Tax Tips, Women Need To Know
June 6, 2006 | Personal Finance, Women

Married Women

  1. Don’t Fly Blind! This cannot be overstated!!! Know what you are signing when you file your tax return and make and keep copies. You are legally responsible even if you don’t get involved in the preparation. So don’t just sign whatever your spouse puts in front of you without looking it over, ask questions and obtain copies. You would be amazed at what you may learn.
  2. Take Control! Handle the tax preparation yourself (rather than pass the job onto your husband). It gives the wife (who makes most of the big home/family spending decisions anyway) a better grip on the family’s financial situation.
  3. Remember Retirement! There may be retirement plans you didn’t know about, even business partnerships you were unaware existed. What you don’t want is to find out after a separation, divorce, or death that you owe money for taxes. This goes for any contracts your spouse may ask you to sign (loans etc.).

Divorced or Separated Women

  1. Plan Exit Strategy! Get “IRS Publication 504 For Divorced or Separated Individuals” before you file (better still, get it before you sign your settlement agreement). Log onto IRS.gov. It will help you with all of the following important issues.
  2. Beware of Joint Filing Pains! If you are divorced on the last day of the year then you are considered unmarried for that entire tax year and cannot file jointly. But if you were not yet divorced by that date, you may want to calculate your taxes under both the “married filing separately” status and “married filing jointly” status to determine which is most beneficial. Beware though that if you do decide to file jointly, you will be held both jointly and individually responsible for the tax and any interest and penalty due on your joint return, so be careful you could be left with the tab.
  3. “Alimony” Awareness! It’s taxable to those who receive it, deductible to those who pay it. You must add alimony to your income when you file your taxes. You will not be taxed on child support or on payments that have been specifically designated as “non-alimony.” Knowing this before you agree to a settlement can be very helpful.
  4. Claim the Kids! Do not give away your right to claim your children as dependents on your income taxes without careful research and consideration of the implications of this. The IRS offers deductions and tax credits for dependant children that can save you significant amounts of money each year.

Single Moms

  1. Let Kids Cut Taxes! Dependent children lower your tax bill in a number of ways: First, they can change your filing status to one that lowers your tax rate and increases your standard deduction; second, they reduce your taxable income through deductions; and third, they may make you eligible for tax credits, which reduce your tax bill directly.
    Tax credits to check out:

    • Child and Dependent Care Credit – this credit is for care expenses for children under age 13 or for a disabled spouse or dependent, so that a taxpayer can go to work. It is subject to limitations.
    • Child Tax Credit – the maximum amount of this credit is $1,000 for each qualifying child under 17; can be used in combination with the Child and Dependent Care Credit.
    • Adoption Credit – if you are an adoptive parent you may be able to take a tax credit of up to $10,630 for qualifying expenses paid to adopt an eligible child. For special needs children, you do not need to meet the qualifying expense criteria.
    • Earned Income Tax Credit (EITC) – a refundable federal income tax credit for low-income working individuals and families.
  2. Be Queen of Your Castle! The “Head of Household” filing status saves you money. If you have at least one “qualifying child” or a dependant parent, and you’ve paid more than half the cost of keeping up a home for the year, then file as “Head of Household” – you’ll save a bundle on your taxes. Standard deductions are higher and in most cases you can earn a lot more and still be taxed at a much lower rate than if you file “Single.” NOTE: even if the child’s other parent is allowed to claim your child as his dependent, not yours, you can still file as “Head of Household” if the child meets all other qualifying requirements.
  3. Take College Credits! If you are struggling to pay for kids in college, there are two tax credits available to help you offset the costs by reducing the amount of your income tax. They are the hope credit and the lifetime learning credit. You cannot claim both credits for the same student in one tax year, and the credit can be claimed only on the return declaring the student as a dependent. How much you get from each depends on your adjusted gross income.
    The Hope Scholarship – gives eligible parents a tax credit of $1,500 per child for tuition during the first two years of college.
    The Lifetime Learning Credit – gives eligible parents a tax credit of up to $2,000 for qualified education expenses for all students enrolled in eligible institutions.

  4. Get Free Help! Don’t miss out on any of the money-saving deductions and credits available to you because they seem too complicated to figure out. Reach out for free help from the Internal Revenue Service. They answer questions a lot faster than you think on IRS.gov or via the Tax Help Line for Individuals at 1-800-829-1040.

Last Minute Tax Tips for Everyone

Two-Day Reprieve! The due date for 2005 taxes is April 17 since April 15 falls on Saturday this year.

  1. e-File For Free! File online for free with IRS “Free File” program – most taxpayers qualify (70%). If your adjusted gross income is $50,000 or less you can access free online tax preparation and electronic filing services at IRS.gov thanks to a partnership agreement between the IRS and the tax software industry.
  2. Buy More Time. You now get 6 more months to file instead of 4. File form 4868 by April 17th. But remember if you owe you still need to estimate and pay when you file for your extension or else you will be subject to interest and penalties.
  3. Devil in the Details! Double and triple check names, addresses and social security numbers. You would be amazed how often minor errors create major headaches for taxpayers. Finally, make and save copies of everything before you send it off.

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