Tax Season Tips

Know your standard deduction

If you don’t itemize, your basic standard deduction for 2014 depends on your filing status:

  • Single $6,200
  • Married Filing Jointly $12,400
  • Head of Household $9,100
  • Married Filing Separately $6,200
  • Qualifying Widow(er) $12,400

If you’re 65 or older or blind, your standard deduction is higher than these amounts. If someone can claim you as a dependent, your deduction may be limited.

The Child Tax Credit may save you money at tax-time if you have a qualified child.

For this credit, a qualifying child must pass several tests:

• Age test.  The child must have been under age 17 at the end of 2014.

• Relationship test.  The child must be your son, daughter, stepchild, foster child, brother, sister, stepbrother, or stepsister. The child may be a descendant of any of these individuals.A qualifying child could also include your grandchild, niece or nephew. You would always treat an adopted child as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

• Support test.  The child must not have provided more than half of their own support for the year.

• Dependent test.  The child must be a dependent that you claim on your federal tax return.

• Joint return test.  The child cannot file a joint return for the year, unless the only reason they are filing is to claim a refund.

• Citizenship test.  The child must be a U.S. citizen, a U.S. national or a U.S. resident alien.

• Residence test.  In most cases, the child must have lived with you for more than half of 2014.

Limitations.  The Child Tax Credit is subject to income limitations. The limits may reduce or eliminate your credit depending on your filing status and income.

Social Security Benefits and Your Taxes

If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits.

• Form SSA-1099.  If you received Social Security in 2014, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits.

• Only Social Security.  If Social Security was your only income in 2014, your benefits may not be taxable. You also may not need to file a federal income tax return. If you get income from other sources you may have to pay taxes on some of your benefits.

• Tax Formula.  Here’s a quick way to find out if you must pay taxes on your Social Security benefits: Add one-half of your Social Security to all your other income, including tax-exempt interest. Then compare the total to the base amount for your filing status. If your total is more than the base amount, some of your benefits may be taxable.

• Base Amounts.  The three base amounts are:

 $25,000 – if you are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from your spouse for all of 2014

 $32,000 – if you are married filing jointly

$0 – if you are married filing separately and lived with your spouse at any time during the year

Unemployment Benefits

If you lose your job, you may qualify for unemployment benefits. The payments may serve as much needed relief. But did you know unemployment benefits are taxable? Here are five key facts about unemployment compensation:

1. Unemployment is taxable.  You must include all unemployment compensation as income for the year. You should receive a Form 1099-G, Certain Government Payments by Jan. 31 of the following year. This form will show the amount paid to you and the amount of any federal income tax withheld.

2. Paid under U.S. or state law.  There are various types of unemployment compensation. Unemployment includes amounts paid under U.S. or state unemployment compensation laws.

3. Union benefits may be taxable.  You must include benefits paid to you from regular union dues in your income. Other rules may apply if you contributed to a special union fund and those contributions are not deductible. In that case, you only include as income any amount that you got that was more than the contributions you made.