By Brian Hewitt
The holidays are over, the gift-giving (and spending) is done, and you’re almost finished returning all of the things you don’t want or need. You’ve even jotted down your New Year’s resolutions and plan to stick to them.
Time to relax? Maybe not right away — it’s time to start thinking about your taxes.
Here are Social Security’s top three tips for making tax time a lot easier.
1) Don’t forget the children. Make sure the kids (and all the dependents) you list on your annual tax forms have Social Security numbers. Yes, children do need Social Security numbers. There once was a time when a child did not require a Social Security card until later in life, but in 2010, that day is long gone. If you want to claim your child as a dependent on your tax return, your child will need a Social Security number. For many families, it’s not only the kids who will need a number. All dependents listed on your federal tax returns will need Social Security numbers, including a dependent parent who lives with you and receives support from you. If any of your dependents needs a Social Security number, you can get an application at www.socialsecurity.gov.
2) Check the names and numbers. It’s not enough for everyone on your tax return to have a Social Security number — they also must be the correct numbers, and they must match your names exactly. The Internal Revenue Service checks all the names and Social Security numbers on your tax return against Social Security’s records. If the names and numbers do not match Social Security’s records, you will receive a letter from IRS asking you to explain the discrepancy. You cannot receive a tax refund until the discrepancy is resolved, which could mean an unnecessarily long delay.
3) Social Security tax on Social Security benefits. If you receive Social Security benefits and your total income, including benefits and any other income such as wages, pensions, or investment income is high enough, you may have to pay taxes on a portion of your benefits. So plan accordingly as you work out your budget. You may have to pay taxes on your Social Security benefits if:
• you file as an individual and have a total annual income of $25,000 or more; or
• you file a joint return and have a combined total annual income of $32,000 or more.
These simple tips can move taxes from monumental to manageable when the time comes to file your tax return.