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taxable income

What You Need To Know About Tax Exemptions And Dependents

By //  by Khaleef Crumbley

Some tax laws and guidelines affect every person who may have to file a return – this includes rules governing tax exemptions and dependents. Ever since I became involved in preparing taxes, I have noticed a lot of confusion regarding exemptions and dependents.

Apparently, so has the IRS. Therefore, they have released a bulletin outlining six facts regarding tax exemptions and dependents that will help you when you file a tax return:

Tax Exemptions And Dependents:

  1. Exemptions reduce your taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. For each exemption you can deduct $3,650 on your 2010 return.

  2. Your spouse is never considered your dependent. On a joint return, you may claim one exemption for yourself and one for your spouse. If you’re filing a separate return, you may claim the exemption for your spouse only if they had no gross income, are not filing a joint return, and were not the dependent of another taxpayer.

  3. Exemptions for dependents. You generally can take an exemption for each of your dependents. A dependent is your qualifying child or qualifying relative. You must list the social security number of any dependent for whom you claim an exemption.

  4. If someone else claims you as a dependent, you may still be required to file your own return. Whether you must file a return depends on several factors including the amount of your unearned, earned or gross income, your marital status, any special taxes you owe and any advance Earned Income Tax Credit payments you received. [Find out if you need to file an income tax return]

  5. If you are a dependent, you may not claim an exemption. If someone else – such as your parent – claims you as a dependent, you may not claim your personal exemption on your own return.

  6. Some people cannot be claimed as your dependent. Generally, you may not claim a married person as a dependent if they file a joint return with their spouse. Also, to claim someone as a dependent, that person must be a U.S. citizen, U.S. resident alien, U.S. national or resident of Canada or Mexico for some part of the year. There is an exception to this rule for certain adopted children. See IRS Publication 501 (opens a PDF),  Exemptions, Standard Deduction, and Filing Information for additional tests to determine who can be claimed as a dependent.

Hopefully, these guidelines have helped you to develop a better understanding of exemptions and dependents. If you need more assistance, visit out tax help page. There you will find guides, articles, and other reference material related to this and other subjects!

Once you are ready to prepare a return, be sure to contact us to set up an appointment for tax preparation. If you decide to file your own taxes, we recommend using TurboTax to do so.

Be sure you are aware of the tax filing delay, as well as the fact that the tax filing deadline has been extended this year. To get the most out of your financial situation in 2011, you should know the IRA Contribution Limits, 401k Contribution Limits, and the Income Tax Rates for 2011!

photo by jscreationzs

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Filed Under: Taxes Tagged With: dependents, earned income tax credit, economy of the united states, exemptions, finance, gross income, income tax in the united states, income tax returns, internal revenue service, irs tax forms, personal exemption, publication 501, standard deduction, tax, tax exemption, tax exemptions, taxable income, taxation in the united states

Which Of The Free Tax Forms Should I Use To File?

By //  by Khaleef Crumbley

Many people are confused by the different free tax forms available to use. Of course, if you come to KNS Financial for tax preparation, then you won’t have to worry about finding free tax forms!

Choose The Simplest Free Tax Forms For Your Situation

In order to file a tax return, you will have to determine which form to use (unless you decide to e-file). Since the IRS is no longer mailing out paper tax packages to taxpayers, the choice will become that much more difficult!

Because of this, the IRS has released the following guidelines to follow in order to determine which option is best for your tax situation when looking at the free tax forms:

What To Look For When Choosing Your Free Tax Forms

Use the 1040EZ if:

  • Your taxable income is below $100,000
  • Your filing status is Single or Married Filing Jointly
  • You and your spouse – if married — are under age 65 and not blind
  • You are not claiming any dependents
  • Your interest income is $1,500 or less

Use the 1040A if:

  • Your taxable income is below $100,000
  • You have capital gain distributions
  • You claim certain tax credits
  • You claim adjustments to income for IRA contributions and student loan interest

If you cannot use the 1040EZ or the 1040A, you’ll probably need to file using the 1040. Among the reasons you must use the 1040 are:

  • Your taxable income is $100,000 or more
  • You claim itemized deductions
  • You are reporting self-employment income
  • You are reporting income from sale of property

Now that you know what to look for, here is a link to get the Internal Revenue Service Tax Forms that you need. If you don’t want to deal with the headache of checking these figures, then be sure to contact us for tax preparation!

If you are brave enough to prepare your own income tax return, then I would recommend using TurboTax – this software will actually choose the correct paperwork for you!

Be sure you are aware of the tax filing delay, as well as the fact that the tax filing deadline has been extended this year. Also, you should know the IRA Contribution Limits, 401k Contribution Limits, and the Income Tax Rates for 2011!

photo by Arvind Balaraman

Filed Under: Taxes Tagged With: economy of the united states, finance, forms, free tax, income tax in the united states, income tax returns, internal revenue service, internal revenue service tax forms, irs tax forms, itemized deduction, self employment, tax credits, tax filing, tax preparation, tax return, tax returns, taxable income, taxation in the united states, Taxes, taxes form, turbotax, united states, which one

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