Dear Bonnie: I can’t believe it’s tax time again. I just got my W2 in the mail. I can’t find anything in this house. I keep swearing I will get organized but I’m a single mom with two kids and no time. My ex always tells me how much alimony he’s deducting on his tax return and I have no clue if he’s inflating it or not (I think he is). Every year I make a new year’s resolution to do better but I don’t even know where to begin. Can you help? – Danielle, Sonoma
Dear Danielle: I’ll try to help. Here’s my short list:
Get organized. Create a file for the current tax year. During the year slam in paperwork for transactions that impact your taxes, e.g. copies of letters from nonprofits thanking you for charitable contributions, receipts for IRA contributions, closing statements from a refinancing, receipts for vehicle registration and property tax payments, beginning and ending odometer readings if you use your vehicle for business. Then in January when all those important tax documents arrive – W2s, K-1s, 1099s, etc – put those in the tax file and voila, you have a compilation of your tax data without a lot of extra work. Every year begin a new file.
If you suspect your ex-spouse will attempt to take your kid(s) as dependent(s) on his tax return and he is not entitled to the deduction, beat him to the punch by filing your taxes first. The IRS will not get in the middle of a domestic dispute. Whoever files first gets the deduction. If the later-filing party is entitled to the deduction, he or she will have to make a case for it.
Keep important information relating to the validity of deducting your dependent in your tax file. This includes paperwork such as school records which show the child lived at your address and records to prove that you provided more than 50 percent of the child’s support.
At year end ask your child care provider for a statement showing how much you paid. Make sure you have the provider’s federal ID number or social security number and address in order to take the credit.
Track alimony payments. This is taxable income to you and must be reported on your income tax return. Compare your total with the total your ex comes up with. One way to avoid an audit is to be sure alimony numbers match between the payer and the payee tax returns. Child support is not taxable nor is it a deduction for the spouse who provides it. If you are getting a divorce, talk to your tax pro to ensure that support payments you receive will be allocated properly between alimony and child support.
Track tuition, books, computers, and fees that you pay on behalf of your dependent child. You may be able to claim an education credit or deduction for the amounts you pay. And remember, if the child goes away to school and you are providing more than 50 percent support, you may still claim head of household status even during the absence of the child.
If you are going through a major life change: marriage, divorce, purchase of residence, loss of a residence, changing jobs, or becoming self-employed, contact your tax pro for tax planning tips and to discover the tax ramifications of your new course.
Happy New Year to one and all! Be safe!
If you would like Bonnie to answer a tax question for you, write to her at bonnie@taxpertise.com
Be First to Comment