Let me state my qualifications on this topic.
- I have prepared tax returns since 2001.
- I worked for H&R Block for seven years.
- I began my own tax preparation company in 2008.
- I was awarded the FINRA Military Spouse Fellowship in Fall 2010.
- I passed the IRS Registered Tax Return Preparer exam in July 2012.
- I became an AFCPE Accredited Financial Counselor in February 2013.
- I fully participate in the IRS Annual Filing Season Program every year.
- I am a member of both NATP and AFCPE.
- Oh and I've been a military spouse since 2001 and caregiver since 2011.
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.
- Social Security Income
- VA Caregiver Program Stipend
- VA Compensation for the Veteran
- CRSC Combat-Related Special Compensation
- Non-Medical Attendant Pay
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.
Jessica Allen, AFC