction is phased out. For 2016 the exemption is $4,050 for every child you can claim as a dependent. It starts to phase out if you earn $285,350 or above, and is gone completely if you are earning $407,850.
Include the child tax credit – A single mom filing as head of household and making less than $75,000 (as of right now) can claim a $1,000 child tax credit for each child. This amount comes off your tax bill. If you owe less than the child tax credit, you’ll receive the balance as a refund. To qualify, the child must:
- Be 16 years old or younger and be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, grandchild, niece, nephew or a legally adopted child
- Have lived with you for more than six months
- Be a United States citizen, U.S. national or U.S. resident alien
- Be your dependent
- Have received more than half of their support from you
For more in-depth information, go here: 7 Requirements for the Child Tax Credit
Deduct Childcare Expenses – If your dependent child is 12 years old or younger, and you pay for daycare while you work or look for work, you may be eligible for a childcare tax credit. To qualify you must have an income, be a full-time student, or be physically or mentally unable to care for yourself. The care provider must be older than 19 years of age, can’t be a parent of the qualifying child, and must be identified on your return. Depending on your income, the credit can be up to 35 percent of childcare costs. Any contributions to childcare expenses from an employer must be deducted from the total expense.
One more link – Emma Johnson has a great blog post about this same topic, and it’s very comprehensive. Check it out here: What Every Single Parent Needs To Know About Taxes.
Overwhelmed yet? I hope not!
I’ve tried to keep things simple – of course, that’s not always easy when it comes to taxes!
These are just a ideas and tips to get you headed in the right direction, come tax preparation time. Whether you use a tax prep software or have them done by a professional tax preparer, getting your paperwork together beforehand and knowing what deductions/exemptions you qualify for will help to make tax time go much smoother.