Tax laws constantly change, from year to year. We now have the child tax credit to work with, plus the standard life changes that have always affected your taxes. Life changes could affect your taxes for the better – or worse, depending on your situation. You may have to make changes to certain documents to take advantage of major life changes on your taxes.
Changed Your Marital Status
If you changed your marital status, you also need to make certain changes to your tax returns and the related forms. If you change your name, you must notify the Social Security Administration (SSA) of the name change via form SS-5. You risk having your tax return rejected if your name does not match. You can always use your original name on the joint tax return if you do not have time to change it at the SSA prior to the tax filing deadline.
You also need to change your withholding. Ask your employer for a new W-4 so that you can adjust your withholdings. You should also coordinate work benefits. Compare health care plans and other benefits to determine which is financially beneficial. For example, your new spouse’s work might offer a better health care plan for less money.
If your marital status changes because you divorced, you cannot file as married if the court finalized your divorce by December 31. This will most likely cause your tax bracket and deductions to change. However, if the court awarded you primary custody, you can file as head of household, which minimizes some of these changes.
Had a New Baby
If you had a new baby last year, you could take advantage of many tax breaks. Make sure you get your new baby a social security number right away. You will need the social security number to claim the baby as a dependent on your tax returns for the additional child tax credit. When you apply for the birth certificate, ask for a Social Security card at the same time. If you didn’t, file Form SS-5 with the Social Security Administration along with proof of the child’s U.S. citizenship, age, and identity. Ensure you update your W4 forms at work to lower your federal withholding.
Bought a House
If you were renting and bought a home, you will most likely have some new tax benefits that were not available to you as a renter. Depending on your circumstances, you might be able to deduct property taxes, mortgage interest, points, interest on a home equity loan, and home improvements that are required for medical purposes. If you work from home, you can also claim the home office deduction.
Got a Raise or Promotion
If you got a promotion, you probably got a raise – or maybe you got a raise in the same position. Either way, the additional money could put you into a new tax bracket. This is a good time to review your W4 to make sure you have the proper deductions for withholding taxes. You might also consider putting additional money into tax-deferred accounts. Once you retire, you might drop a tax bracket, which would lower the amount of taxes on your income.
If you retired last year, the way you do your taxes will most likely change. You might have Social Security or disability income, retirement plan income, or income from a pension plan. You might also retire from one job to take another position to fill your time. You will have to claim the extra income you receive through any retirement accounts.
If you choose to fully retire, make sure that your retirement plan does not charge penalties for withdrawing from a retirement plan too early. You can also reduce your yearly income tax by finding retirement contributions.
Contact Tax Attorneys and Business Tax Attorneys
Do you have questions or concerns about your taxes? Contact the tax attorneys at France Law today to schedule a consultation for help with your taxes. If you have a business, our business tax attorneys can help you file every year as well.