Day: December 7, 2021

More Advice for Correctly Claiming Tax Dependents

Christina Lane


With that in mind, we have created this list of tips for properly claiming tax dependents when the time comes.

Taxes are no joke. There’s a reason why they are included in a popular joke about the only constants in life. Whenever you go to fill out and file tax-related paperwork, you must do so with caution. The IRS doesn’t consider mistakes to be accidental. As such, any perceived infractions could result in harsh fines, claims denials, and even refusal of tax refunds. With that in mind, we have created this list of tips for properly claiming tax dependents when the time comes. 

Caveats Regarding Qualifying Relatives 

Last time, we discussed the process for claiming your children as dependents. This week, we turn our attention to the other relevant category: your qualifying relatives. These people do not have to be adults; any age is fine. However, they cannot be listed as someone else’s qualifying child. You must share a relationship bond with the person in question, and they have to be a member of your household. That’s also one of the big reasons why you could theoretically add elderly parents to your papers. They might need your support, but otherwise, they’re capable of living on their own. 

The Gross Income Test 

Gross income is capped for the purposes of this procedure. It is also part of what is known as the gross income test. The ceiling associated with this test is $4,300 in the tax years for both 2020 and 2021. People with disabilities and those who receive their income from a sheltered workshop are considered exceptions. Where does this money come from? Revenue streams include rental properties, business income, unemployment benefits (the ones which are not tax-exempt), and related Social Security benefits.    

The Financial Support Test 

Likewise, there are a few conditions that fall under the umbrella of the financial support test. You need to provide a majority of the person’s financial support within that given year. The support manifests as rent, groceries, utilities, clothes, and medical expenses that were not reimbursed. Additional support examples come from travel costs and recreation expenses.  

Who is Not Considered a Dependent?  

It is also good to know – indeed, great – to know whom you cannot name as a dependent on your taxes. When you are someone else’s dependent, then you cannot claim others as your tax dependents. Spouses who join you in filing a tax return are likewise disqualified. Anyone who is not an official American citizen or a resident alien and so on cannot be dependents either. Moreover, you can’t cite someone from Canada or Mexico.   

Trust the Professionals at the Harding Group

Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients. 

Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning?  We have the necessary expertise and years of proven results to help. 

We gladly serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of tax time, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on FacebookTwitterYouTube, and LinkedIn

The post More Advice for Correctly Claiming Tax Dependents appeared first on The Harding Group.

How to Properly Claim Tax Dependents on Your Paperwork

Christina Lane


Relatives and children can both count as tax dependents.

Relatives and children both count as tax dependents. They matter so much because they qualify you for certain breaks you couldn’t access otherwise. Such breaks are bigger than you might believe, which of course, means filing the paperwork correctly becomes an even more attractive incentive. We’ll show you how to identify and declare your dependents on your returns to make them as valid and legitimate as possible! 

Let’s Define the Term 

Kids and relations must possess certain attributes to fit this description. When they do count, you can take advantage of valuable deductions and credits that will help you save some money. The Head of Household filing status is a big deal, and it carries an immense amount of responsibility. That said, this distinction allows you to tap into the Child Tax Credit, the Earned Income Tax Credit, or the Child and Dependent Care Credit. Whichever one applies best will depend on your circumstances

How Your Children Can Be Named as Tax Dependents

First of all, the child or children you claim must belong to your family unit. Sons, daughters, stepchildren, foster children, and siblings all fall into this category. Any children of such family members likewise qualify. However, the kids need to meet age restrictions. For instance, they must be 18 or 23 or younger; the second caveat comes from the “student” designation as long as they have been in school for five months of the calendar year. That’s the minimum threshold, at least. Even if your children exceed these age limits, you can still claim them if a doctor has diagnosed them with a permanent or total disability. 

The So-Called Residency Test

The child in question must also live in your home with you. Some exceptions are accepted, such as moving away to college or spending time in the hospital. Cases of divorce or separation can complicate matters. In general, though, the custodial parent may claim their children as their tax dependents. 

The Income Stream Test

When your children have a steady income, the lines blur even more. They cannot be named dependents if they claim more than 50% of their own financial support. Likewise, they are not allowed to file a joint return with someone other than you. The loophole has to do with possible spouses, though. That means the child and their spouse are permitted to claim tax refunds or estimated taxes paid. Finally, they must pass the citizen/resident test. What is that? We will have to explain next time!   

Trust the Professionals at the Harding Group

Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for consultations and strive for open communication with our clients. 

Are you interested in business advising, tax preparation, bookkeeping and accounting, payroll services, training + support for QuickBooks, or retirement planning?  We have the necessary expertise and years of proven results to help. 

We gladly serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of tax time, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on FacebookTwitterYouTube, and LinkedIn

 

The post How to Properly Claim Tax Dependents on Your Paperwork appeared first on The Harding Group.