Saturday, January 23, 2016

Caregivers and Income Tax Filing

I have had numerous requests to blog about this topic so here we go.....

Let me state my qualifications on this topic.
The topic of income tax in the wounded world is often very confusing. Many do not understand a few key concepts that can make you income tax filing a bit easier or even eliminate the need for you to file. I fully acknowledge that you need a translator to understand the IRS at times. Let me help with a bit of the translation. (Please take note I have linked sites to many items listed.)

Let's start with income itself. We have two categories: earned and unearned.
  • Earned income simply means you have actually worked a job of some sort and received payment from working. You will receive a W2 or 1099 MISC from this income. If you are running your own business, you will need a detailed log of your income and expenses in order to report them. 
  • Unearned income simply means the income came to you through passive means, meaning you did not work to receive it. The most common type of unearned income I see comes from interest earned from savings accounts and/or social security.
In the caregiver world here are the sources of income that primarily concern us.
These sources of income are non-taxable and are unearned income. Social Security Income only becomes taxable when your earned income exceeds the limits set by the Social Security Administration. However even if your SSI is taxable it is still unearned income and will not be considered for tax credits.

Now let me post a few questions that are frequently asked.

What if my child(ren) receive Social Security?
Here's a great link that will go into further detail, but usually the child's social security income is not reported on an income tax return.

How do I receive Child Tax Credit and/or Additional Child Tax Credit?
You must first have earned income to be eligible for the credit. If you have earned income, then the credit will be calculated based on that income and the amount of qualifying child(ren) you have. Unearned Income will not qualify you for this credit.

How do I receive Earned Income Tax Credit?
Like Child Tax Credit you must have earned income to be eligible for the credit. If you have earned income, the credit will be calculated based on that income and the amount of qualifying child(ren) you have. Unearned Income will not qualify you for this credit.

How does the Affordable Care Act impact us?
Everyone must either have health care coverage or meet the requirements for an exemption. If you do not have coverage or meet the exemption then you are assessed a penalty on your income tax return. If you have only unearned income, then you will meet the requirements for an exemption. If you have Tricare, Champ VA, or other health care coverage, you will receive your 1095 form from your company for you to show your tax professional and to keep in your records.

Do we need to file a tax return?!
Visit this IRS link to find out or contact a professional.

Please remember every income tax filing situation is fact dependent. It is always best to consult a professional with any additional questions. Here are a few links to help you find a professional.
Best wishes on your tax filing! May the odds be ever in your favor!
Jessica Allen, AFC

4 comments:

  1. Thanks for the brilliant information regard income tax. I appreciate the author's work from bottom of my heart.

    Income Tax Return Filing

    ReplyDelete
  2. So the way I see it is this
    1. My family has zero earned income which keeps us
    From receiving any kind of return from the irs.
    2. As a caregiver I am not receiving any points
    Towards my social security when I become of age to
    Draw it for myself.
    3. We have a a house payment we can't claim as well as
    2 children we do not get to claim.
    3. We are invisible to the system when it come to our
    Future finances.

    ReplyDelete