Its tax season again, and there is a number of situations that Servicemembers find themselves in that are very difficult. Some of them affect your taxes, and some don’t, but they all affect your financial situation. Facing new circumstances can make anyone struggle and you should know that faced with the same situations, everyone would struggle.
Some of the more common situations others have gone through before. So here are a few of the more common issues, and some tips to dealing with them at Tax time.
Death of A Spouse. Nothing hits as hard as loss of a loved one, and the death of a spouse ranks right up at the top of the hardship list. For tax purposes you are able to file married filing jointly for the entire year that your spouse died. The exception is if you remarried before the end of a calendar year, in the year of the death. Life insurance benefits that you may have collected are normally tax-free. If you invested the money in some way, there may be some tax liability however.
Your Kids Go On Solo. When your children move out of your house you often lose the exemption that you had as a dependent in your household. The exceptions are: if you still paid at least half or more of their expenses, if they are younger than twenty four at the end of the tax year, and if they are full time students. Under these conditions, you may still be able to claim them as a dependant for tax purposes. They cannot file returns claiming themselves as dependents; this is called double dipping, and will incur the wrath of the IRS upon you.
Your W-2 is In Error. If you get a copy of your W-2 Statement and any of the information is wrong, you should contact your employer immediately. They are required by law to correct it, and issue you a new W-2 as soon as possible with the corrected information. You should always check to make sure that the details such as street address, name, even your social security number and name, as well as the pay and withholding amounts are correct. Divorce.
Getting a divorce can ruin anyone’s day; just try to not let it ruin your tax filing too. If you were divorced in the year up to and including December 31st, you cannot file married filing jointly. The IRS takes a very dim view of it if you try.
Your divorce decree should state who could claim any children you have as dependents for tax purposes. If that was not discussed or spelled out you can agree to alternate, but what ever you do make sure you both do not claim them at the same time for the same tax year. Nothing will attract an IRS audit any quicker.