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January 29, 2018
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Can I Claim My Significant Other as a Dependent?

Are you living with your girlfriend or boyfriend? Have you ever wondered whether or not you could claim him or her on your tax return as a dependent? Like many things in life, it depends. Even if it feels like an awkward thing to wonder, it’s worth the ask. Each dependent lets you claim a dependent exemption, reducing your taxable income by $4,050 per dependent for 2017.

A boyfriend or girlfriend can be claimed as a dependent if they pass some of the same tests used to determine if your child or relative can be claimed as a dependent.

First, your significant other cannot be claimed as a dependent if they are eligible to be claimed as a dependent on another tax return. Whether your boyfriend or girlfriend is being claimed is irrelevant, it’s the eligibility that matters. Once you see the rules, especially the residency, and support rules, this will make perfect sense. So, if your significant other’s parents could claim him or her, you cannot. Your significant other also must be a U.S. citizen, resident alien, national, or a resident of Canada or Mexico.

That’s the first phase of tests.

If he or she passes those rules, these four “tests” will need to be passed to qualify as a dependent. He or she:

  • Is not a “qualifying child” of a taxpayer. The IRS has specific qualifying child rules based on relationship, age, residency, and joint return
  • Earned less than $4,050 in taxable income (amount of the personal exemption) in 2017
  • Did not provide their own support. You must provide more than half of the total support for the year
  • Lived with you all year as a member of your household (keep in mind: dependent relatives do not have to live with you)

As you can see, the tests make it impossible for someone to be claimed as a dependent on two returns. Either you provided their support or someone else did.

If you and your significant other are living together and considering this route, there are also other ways you can save a lot of money by integrating your finances, without having to get married. For example, you could combine auto insurance policies for a multi-car discount. It might not be as romantic as getting married, but it could result in big savings over the course of a year!

For more information about integrating your finances, reach out to Williams Accounting & Consulting to speak with one of  our professionals to implement a plan that works for you!


January 27, 2018
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10 Overlooked Tax Deductions

Tax deductions and credits can save you money at tax time, but many taxpayers miss them because they don’t realize things they do in their everyday life can give them more money back.  One thing you should know is that tax deductions and credits help your tax situation in two different ways: Tax deductions can save you money by lowering your taxable income. Tax credits directly reduce the taxes you owe, and if you qualify, you can claim a credit whether you itemize your deductions are not. See if you can get a break on your taxes with these 10 overlooked tax deductions.

1. Tuition and Fees Deduction

Taxpayers taking a full course load and working toward a degree can receive education benefits through the American Opportunity Tax Credit for college expenses, but those who took even just one class to further their career may be able to take the tuition and fees deduction. With this credit, you can deduct up to $4,000 for tuition and fees, books and educational supplies for you, your spouse or dependents.

2. State and Sales Tax Deduction

Taxpayers can deduct state income taxes, but what about people who live in states that don’t have a state income tax? The state and local sales tax deduction is useful for those who don’t pay state income tax because they can deduct sales tax paid on purchases. Even people who live in states that pay state income tax can benefit if they paid more sales tax due to large purchases.

3. Mileage

From weekly doctor’s appointments to out-of-town visits with a specialist or for a procedure, the miles you log while driving your parents to meet their medical needs can be deducted. You can take that deduction if they qualify as your dependent. Keep a log as you’re running around. You can take 19 cents per mile driven for medical purposes in the 2017 tax year. If you’re staying overnight for a medical purpose, deduct $50 per night per person for lodging.

4. Job Searching

If you were looking for a job last year, you may be able to deduct costs related to your job search – even if you didn’t secure a new one. Job search expenses such as preparing and sending résumés, fees to placement agencies and even travel related to searching for a new job can be included.

5. Gambling Losses

Taxpayers who weren’t so lucky gambling last year should know that their losses can be deducted if they itemize their deductions. However, your amount of losses cannot surpass your winnings, which must be reported as taxable income. For example, if you have $2,000 in winnings and $4,000 in losses, your deduction is limited to $2,000. Make sure you have documentation such as receipts, tickets and other records to support your losses.

6. Charitable Contributions

Of course, you may know to estimate the value of items you or your parents donate to charity. But you also can include other out-of-pocket costs related to volunteering. If you or your parents bought ingredients to make meals for the homeless or elderly, or if you drove a personal vehicle while volunteering or assisting a charity, those and other costs can be deducted.

