For those of you waiting until the very last minute to file your tax returns, we’re here to help you get to the finish line. Yahoo Finance partnered with PureWow, a popular women’s lifestyle site, to invite CPAs Sheila Brandenberg and Stephanie Hines to answer your questions. Below are 10 viewer questions they answered during last week’s Facebook Live tax event.
1) “I’m newly married. My wife and I live in NJ, work in NYC and both earn around the same— $100K. Do we file separately, just like we have always up to this point, or jointly? We rent, and have no other deductions or anything.” — Scott
Once you get married, you can no longer file as a single person. Your new options are to file “married filing separately” or “married filing jointly.” In your case, since your incomes are pretty similar and you have no mortgage or other deductions, Brandenberg says it would probably make the most sense to file jointly. Married filing separately is typically the worst tax bracket, says Brandenberg. But if one partner has a lot of itemized deductions, such as medical expenses, it could make sense for your family to file separately.
2) “What happens if I decide to skip filing taxes this year?” — Wilfredo R.
The IRS is not going to let you slide by without filing, Hines warns. So what happens if you don’t file? The IRS will send you a letter that says it is missing your return. If you don’t respond, it will file a return on your behalf. “But a lot of times that liability is higher because it doesn’t have the expenses that you would have on your record,” says Hines. After that liability is assessed, if you still do not respond, the IRS could eventually levy some of your assets. You could also face criminal prosecution, warns Hines. And it’s won’t just be the IRS coming after you—your state will too. Some states suspend drivers’ licenses if tax liabilities aren’t paid.
If you need more time, file an extension to get another six months to file. Just remember, the extension only buys you more time. No one gets out of paying interest, and most people incur late-payment penalties unless they pay at least 90% of what they owe by the April 18 deadline.
3) “Our 17-year-old daughter made $4,500 at her part-time job last year. Can she file her own return to get a refund even though my husband & I still claim her as a dependent?” — Melissa
You can absolutely still claim your daughter as a dependent, says Brandenberg. But your she should definitely file to get any taxes back that were withheld from her paycheck. When you look at the rules on whether or not you can claim a dependent, the IRS considers the age, the amount of income and the amount of financial support the child receives. Since your child is under 19, she can file her own return.
For full-time students earning incomes, Brandenberg suggests they let their employers know that they are in school so they can be exempt from paying taxes. This way they’ll have more money during the year and won’t have to bother filing. If you’re over age 19, and not a full-time student in college, your parents may or may not be able to claim you depending on your income, says Brandenberg.
4) “My entire income is from Social Security and a small retirement check from my past employment. I’m now 71 and have been retired for three years. Do I need to file tax returns?” — Barbara C.
The first step is to see whether your Social Security is taxable, says Brandenburg. A quick way to do that is to take half of your Social Security, add it to any other income that you have, and see if it’s over the threshold. If you’re single, that amount is $25,000; if you’re married filing jointly, the threshold goes up to $32,000.
If you have more than the threshold income after your exemptions and your standard deductions, then you would have a tax filing obligation. Note that once you get past age 65, you get a larger standard deduction than other taxpayers so you may not.
5) Can we claim college applications expenses on our 2016 tax return? — Mina
You are only able to deduct college application expenses for the school that you or your child is actually enrolled in and attending, says Brandenberg.
6) “What should you do if you haven’t filed in almost 4 years?” — Antonio
You probably have quite a bit of mail from the IRS. If you have a very good reason not to have filed and voluntarily come back into the system, the IRS will work with you to get up to date and might even waive some of the penalties and interest that accrued over the years. On the other hand, if you were owed a refund, you will no longer be entitled to receive the funds because you only have three years to claim it. So it’s important to handle the situation as soon as possible.
7) “We had to do a total renovation of a bathroom to make it handicap accessible for my adult son who live with us. What can we deduct?” — David
Renovations typically aren’t a deduction. The cost of a complete renovation will actually be added to the basis, or the purchase price, of the home. You’d receive the benefit when you sell the home. There can be some exceptions to the rules with handicap accessible renovations if they are for medical reasons. But you don’t get to do both—you can’t deduct them as an expense and capitalize it as an improvement.
8) “I was driving for Uber last year (part time). I didn’t receive a 1099 MISC, but received a 1099K. When I wanted to claim money made through TurboTax, it didn’t let me. Does it mean that I don’t have to? I made about $3K, but my expenses were more than what I made.” — David
A 1099K is something that you receive when you get payments by a credit card or from a third party. Even though your expenses amounted to more than your income, you still have to file the Schedule C with your 1040 and deduct your expenses. You might not have received your 1099 MISC, but the IRS still requires you to report all of your gross income from any business that you worked for when you submit your Schedule C. With this form, you will be able to deduct the expenses you had related to driving for Uber.
9) “I paid my child’s college education with his 529 plan. Does he need to report the amount on his taxes or do I report it on my taxes?” — Gary
A 529 plan is a great way to put money away for college. If you’ve taken the funds directly from the 529 plan to pay for qualified education expenses, neither of you have to report tax on the earnings from the 529 plan.
10) “How long should you hold on to health insurance receipts if you pay by debit card/credit card if you have a qualified HSA account, and what is the overall tax benefit for doing it like this?” — Eric P.
Both experts say you should hold onto your receipts for six years. The benefit of establishing an HSA account is that you can put money away for medical expenses before tax, and you’re not required to use the full funds of that account in any tax year.