There is a certain “pumpkin spice” undertone to all coffee beans lately, which means it is time to talk about taxes.
Wait a minute. Do you think taxes only happen during “tax season”?
The IRS doesn’t care what temperature it is, or whether the roads are safe for driving. If you are a US citizen, they don’t even care which continent you live on.
The truth is – every dollar you earn, every client bill you prepare – IRS taxes are incurred.
State and Local Taxes (SALT), affect most of us every day as well.
Another truth – most of the dollars you spend for your home, business, education or child care can lower your tax bill. Notice I said most, but not all.
Knowing which expenses truly count is key for making that final 1040 balance due as low as possible.
For example, does your employer offer Dependent Care Benefits (DCB) as a payroll deduction?
Those are reported in a separate box on your W2. They are excluded from tax withholding on your paycheck.
However, those amounts can become taxable on your 1040, under different circumstances:
- If only one spouse has taxable earnings, DCBs are taxable on a joint 1040.
- If one spouse is self-employed and posts a loss or minimal income for that year, that means no Dependent Care deduction.
- If one spouse gets laid off or injured during the year, the Dependent Care deduction is limited.
- If the withheld funds are not spent correctly – with a licensed provider, in the correct time frame, with a receipt or statement – these amounts become taxable.
Many other credits and deductions can be lost if not planned for correctly – Retirement Savings, SALT, Lifetime Learning, Self-Employed Health Insurance Premiums, to name a few.
Questions? Post a comment or submit that contact request before 12/31.