7. Home Improvements for Aging Adults

Investing in ramps for a wheelchair-bound parent, handrails and grab bars in the bathroom, or a stepless shower can be part of a deduction. It doesn’t matter if the improvements are in your home or your parents’ home, as long as it doesn’t add value to the house. The IRS says that the cost of the improvement is reduced by the increase in your property value. Other changes, such as widening doorways and hallways, lowering kitchen cabinets and installing lifts, also typically do not add value to houses.

 8. Student-Loan Interest

You can deduct interest only if you are legally required to repay the debt. But if parents pay back a child’s student loans, the IRS treats the transactions as if the money were given to the child, who then paid the debt. So, if the child is no longer claimed as a dependent, he or she can deduct up to $2,500 of student-loan interest paid by Mom and Dad each year. And he or she doesn’t have to itemize to use this money-saver. (Mom and Dad can’t claim the interest deduction even though they foot the bill because they are not liable for the debt.).

 9.Military Reservists’ Travel Expenses

Members of the National Guard or military reserve may write off the cost of travel to drills or meetings. To qualify, you must travel more than 100 miles from home and be away from home overnight. If you qualify, you can deduct the cost of lodging and half the cost of your meals, plus an allowance for driving your own car to get to and from drills. For 2017 travel, the rate is 53.5 cents a mile, plus what you paid for parking fees and tolls. You may claim this deduction even if you use the standard deduction rather than itemizing.

10.Child Care Credit

You can qualify for a tax credit worth between 20% and 35% of what you pay for child care while you work. But if your boss offers a child care reimbursement account—which allows you to pay for the child care with pretax dollars—that’s likely to be an even better deal. If you qualify for a 20% credit but are in the 25% tax bracket, for example, the reimbursement plan is the way to go. Not only does money run through a reimbursement account avoid federal income taxes, it also is protected from the 7.65% Social Security tax.

You can’t double dip. Expenses paid through a plan can’t also be used to generate the tax credit. But get this: Although only $5,000 in expenses can be paid through a tax-favored reimbursement account, up to $6,000 for the care of two or more children can qualify for the credit. So, if you run the maximum through a plan at work but spend even more for work-related child care, you can claim the credit on as much as $1,000 of additional expenses. That would cut your tax bill by at least $200.

If you have questions or comments regarding tax deductions, feel free to comment below or contact us direct so that we can assist you with cutting your tax bill by claiming all the tax write-offs you deserve.


January 27, 2018
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4 Smart Ways to Spend Your Tax Refund

A lot of us are expecting an income tax refund this year from Uncle Sam. But before you think of spending it on things frivolous splurges, think again and use it wisely. The average income tax refund is usually around $3000, with most people receiving that money within three weeks of filing their tax returns. Whether it’s paying off debt, or simply investing in yourself, there are better ways to spend your money.  Here are our top 4 ways to spend your tax refund:

1. Increase your emergency fund

If you already have an emergency fund; why not increase it? As we all know, rainy days will come but we never know how severe. Boost your funds by keeping it in an online savings account. There, your tax money will grow; thanks to power of compounding interest.

2. Invest in a retirement fund

Another best use of your tax refund is to invest in a Roth IRA, traditional IRA or a 401(k). Why? Because saving for your retirement is important. You need to make sure you have enough money to live off when you can no longer work. Also, if you have student loans or any type of personal loans, you can use that money to pay them off. Need assistance with creating a retirement fund? Our friend’s over at Insurance Smarts are glad to assist you. Tell them Williams Accounting & Consulting sent you!

3. Buy real estate

Depending on how much you received from your income tax refund, some or all of the money can be used toward a down payment for a rental property. Some properties require 20% down for a down payment on a house, so your tax refund check can help generate additional income.

4. Invest in yourself

Another best use for your tax refund money is to invest in you. Buy books on personal interests, or invest in a personal hobby. If all fails, register for a finance seminar about personal finances. The more you learn about personal finances, the more you will be able to take control of your money and achieve financial success. We even offer financial guidance and accounting tips every Wednesday on our Facebook page, free of charge.

Although we’ve provided our top four ways to spend your tax returns, we would like to hear from you as well! If your top four didn’t make it on our list, drop us a message below and tell us about it.  Who knows, it might make our list for next year!

Happy Tax Season!


January 27, 2018
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Grandparents Caring for Grandchildren Should Check Their Eligibility for EITC

Grandparents who work and are also raising grandchildren might benefit from the earned income tax credit. The IRS encourages these grandparents to find out, not guess, if they qualify for this credit. This is important because grandparents who care for children are often not aware that they could claim these children for the EITC.

