5 Tax Mistakes New Parents Tend To Make
A number of rebates are given by the government to new parents. These rebates can be quite useful since raising a child in this economy can make a major dent in any parents’ bank account. However, not many are aware how they can avail these tax rebates when they have a child. Read on to know more about tax mistakes made by new parents so that you can avoid these in the future.
- Failing to get a Social Security Number (SSN) for the child: Financial experts believe that new parents should get an SSN for their child as soon as possible because this number helps in claiming a number of tax benefits.
Most hospitals help parents get an SSN number by assisting in the paperwork, but the parents are responsible for using this number while filling in tax forms.
- Skipping Child Tax Credit: The Child Tax Credit or CTC provides credits of up to $1,000 for every child under the age of 17 years. If the CTC exceeds the tax amount, the family receives some or all the credit as a refund. This is known as the Additional Child Tax Credit (ACTC). This credit is interest-free from the date when the child was born. If the child is born in the year-end, parents can claim the CTC, given that the age of the child is less than 17 years during the claim year.
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- Forgetting to adjust withholdings: New parents often forget to adjust the amount of money that their employers withhold for taxes each month. In order to adjust this amount, parents have to ask their employers to provide a new W4 form. In this form, new parents have to indicate that they have become parents and have a new-born child at home. The employers should also be asked to reduce the amount of money that is being deducted in order to take advantage of some new rebates and credits.
- Forgetting to claim adoption credits: If you have become a new parent through adoption, you become instantly eligible for an important federal tax credit. This tax credit gives new parents credits that go up to a whopping $13,400. This amount can assist new parents trying to manage the costs that come with adoption. The government also allows new parents to use the adoption credit over a period. Parents do not have to use the entire credit in the very first year. This credit can be used within the five years of adoption or whenever the credit gets exhausted before 5 years. In order to get this credit, the adopted child has to be below the age of 18 years.
- Skipping child care credit: Child care credit is given to parents who are working and have to pay for childcare services (nanny or a childcare center). Most new parents do not know about this important tax credit, which can save them thousands of dollars in tax. The maximum amount of expenses that can be claimed for one child is $3000 and the amount goes up to $6,000 for two or more children.
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