Babies Are Beautiful...And at Tax Time, They Can Benefit Your W-9's Bottom Line
Many families miss key credits and deductions, says Lisa Greene-Lewis, aka “TurboTax Lisa.” The CPA and TurboTax tax expert is the editor of the TurboTax Blog and is a regular contributor to U.S. News and World Report and The Huffington Post.
We asked her to answer a few questions to help the families of the 160,000+ children our teachers care for every day. TurboTax Lisa kindly obliged.
1. What are the top three tax benefits that families with young children most often miss out on?
When it comes to children, people often overlook or are not aware of the different tax credits they may be entitled to. For example:
- Earned Income Tax Credit: The Earned Income Tax Credit can be a tremendous benefit for parents, but the IRS reports that only one in five eligible taxpayers take it. Don’t miss out: For a low to moderate income family of three or more children, the credit could be worth up to $6,269 in 2016. To qualify, you must meet the income requirements (more on that here).
- Child and Dependent Care Credit: If you sent your child (under 13; if your child is disabled, no age limit) to a child care provider last year, you may be able to claim a credit of up to $1,050 for one child and $2,100 for two or more. Under this credit, expenses such as child care, summer camp, and babysitters all may qualify if you’ve paid for care so that you and your spouse could work or look for work.
- Child Tax Credit: This credit is different than the Child and Dependent Credit. This credit can be worth $1,000 for each qualifying child (such as your daughter, son, stepchild, foster child) you claim under the age of 17. This can help reduce or eliminate the taxes you owe for the year.
2. If you missed out on these credits in the past, is it possible to amend previous returns?
Absolutely. You can amend your past returns to claim a bigger tax refund. Generally, you have within three years after the date you filed, or within two years after the date you paid the tax, whichever is later. TurboTax will guide you through the amendment process, but remember that amended tax returns cannot be e-filed. They must to be mailed in.
3. Fill in the blank. If families with young children do one thing next year to help them save money on taxes, it would be_______.
Contributing to benefit plans that may be offered through work to help with your bottom line. Look into plans that allow you to set aside money before taxes, like 529 plans for college and post-secondary education savings, and Flexible Spending Accounts or Health Savings Accounts for qualified expenses (most commonly for medical expenses, but often for dependent care, as well).
4. What else makes a difference to families?
Donating cash is a great way to help others and help your taxes. Don’t forget about other charitable donations like traveling to volunteer. Mileage to and from your volunteer work is worth 14 cents per mile. People often miss that one.
5. Should families itemize?
Each year people take the easy way out and take the standard deduction, but if your deductible expenses are close to the standard deduction, it’s worth trying to maximize your deductions so you can claim the bigger itemized deductions.
Don’t forget to claim deductible expenses like your kids’ clothes you gave away to charity, job search expenses, or your unreimbursed employee expenses. Adding these expenses can bump your deductions up over the standard deduction and give you a bigger tax refund.