It’s the hottest time of the year, and we’re all looking forward to our vacations! While tax season is still months away, it is important to keep taxes a top priority as you move forward with the year. Here are a couple of tips for taxes in the summer.
If you are a seasonal employee, you may be solely be working during the summer for your temporary employer. Be sure to fill out a new Form W-4 for each job you are hired for. Not only will this form let your employer know how much income tax to withhold from your paycheck, it will also determine whether you will receive a refund, owe taxes, or be tax balanced when you file your return.
Make sure to also determine if you’re a wage or self employed worker. If your employer provides you a W-2 that reports your income, you are a wage worker (aka employee). However, if your employer provides you with a 1099-MISC, you are typically considered to be self employed. If your net income from self employment is $400 or more, the IRS requires you to pay self-employment taxes, so be aware of how much you earn over the course of the summer.
Although you don’t necessarily have to file taxes if you make below $6,350, you may still want to file a tax return if you are expecting a refund. If your employer withheld too much tax from your paycheck, you will need to file a return in order to receive a tax refund.
Getting married profoundly impacts your tax situation. Though taxes are at the bottom of your priority list during this momentous occasion, being prepared tax-wise can prevent headaches later down the line.
If you get married before December 31st, 2019, you’re considered to be married for the entire year for tax purposes. You must file either as Married Filing Jointly or Married Filing Separately.
Both you and your spouse will need to update your paycheck tax withholding by increasing or decreasing allowances on Form W-4. Your goal is to make sure your W-4 information matches the amount of tax that is withheld from your pay. This will prevent you from receiving too large a refund or owe a disproportionate amount of tax when filing.
Be sure to inform the Social Security Administration of your name change after tying the knot (they will send the information to the IRS) as well as notifying the IRS on your address change if you are moving. This prevents any delays in the processing of your filed tax return.
With your kids being out of school and bored at home, you may elect to send them to summer camp. If you have to pay someone to care for your kids in order to work, you can get a tax break for the expenses. Keep in mind however that day cares & day camps qualify, but overnight camps do not. You can count the costs towards the Dependent and Child Care Credit.
In order to qualify for the Child Care Credit, you must be working or actively seeking employment. If you are married, both you and your spouse must be working or actively seeking work. Keep in mind that merely actively job-searching without success will not qualify you for the credit, as earned income is one of the prerequisites to be able to claim the credit. Stay at home mothers or fathers don’t qualify.
Are you fortunate enough to have a summer home or vacation property? You can rent it out for up to 15 days a year without paying taxes on the rental income, as well as deduct the qualified expenses for the rental home on Schedule A of your tax return. If you paid interest on the mortgage of your second home, don’t forget to deduct the mortgage interest.
Get peace of mind this summer with a diligent, experienced CPA. We take extra precaution to protect our clients’ information, providing an additional layer of security in the fight against identity theft. To minimize your risk of identity theft and maximize your refund, submit our online contact form or call our Raleigh accounting firm today at 919-420-0092.