Clear up confusion during tax time

This article was originally published on Monday, 11 February 2013 as the Money Matters article in the Guam Pacific Daily News (PDN).  Click here to subscribe to the PDN.

Benjamin Franklin once said “there are only two things certain in life: death and taxes.”

These next two months should be used for preparing our taxes. It can be less stressful if you prepare yourself ahead of time. Collecting your tax-related documents and making a checklist are a worthy way to start.

To help ease the confusion of tax time here are some other tips you may want to consider:

Be aware of changes. Every year the tax laws are reviewed and revised. If you are uncertain of a change in the tax law or forms, the Internal Revenue Service has a hotline which you can call for assistance. Individuals who have questions may call 800-829-1040, Monday through Friday 7 a.m. to 7 p.m. (EST) or visit the local Department of Revenue and Taxation in Barrigada on Route 16. You also can check their website at https://www.guamtax.com for updates.

The IRS also has a helpful Frequently Asked Questions Web page at www.irs.gov. You can subscribe to the IRS Tax Tips through its website or download its IRS2Go app for smartphones.

Changes in your household. If you had any modifications in your household such as getting married, having a child, retiring, buying or selling a home or changes in employment in 2012 be aware that these modifications will impact your taxes. This could affect how much you pay or how much your refund will be.

If your children became a certain age or your income increased you may no longer be eligible for the child tax credit or child and dependent care deduction.

If you had or adopted a child in the past year ensure that the new addition to your family has their Taxpayer Identification Number, which is usually their Social Security number.

Once a child is born, file for your child’s Social Security card as soon as possible — not having this number may deny you from the child tax credit or any other credits or deductions that may be given. If you do not have your child’s Social Security card ready at tax time, the IRS suggests you file for an extension rather than sending in a return without a required Social Security number.

If you got married in 2012, you may want to research the pros and cons of filling jointly. Be especially careful if you recently divorced and you have dependents. Only one of you can claim your children as dependents.

If there has been a significant change in your household’s income there may be a change in how much you pay or receive. If you know ahead of time that you will be paying more this year on taxes due to an increase in income, start saving now so that it will not impact your budget too severely.

If you feel that the tax law changes are going to affect you or if a major change in your household status has occurred in 2012, you may want to talk to a tax professional. By talking to a tax professional you can guarantee that you are taking full advantage of tax deductions or credits.

Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 20 years experience in retail banking and at financial institutions in Guam and Hawaii. If there is a topic you’d like Michael to cover, please email him at moneymattersguam@yahoo.com. To read past columns visit the Money Matters blog at https://moneymattersguam.wordpress.com.

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