Time to File Your

2014 Income Tax Return

Center for Economic Progress Tax Clinic

312-630-0280 or TAXCLINIC@economicprogress.org

1

Today’s Topics

Do you need or want to file a tax return?

Filing Status

The Earned Income Tax Credit

The Child Tax Credit

The Child and Dependent Care Credit

Benefits Related to Education

What Free Filing Assistance is Available?

Who Must File Tax Return for 2014?

IF your filing status is...

THEN file a return

if your gross

income is at

least…*

single $10,150

head of household $13,050

married, filing jointly $20,300

married, filing separately $ 3,950

qualifying widow(er) with

dependent child $16,350

3

Or, you MUST file if you had net earnings from self-employment of at

least $400.

The Interactive Tax Assistant is a great resource:

http://www.irs.gov/uac/Interactive-Tax-Assistant-(ITA)-1

*An additional standard deduction amount is provided for taxpayers who are 65 years old or older.

What is Gross Income?

• Wages, salaries, tips

• Interest and dividends

• Alimony received

• Self-employment income

• Distributions from pensions, IRA’s, other retirement

accounts (see IRS Publication 590 for more information).

• Income from discharge of indebtedness

• Gross income does not include social security benefits

unless ½ of social security plus other income is more than

$25,000 ($32,000 if married filing jointly). See IRS

Publication 915 for more information.

4

Who Should File Tax Return

• You had income tax withheld from your pay (generally be

withholding from wages, Form W-2, or from unemployment

compensation, Form 1099-G).

• You had dependents

• You qualify for the Earned Income Tax Credit

• You qualify for the Additional Child Tax Credit

- Earned Income Credit

- Additional Child Tax Credit

Even if you do not have to file, you should file a tax return if you can get

money back!

5

6

The Dependency Exemption ($3,950)

• Qualifying Child: – Under 19, or under 24 if a full time student

– Younger than you

– Relationship (child, stepchild, adopted child, sibling, stepsibling, or

descendant of any of these).

– Lived with you for > ½ the year.

– Child did not provide for > ½ of his/her own support.

• Qualifying Relative (QR): – Not a Qualifying Child of another taxpayer who has a filing requirement

or claims the EITC.

– QR is related to you, OR can be anyone as long as lived with you for the

entire year.

– If QR is related, no residency requirement.

– You provided for > ½ of the QR’s support.

– QR had income of less than $3,900.

7

Filing Status: Why does it matter?

• Standard Deduction Amounts for 2014

– Single: $6,200

– Married Filing Jointly: $12,400

– Married Filing Separately: $6,200

– Head of Household: $9,100

– Qualifying Widow(er) with Dependent Child: $12,400

For an individual who may be claimed as a dependent by another taxpayer, the

standard deduction cannot exceed the greater of $1,000 OR ($350 + the

individual’s earned income). The additional standard deduction amount for the

aged or the blind is $1,200; that amount is increased to $1,500 if the taxpayer

is single and not a surviving spouse.

8

Filing Status: Head of Household

• Requirements:

– You are unmarried or considered unmarried on the

last day of the year.

• “Considered unmarried” = unmarried, legally separated,

married but have lived apart for at least the last six months of

the year.

– You paid > ½ the cost of keeping up a home for the

year.

– A qualifying child or qualifying relative lived with

you in the home for > ½ the year.

• School is temporary absence and doesn’t count.

• If the "qualifying person" is your dependent parent, he or she

does not have to live with you.

9

Filing Status

• Married Filing Jointly: You’re married as of the

close of the taxable year.

• However, if H+W are living apart (for the last six

months of the year) and H has child for > ½ the

year and provides >1/2 of support, H can filed as

Head of Household. However, W will be

married and would file Married Filing

Separately.

• You do not file as “Single” if you’re legally

married.

10

The Earned Income Tax Credit: How does it work?

11

The Earned Income Tax Credit: The Numbers

MAXIMUM INCOME single or head of household married filing jointly

no children $14,340 $19,680

one qualifying child $37,870 $43,210

two qualifying children $43,038 $48,378

three qualifying children $46,227 $51,567

MAXIMUM EITC

no children $487

one qualifying child $3,250

two qualifying children $5,372

three qualifying children $6,044

12

The Earned Income Tax Credit:

General Requirements (IRS Publication 596)

• Taxpayer and qualifying children must have a valid social security

number.

• Taxpayer must have earned income – either wages or self-

employment.

– Taxable disability benefits received under an employer’s

disability retirement plan are considered earned income until the

taxpayer reaches minimum retirement age.

– Disability insurance payments received from a disability

insurance policy where the premiums were paid by the taxpayer

are not earned income.

• Taxpayer cannot have investment income over $3,200.

• Taxpayer cannot use married filing separately filing status.

13

Who is a qualifying child for the EITC? 1. Age – The child must be under age 19 at the end of the

tax year or under age 24 if the child is a full-time student.

The child must be younger than the taxpayer. A child

who is permanently and totally disabled can be any age.

2. Relationship – The child must be the taxpayer’s child,

stepchild, adopted child, foster child, sibling, stepsibling

or a descendent of any of these relatives.

3. Residency – The child must live with the taxpayer, in

the United States, for more than half of the tax year.