The EITC is a refundable tax credit. This means that those who qualify and claim the credit could pay less federal tax, pay no tax, or even get a tax refund. Grandparents who are the primary caretakers of their grandchildren should remember these facts about the credit:

  • A grandparent who is working and has a grandchild living with them may qualify for the EITC, even if the grandparent is 65 years of age or older.
  • Generally, to be a qualified child for EITC purposes, the grandchild must meet the dependency and qualifying child requirements for EITC.
  • The rules for grandparents claiming the EITC are the same for parents claiming the EITC.
  • Special rules and restrictions apply if the child’s parents or other family members also qualify for the EITC.
  • There are also special rules for individuals receiving disability benefits and members of the military.
  • To qualify for the EITC, the grandparent must have earned income either from a job or self-employment and meet basic rules.
  • The IRS recommends using the EITC Assistant, available in English or Spanish, on IRS.gov, to determine eligibility and estimate the amount of credit.
  • Eligible grandparents must file a tax return, even if they don’t owe any tax or aren’t required to file.

Qualified taxpayers should consider filing electronically. It’s the fastest and most secure way to file a tax return and get a refund.

By law, the IRS cannot issue refunds before mid-February for tax returns that claim the EITC or the additional child tax credit. The law requires the IRS to hold the entire refund – even the portion not associated with the EITC or ACTC. The IRS expects the earliest EITC/ACTC related refunds to be available in taxpayer bank accounts or on debit cards starting Feb. 27, 2018, if these taxpayers choose direct deposit and there are no other issues with their tax return.


January 27, 2018
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4 Reasons to File Your Taxes Early

If you’re used to filing taxes, you’re probably aware that they’re due sometime near mid-April. Typically, tax returns must be submitted by April 15th, but this year, you get a couple of days worth of leeway. That’s because April 15 falls on a Sunday, but since the following Monday is Emancipation Day — a Washington, D.C., holiday — filers get until April 17 to get their returns over to the IRS.
That said, you can submit your tax return as early as Jan. 29 this year, and it pays to aim for that deadline, or one shortly thereafter, even if it means putting in some extra effort in the coming weeks. Here’s why.

1. You’ll get your money sooner
An estimated 80% of tax filers get a refund each year, and not a small one, either. In fact, last year, the typical refund was $2,763 — not exactly pocket change. If you have outstanding bills to pay, a vacation you’re looking to fund, or just a general desire to get your hands on the cash that’s rightfully yours, then filing early is the best way to do just that.

Keep in mind, however, that if you’re planning to claim the Earned Income Tax Credit or the Additional Child Tax Credit, the earliest you can expect your tax refund is late February. Why? Because of high levels of fraud associated with these credits in particular, the IRS is required to withhold associated refunds longer. Furthermore, this restriction applies to your entire refund, even the portion of it having nothing to do with these credits. But if you’re not planning to claim the Earned Income Tax Credit or the Additional Child Tax, and you file your return electronically without errors, you can typically expect to get your money back within three weeks’ time.

2. You’ll give yourself more time to address an underpayment
Though most tax filers wind up with a refund each year, you may land in that rare but notable category of workers who end up owing money on their taxes. And if that’s the case, you may be in trouble, especially if your underpayment is sizable and your savings are nonexistent. On the other hand, if you give yourself two and a half months to come up with a plan for paying your tax debt, as opposed to waiting until the last minute, you stand a better chance of avoiding the penalties that come with paying the IRS late.


3. You can avoid tax fraud
Tax fraud is a major problem for filers of all ages, but believe it or not, filing your return early might actually help you avoid falling victim. What will typically happen is that a criminal will access your information, file a return in your name, and attempt to snatch your refund in the process. But if you file your return early enough, that’ll be a harder feat for someone to pull off.
See, the IRS has software that’s designed to flag duplicate returns, and so if it has one on file for you and someone else then submits a second one, it’s the fraudulent return that’ll get rejected. On the other hand, if a criminal beats you to the punch, it’ll be on you to get things sorted out, which could not only delay your refund but also constitute a major headache.

4. You want to lower your stress level
Let’s face it: The tax-filing process can be stressful to say the least, especially if your return is complicated and requires a lot of legwork (such as needing to calculate deductions or follow up on missing documentation). One final benefit of getting your return in early is having one less thing to worry about between now and mid-April. Once that return is out of your hands, you’ll be able to move forward and focus your efforts and mental energy elsewhere.
Though there are plenty of good reasons to file your taxes early this year, here’s one good reason not to: You’re missing key information that could compromise the accuracy of your return. While it’s helpful to get your taxes in ahead of schedule, if you don’t have the data needed to be precise, you’re better off waiting. Otherwise, you’ll increase your chances of getting audited, and that’s a whole other potential nightmare to contend with.