A common scenario at tax time is for students away at college (or even students living at home) to go ahead and file their tax returns on their own as a proclamation of independence. Even more importantly, they are doing it to get the tax stimulus rebate checks from last year. Please don’t do that without checking with your parents, especially if you are living at home and extra-especially if they are paying your college tuition. Getting the $300 in incentive money might blow them out of the water not only in terms of losing the dependency exemption they take from you but also in terms of any college deductions (Lifetime Learning, Hope Credit or Tuition and Fees). Parents and adult children of college age of the previously mentioned parents, please take the time to talk about filing and income taxes before you jump in. If the student has already filed and taken their own exemption, have them do an amended tax return (Form 1040X) for the Federal return and whatever you need to amend for your respective state taxes (in California for example it is 540X).
You will need to mail in your amended return for them claiming zero exemptions for the student on their own return and then mail in the parents return claiming the student. It will take a few months to get things straight but it will happen.
Also for parents who are taking daycare deductions, for the state of California you will need to have not only the employee identification number or social security number for the person caring for your child (or children) but their
phone number with their address as well. You will also need to take into account how much time the actual child lived in your house throughout the year. That is an important issue for separated parents or people who are divorced who are splitting the benefits of a child due to a court order or the divorce settlement.
In other news, the supply destruction of jobs and resources is continuing with more companies laying off workers and shuttering production facilities until things pick up. Make sure that you are aware of your surroundings at work and if you aren’t starting to save an emergency fund – get started on it just in case your business is next.
Have a good weekend.
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Kim Isaac Greenblatt
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