• Get in the Know About Filing Your Taxes

    The tax deadline has been extended until May 17, 2021. Here are some tips to help you file taxes this year.

     

    Determine where the child lives:

    1. Usually, the parent who has custody of the child claims the child on his or her tax return. However, there may be an exception. Where the child spends the majority of his time can be a factor as to which parent can claim the child on their tax return.
    2. The IRS can disregard the divorce decree or separation agreement when it comes to custody.
    3. When a child lives with one parent for more than half of the year, even if it's not the custodial parent, the IRS is likely to grant that parent the right to claim the child on the tax return.
    4. The IRS considers where the child sleeps as a strong determining factor.

    Filing as head of household:

    Choosing to file as head of household usually allows you a higher standard AA Parents deduction and reduces your taxable income. To qualify for head of household, you must:

    1. Pay more than 50% of the household expenses;
    2. Be unmarried on the last day of the tax year, and;
    3. Have your child live with you for more than six months of the year, except for being at school.
    4. TurboTax can help you determine whether you qualify for head of the household status.

    Include the dependent care credit:

    The IRS allows single parents to claim a percentage of child care expenses paid that allow them to work outside the home or look for work with the Child and Dependent Care Credit. Child care expenses can be claimed for children 12 years and younger. The amount allowed is up to $3,000 for one child and $6,000 for two or more children.

    Only the custodial parent can claim the dependent care credit, even if the other parent claimed the dependent exemption. If the child turned 13 years old during the tax year, you may claim a credit only for the portion of the year that he was 12. When you use TurboTax to prepare your taxes, we’ll handle all of these calculations.

    When both parents claim the same child:

    Divorced parents should communicate clearly in advance of tax season to establish who will claim the child or children. In the event of a dispute where the child’s overnights are split evenly between the parents, the IRS will award the dependent deduction to the parent with the higher AGI (adjusted gross income).

    When both parents claim a child on an electronically filed tax return, the second return will be rejected (the one filed later) as the child’s social security number will have already been used on a return. If, however, you believe you have the right to claim the child (according to the dependent tax rules), you can dispute this.

    Here are the steps:

    1. File a paper return instead of e-filing it. You can continue to prepare it online, but you will need to print it and mail it instead at the end.
    2. Include a letter explaining the situation, along with evidence (like school registration and medical records), proving that you have the right to claim the dependent(s).
    3. The IRS will review both returns, contact both of you by mail for further proof if necessary, and then decide which person can claim the dependent(s) based on current tax law.

    Child tax credit:

    A tax credit directly lowers your tax bill dollar-for-dollar. For example, a child tax credit of $2,000 in 2020 could lower your tax obligation by thousands of dollars if you have several children. But not every child qualifies. Your child must be:

    • Underage 17 at the end of the year
    • Your own child, stepchild, foster child, brother, sister, stepbrother, stepsister, half-brother, half-sister, or a descendant of any of them (for example, your grandchild, niece, or nephew)
    • Claimed as a dependent on your taxes
    • A U.S. citizen, national or resident alien
    • Living with you more than half of the year

    Higher education tax credits:

    Parents can claim two credits for higher education:

    • The American Opportunity Tax Credit (AOTC)
    • The Lifetime Learning Credit (LLC)

    The AOTC can be used for up to four years. The Lifetime Learning Credit has no limit if your child higher education course.

    Qualified expenses include:

    • Tuition
    • Enrollment fees
    • School materials

     

    These tips have been provided by the NC Department of Revenue and their tax preparation partners.

  • The following Free File products are affiliated with Free File, Inc. (FFI) providers. 

    Free File, Inc. providers partner with the IRS and state revenue agencies to offer free electronic tax services to qualifying taxpayers.

     

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    • Adjusted Gross Income: $63,000 or less ($72,000 or less for active-duty military)
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    • Adjusted Gross Income: $39,000 or Less ($72,000 or less for active-duty military; includes Reservists and National Guard)
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