Taxes 101

  • Who can I claim as a dependent?

    A dependent can have many definitions, but fundamentally, a dependent is someone who is supported by another for tax purposes. Examples of dependents include, but are not limited to:

    • Qualifying child - under the age of 18, or under the age of 24 and a full-time student (full-time status is determined by the individual institution)
    • Qualifying child - earns less than $3,800/year, and you provided more than half of their support
    • Spouse - physically or mentally incapable of self-care, and lives with you more than half the year
    • Parent - earns less than $3,800/year, and you provided more than half of their support

    I’m a student, filing single, and can be claimed as a dependent by my parent(s). How much do I have to make before I file a tax return?

    According to the IRS Publication 501, a dependent may still need to file a return if his or her earned income (wages, salary, and/or self-employment income) was more than $6,100.

    If a dependent has unearned income in the form of investment income or unemployment that is more than $1,000, a return must also be filed.

    If a dependent has combined unearned and earned income (gross income) and it is more than the larger of

    1. $1,000 or
    2. Earned income (up to %5,750) plus $350,

    A dependent file a tax return.

    A dependent’s unearned income can be claimed on a parent’s return. If the below conditions are met and the parent wishes to claim the child’s income on his or her return, the dependent does not have to file a tax return:

    • The dependent was under age 19 (or under age 24 if a student) at the end of 2013. (A child born on January 1, 1995, is considered to be age 19 at the end of 2013; you cannot make the election for this child unless the child was a student. Similarly, a child born on January 1, 1990, is considered to be age 24 at the end of 2013; you cannot make the election for this child.)
    • The dependent had gross income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends).
    • The interest and dividend income was less than $10,000.
    • The dependent is required to file a return for 2013 unless you make this election.
    • The dependent does not file a joint return for 2013.
    • No estimated tax payment was made for 2013 and no 2012 overpayment was applied to 2013 under the dependent's name and social security number.
    • No federal income tax was withheld from the dependent's income under the backup withholding rules.
    • You are the parent whose return must be used when making the election to report the dependent's unearned income.

    What is EITC? How do I claim it?

    The Earned Income Credit (EIC) is available for low- to moderate-income taxpayers. To qualify, your adjusted gross income (AGI) must be:

    • Less than $37,870 ($43,210 if married filing jointly) with one qualifying child
    • Less than $43,038 ($48,378 if married filing jointly) with two qualifying children
    • Less than $46,227 ($51,567 if married filing jointly) with three or more qualifying children

    What is the First-Time Home Buyer Credit?

    The First-Time Home Buyer credit was available to taxpayers who purchased a primary residence in 2008, 2009 or 2010. Your current return may be affected if you took the credit during those years and you have since been repaying it. If you have been making payments, you'll enter that information on the Federal tab/Additional Information sub-tab under "Additional Questions." Click Add or Review on the "First Time Home Buyer Credit Repayment" line.

    What are Estimated Tax Payments?

    Estimated Tax Payments are a way to pay tax on income that is not subject to withholding. This includes income from self-employment, interest, dividends, alimony, rent, gains from the sale of assets, prizes and awards. You also may have to pay estimated tax if the amount of income tax being withheld from your salary, pension, or other income is not enough.

    Estimated Tax Payments are most commonly used by self-employed individuals who are paid directly by their clients and customers. Unlike income from an employer, no taxes are typically withheld on self-employed income. Quarterly estimated tax payments allow them to pay income tax and self-employment tax during the course of the year to avoid penalties and a large tax bill.

    Does The Affordable Care Act impact my taxes?

    For more information on the Affordable Care Act and your specific tax situation, please visit The Tax Doctor to learn more.

    Do I have to report my unemployment benefits? Are they taxable?

    Yes, unemployment benefits are counted as taxable income.

    What does it mean “to itemize?”

    Each year you can choose either to take what’s called the standard deduction or to itemize your deductions. For many people – especially those with uncomplicated finances – taking the standard deduction is the best choice. It’s also simpler and faster. Itemizing means adding up all your deductions to see if the final sum is greater than what your standard deduction would be. If you choose to itemize, we’ll ask you about all the different types of possible deductions

    What happens to my taxes if I withdraw money from a retirement account early?

    Withdrawing money early from certain retirement accounts early comes with a 10% tax penalty. Not only does it come with a penalty, but the amount withdrawn is counted as income that a taxpayer has to regular income tax on. This could potentially move you to into the next tax bracket, which could affect Social Security taxes and other considerations.

    How do I determine the value of non-cash charitable contributions?

    Non-cash contributions can only be deducted at the fair-market value, or “the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.” Please see IRS Publication 526 for more information.