4. Support – There is no support requirement for a

qualifying child for EITC.

14

Watch out!: There are penalties for improper

EITC claims.

• Taxpayer makes a mistake: No EITC the following year

unless Form 8862 is submitted

• Taxpayer recklessly disregards the EITC rules: No EITC

for two subsequent years

• Taxpayer fraudulently claims EITC: No EITC for ten

years

• Paid preparer fails to exercise due diligence: Preparer

pays a $500 penalty per tax return

15

The Child Tax Credit A refundable credit worth up to $1,000 per child.

Requirements:

1. Child must be under age 17 (no exception for

students or the disabled).

2. Child must be taxpayer’s child, stepchild,

adopted child, foster child, sibling,

stepsibling, or descendent of any of these.

3. Child must have lived in the U.S. with the

taxpayer for more than half the tax year.

4. Child did not provide over ½ of his/her own

support.

16

The Child Care Credit A nonrefundable credit of up to $3,000 (or

$6,000, if more than one child) to help parents

who work – child care that enables you to

work!

Requirements:

1. Child must be under age 13 or disabled.

2. Child must be taxpayer’s child, stepchild,

adopted child, foster child, sibling,

stepsibling, or descendent of any of these.

3. Child must have lived with the taxpayer for

more than half the tax year.

4. Child did not provide over ½ of his/her own

support.

17

Benefits Related to Education

• American Opportunity Credit

– Who? Full-time undergraduate in a degree

program.

– Maximum benefit: $1,000 refundable credit +

$1,500 nonrefundable credit.

– You need to have spent $4,000 for maximum

benefit.

– Eligible expenses include tuition, fees, books,

course materials.

18

Benefits Related to Education

• Lifetime Learning Credit

– Who? Just taking 1-2 classes or in graduate

school. Does not need to be in degree

program if class improves job skills.

– Maximum benefit: $2,000 nonrefundable

credit.

– You need to have spent $10,000 for

maximum benefit.

– Eligible expenses include tuition and fees

only.

19

Benefits Related to Education

• Tuition and Fees Deduction

– Who? Just taking 1-2 classes or in graduate

school; does not need to be in degree

program.

– Maximum benefit: $2,000 adjustment to

income.

– Eligible expenses include tuition and fees

only.

20

Benefits Related to Education

• Student Loan Interest Deduction

– Who? Former student paying on loans from a

full-time degree program.

– Maximum benefit: $2,500 adjustment to

income.

– Eligible expenses include loans used to pay

for tuition, fees, books, course materials,

room & board, transportation.

21

Other Filing Issues ♦ Refunds should be directly deposited into bank accounts because it is safer

and faster.

♦ Employees should carefully determine withholding allowances to avoid

having too much withheld. Use the IRS W-4 withholding calculator, which

can be found on www.irs.gov.

♦ Self-employed taxpayers must keep records of income and expenses

throughout the tax year. Self-employed taxpayers who anticipate owing

more than $1,000 in tax must also make quarterly payments to IRS on April

15, June 15, September 15, and January 15 using Form 1040ES. Refer to

IRS Publication 334 for more information.

Most importantly…

READ your tax return carefully

and ask questions before you

sign.

Under penalties of perjury, I declare that I have examined

this return and accompanying schedules and statements,

and to the best of my knowledge and belief, they are true,

correct, and complete.

22

23

The IRS talks about the most common Tax

Return errors…

• Incorrect or missing social security numbers.

• Incorrect/misspelled names for dependents.

• Names should appear exactly as they do on the Social

Security card.

• Math errors.

• Figuring out credits.

• Incorrect Bank Account Numbers for direct deposit.

• Sign and date the return. If Married Filing Jointly, both

spouses must sign and date.

Do you need help? Who is CEP? The Center for Economic Progress (CEP) helps hard-working, low-income

families move from financial uncertainty to financial security. We offer a full-

range of services to help families acquire the knowledge, skills, tools and

confidence to make sound financial choices.

1. Tax Preparation

2. Legal Services at the Tax Clinic

3. Financial Coaching and Access to

Financial Products

24

Free Filing Assistance

• Income maximum: $25,000 for individuals and $50,000 for

families.

• You MUST bring with you to the site: All W-2s and 1099s (if any) for the year involved

Social Security cards or Individual Taxpayer Identification Numbers

(ITINs) for all family members

Valid photo ID for the person filing

Copy of previous year’s tax return, if possible

Bank account number and routing number if you choose to direct

deposit your tax refund

Property tax bill

Amount spent on college expenses

25

Go to www.economicprogress.org to find a location near you.

Do You Have Tax Dispute With the IRS?

• Dispute your liability

- The IRS erroneously disallowed your business expenses

- The IRS erroneously disallowed your Earned Income Credit,

Adoption Tax Credit, Child Tax Credit, filing status, etc.

- The IRS claims you underreported income or cancellation of

debt on your tax return

• Stop the levy and/or negotiate an affordable payment option

- Currently Not Collectable Status

- Installment Agreement

- Offer in Compromise

26

Call our Tax Clinic at 312-630-0280 if you have a tax dispute with the

IRS!

Contacting Us

Center for Economic Progress

312-630-0280

www.economicprogress.org

27

Questions?

28