Get Ready for Tax season: How Parents can Turbo Charge Tax Returns

As new parents, you have a lot to juggle, from diaper changes to midnight feedings. And while taxes might be the last thing on your mind, it's essential to understand your tax obligations now that you have a dependent. Understanding the tax benefits available to you as a parent and how to claim them is critical. 

But don’t just take our word for it. We spoke with Clare Herceg, the Founder of Let’s Get Set, on the importance of not only understanding our tax obligations, but also why and how we should be maxing out our returns. 

“Filing taxes as a new parent is exciting because you are newly eligible for tax credits (aka money back) for the first time, which means you may go from owing taxes to getting thousands back. Double check that you are receiving the Child Tax Credit, the Earned Income Tax Credit, and the Child and Dependent Care Credit on your federal taxes as those are the big ones! Some states have their own state versions of these credits too, which can mean even more money for you.”

Who is considered a dependent?

The Internal Revenue Service (IRS) considers a dependent to be a qualifying child or relative. 

A qualifying child is a child who is:

• Under the age of 19 or under the age of 24 if they're a full-time student
• Has lived with you for more than six months of the year
• Has not provided more than half of their support during the year
• Is related to you (child, stepchild, foster child, sibling, or a descendant of any of these)

A qualifying relative is a person who is:

• Related to you or lives with you all year as a member of your household
• Has a gross income of less than $4,300 for 2020 and $4,350 for 2021
• You provide more than half of their support during the year

If your child meets the above mentioned criteria, you can claim them as a dependent on your tax return.

What tax benefits are available to parents with dependents?

Parents with dependents are eligible for various tax benefits. Some of these include:

• Child Tax Credit: For 2021, the Child Tax Credit is $3,000 per child aged six to 17 and $3,600 per child under six. The credit is refundable, meaning you can still receive a refund if you don't owe taxes.

• Earned Income Tax Credit (EITC): The EITC is a refundable tax credit for low-to-moderate-income working individuals and families. You may be eligible for this credit if you have a qualifying child.

• Child and Dependent Care Credit: If you pay for childcare expenses so that you and your spouse can work or look for work, you may be eligible for the Child and Dependent Care Credit.

• Adoption Credit: If you adopt a child, you may be eligible for the Adoption Credit, a non-refundable tax credit for qualified adoption expenses.

How to claim dependents on your tax return?

To claim your dependents on your tax return, you must provide their Social Security numbers. You will also need to file either Form 1040 or Form 1040-SR. If you use tax software, it will guide you through the process of claiming dependents.

Being a new parent is a fulfilling experience, but it can also be overwhelming, especially regarding taxes. Understanding the tax benefits available to parents with dependents and how to claim them can save you a lot of money. If you have any questions, don't hesitate to consult a tax professional or use IRS resources to ensure you are getting all the credits and deductions you are eligible for.

Are you a mom? Do you make less than $70,000? If you're not filing your taxes with Let's Get Set, you'll likely lose thousands of dollars. So, what are you waiting for? Get up to $9,100 in your pocket with Let's Get Set today. 

As mentioned earlier, parenting is time-consuming and unpredictable. Filing an extension for your taxes can be a good idea if you need more time to prepare or file your return. 

Source: IRS,  Filing Requirements, Status, Dependents

Why file an extension?

Filing an extension for your taxes gives you more time to prepare and file your tax return. The deadline to file taxes is typically April 15th of each year. However, if you need more time, you can request an extension, giving you an additional six months to file your return. Your tax return will be due on October 15th instead of April 15th.

How to file an extension for taxes with dependents?

1. Determine if you need to file an extension: Before filing an extension, you must determine whether or not you need to file one. If you cannot file your return by the deadline, you may need to file an extension. Remember that an extension only gives you more time to file your return.
2. Complete Form 4868: To file an extension, you must complete Form 4868, the Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. You can download this form from the IRS website or get it from a tax professional.
3. Provide your dependents' information: On Form 4868, you must provide information about yourself, your dependents, and your tax liability. You will need to provide your dependents' names and Social Security numbers, along with your own.
4. File your extension: Once you have completed Form 4868, you can file it electronically or by mail. If you file electronically, you will receive confirmation that the IRS has received your extension request. If you file by mail, send it to your state's appropriate IRS address.
5. Pay any estimated taxes: If you owe taxes, you must pay them by the April 15th deadline, even if you file an extension. You may be subject to penalties and interest if you don't pay your taxes by the deadline.

Filing an extension for your taxes can give you more time to prepare and file your return. As a parent with dependents, it's important to ensure that you provide accurate information about your dependents on your extension request. Remember, an extension only gives you more time to file your return, not more time to pay your taxes. If you have any questions or need assistance, don't hesitate to consult a tax professional.