Here are a few important points to keep in mind if your child has investment income: Investment income generally includes interest, dividends and capital gains. It also includes other unearned income, such as from a trust. If your child's total investment income is more than $2,100 then the your tax rate may apply to part of that income instead of the child's tax rate. You may be able to include the child’s investment income on your tax return if it was less than $10,500 for the year. If this choice is made, then your child will not have to file his or her own return. If a child’s investment income was $10,500 or more in 2015 then the child must file their own return. -LB
You should file your 2015 tax return on time even if you can't pay what you owe. This will save you from potentially paying a penalty for a late filed return. Here are a few options if you can’t pay all your taxes by the due date.
File on time and pay as much as you can. You can pay online, by phone, or by check or money order. Visit IRS.gov for electronic payment options.
Get a loan or use a credit card to pay your tax. The interest and fees charged by a bank or credit card company may be less than IRS interest and penalties. For credit card options, see IRS.gov.
Use the Online Payment Agreement tool. You don’t need to wait for IRS to send you a bill before you ask for a payment plan. You can use the Online Payment Agreement tool on IRS.gov or file Form 9465, Installment Agreement Request, with your tax return. You can even set up a direct debit agreement. With this type of payment plan, you won’t have to write a check and mail it on time each month.
Don’t ignore a tax bill. If you get an IRS bill, don’t ignore it as the IRS may take collection action. Contact the IRS right away to talk about your options. If you are suffering financial hardship, the IRS will work with you. Remember to file on time. Pay as much as you can by the tax deadline and pay the rest as soon as you can. Find out more about the IRS collection process on IRS.gov. Also check out IRSVideos.gov/OweTaxes. -LB
Money you paid for higher education in 2015 can provide a tax savings in 2016. If you, your spouse or your dependent took post-high school coursework last year, there may be a tax credit or deduction available for you. Here are the key tax savings for higher education expenses:
The American Opportunity Credit: Worth up to $2,500 per eligible student. Used only for the first four years at an eligible college or vocational school for students earning a degree or other recognized credential. For students going to school at least half-time for at least one academic period that started during or shortly after the tax year.
The Lifetime Learning Credit: Worth up to $2,000 per return/per year for all years of higher education, including classes for learning or improving job skills.
The Tuition and Fees Deduction: Worth up to $4,000 and is claimed as an adjustment to income and limited to tuition and certain related expenses required for enrollment or attendance at eligible schools.
You should receive Form 1098-T, Tuition Statement, from your school by Feb. 1, 2016. You may only claim qualifying expenses paid in 2015. You can’t claim either credit if someone else claims you as a dependent. You can’t claim either AOTC or LLC and the Tuition and Fees Deduction for the same student or for the same expense, in the same year. Finally, income limits could reduce the amount of credits or deductions you can claim. -LB
Larry Baker, Enrolled Agent