Friday, January 30, 2015

Tax Preparation: Life Events That Impact Your Taxes

Major errors on a tax return can lead you to have to amend your return or possibly endure an IRS audit. The IRS corrects minor errors such as miscalculations, incorrectly claiming credits, etc. Yet, taxpayers must ensure that their return is accurate so that they may receive any refund on time, and not face delays and difficulties in getting their returns processed.

Often, taxpayers do not consider changes in their life such as marriage, birth of a child, or loss of a job and how this affects their taxes. When circumstances changes for taxpayers, they may be entitled to tax credits and deductions that they otherwise would not get. This works both ways, of course, as individuals who experience certain life changes may no longer be eligible for deductions or credits they had previously taken.


If you experienced any big change in your life during the year, it’s smart to see if it affects your taxes when you file your return. Some of the major life events that can significantly affect your taxes are:

•    Marriage
•    Divorce or Separation
•    Birth of a child
•    Adoption
•    Daycare
•    Retirement
•    Loss of Job
•    Health Care Law
•    Starting a New Carrier
•    Loss of Job
•    Disasters and Causalities
•    Lottery or prize money
•    Persons with Disabilities
•    Mutual Fund Distributions
•    First-time Home Owner
•    Sale of your Home
•    Renting of Home
•    Moving
•    Selling of Assets
•    Bankruptcy
•    Inheritance
•    Decedents

Simply put, any change in your life that impacts your income positively or negatively will likely impact your taxes as well. For example, if you lost your job and got another, which does not pay as much as the previous one, then you may reduce your tax bill by claiming the Earned Income Tax Credit if you qualify.





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