How To Claim Independent On Taxes

What If I Meet One Of These Criteria But My Parents Claimed Me As A Dependent On Their Taxes

As far as I can tell, the criteria for dependency on taxes and the FAFSA are completely independent of each other. Ive read through all the PDF documents including this one, which is pretty clear. So even if your parents claim you on their taxes, you should still go by the above criteria when trying to figure out if youre independent.

What Are The Basic Rules For Claiming A Dependent

Dependents are usually, but not always, a child or other relative. Qualifying children and qualifying relatives have their own additional requirements, but all dependents must meet these requirements:

• Dependents can have their own tax returns, and even be married, but they must not have filed a joint tax return for the year unless its just to claim a refund.
• They must be a U.S. citizen, U.S. national, or a resident alien.
• They must have a taxpayer identification number. Thats usually a Social Security Number, but if the child doesnt qualify for one, it can be an Individual Taxpayer Identification Number or an Adoption Taxpayer Identification Number .

Tax Tips For Independent Consultants

In todays gig economy, working as an independent consultant is hugely popular but the additional income means there are tax implications to think about. Independent consultants work for single and multi-level marketing companies, but they are not considered employees. They sell a product directly to customers through personal connections and hosted events like in-home parties. They can also recruit other consultants and earn a bonus or percentage for sales that happen down the line.

The IRS calls independent consultants direct sellers, and they have rules for how you should file your taxes. If youre worried that your new gig makes you more likely to be audited, follow these tips and feel confident when tax season rolls around.

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Keep Track Of Your Business Expenses

One of the most significant mistakes that self-employed individuals make is not tracking their business expenses throughout the year. They may receive a Form 1099-MISC indicating that they owe state and federal tax, at which point they scramble to remember their business expenses from the past year.

Make sure youre in the drivers seat by tracking all of your expenses and keeping reliable documentation throughout the year. QuickBooks Self-Employed makes it a breeze to track mileage and other business expenses.

Figuring Out The Business

Letâs say I use my phone for business purposes from 9 AM to 5 PM Monday through Friday. Thatâs 40 hours per week. Letâs say my normal waking hours are 8 AM to 10 PM â 14 hours a day.

First, I’ll take my 14 waking hours per day and multiply it by seven to get my total waking hours per week. That comes up to 168 hours. Then, I’ll divide that by the 40 business hours I keep per week. That gives me a percentage of about 24% business use and 76% personal use.

If my phone bill is $100 per month, I can take a tax deduction of $24 per month, or $288 per year.

This same calculation can be applied to other expenses that you use for both business and personal purposes, like your internet bill.

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Who Is Not A Tax Dependent

These people generally wont count as your tax dependents:

• Anyone at all, if someone else can claim you as a dependent .

• Generally, a married person who files a joint tax return .

• Anybody who is not a U.S. citizen, U.S. resident alien, U.S. national or a resident of Canada or Mexico .

• People who work for you.

• Foreign exchange students.

My Parents Do Not Claim Me On Their Federal Income Tax Return Am I Considered Independent For Financial Aid Purposes

Whether your parents claim you as a dependent on their federal tax return does not determine whether you file your Free Application for Federal Student Aid as a dependent or self-supporting student. Your answers to questions on the FAFSA determine your status. Additional information is available on the Federal Student Aid website.

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The Aotc Might Pay You

One more excellent perk of the American Opportunity Tax Credit: The $2,500 credit is refundable, meaning that if you owe less than $2,500 in taxes, youll get a refund in the amount of the difference.

If youre eligible for the Lifetime Learning Credit and the American Opportunity Credit for the same student in the same year, you can only choose one credit, but not both.

Add The Number Of Dependents Claimed

You can claim one exemption for each dependent you claim plus one for yourself and one for your spouse. An exemption is a fixed amount that is subject to change each tax year and reduces your taxable income in the same way deductions do. In 2017 for example, the exemption amount is $4,050. You will multiply this amount by the number of exemptions you are allowed to take and enter the total on the second page of your tax return.

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Deducting Your Family Plan

You can also deduct the portion of your family plan that you use for work.

The easiest way to do this is to get an itemized version of your monthly cell phone bill. This will allow you to determine which charges are directly related to your cell phone, which are associated with your family members. From there, you can split up the shared charges â like sales taxes and fees â between everyone on the plan.

After you’ve figured out your individual cell phone’s cost using your itemized bill, you can split that between your business and personal use, like in the example we went through above.

There’s one other thing to keep in mind when it comes to deducting a family plan: you can only deduct cell phone expenses that you personally pay for. So if a family member is paying for your cell phone and you’re not reimbursing them, you wouldn’t be able to write off that cost.

Get More With These Free Tax Calculators And Money

• See if you qualify for a third stimulus check and how much you can expect

• Know what dependents credits and deductions

• Know what tax documents you’ll need upfront

• Learn what education credits and deductions you qualify for and claim them on your tax returnGet started

The above article is intended to provide generalized financial information designed to educate a broad segment of the public it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

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Could My Adult Dependent Still Be Required To File A Tax Return

Yesyour adult dependent may still need to file a tax return in certain situations.

If your single dependent was under age 65 and not blind in 2020, they must file a tax return if they had:

• Unearned income more than $1,100
• Earned income more than $12,400
• Gross income more than the larger of:
• $1,100
• Earned income up to $12,050 plus $350

If your single dependent was age 65 or older, they must file a tax return if they had:

• Unearned income more than $2,750
• Earned income more than $14,050
• Gross income more than the larger of:
• $2,750
• Earned income up to $12,050 plus $2,000

If your single dependent was under age 65 and blind, they must file a tax return if they had:

• Unearned income more than $2,750
• Earned income more than $14,050
• Gross income more than the larger of:
• $2,750
• Earned income up to $12,050 plus $2,000

If your single dependent was age 65 or older and blind, they must file a tax return if they had:

• Unearned income more than $4,400.
• Earned income more than $15,700.
• Gross income more than the larger of:
• $4,400
• Earned income up to $12,050 plus $3,650

What If I Dont Meet Any Of These Criteria But I Have No Contact With My Parents

Heres what the official student aid site says:

If you have no contact with your parents and dont know where they live, you should discuss your situation with the financial aid office at the college or career school you plan to attend. The financial aid administrator will help you figure out what to do next.

Note: Im not a financial aid counselor or an expert. If youre still unsure, I highly recommend asking a person with those credentials.

Hope this clears up any confusion you have about your status when applying for loans this year. Does this mean youll have to continue selling your blood? Probably. Just take solace in the fact that the rest of us are doing it as well.

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When Your Child Must File

In 2018 and 2019, certain children were taxed using the estate and trust tax brackets, but in 2020, for income above a certain level, the tax rate of the parents will be used. Four tests determine whether a dependent child must file a federal income tax return. A child who meets any one of these tests in 2020 must file:

• If the child only has unearned income above $1,100
• If the child only has earned income above $12,400
• If the child has both earned any unearned income, and the child’s gross income is greater than either $12,400 or their earned income plus $350, whichever is less.
• The child’s net earnings from self-employment are $400 or more

Additional rules apply for children who are blind, who owe Social Security and Medicare taxes on tips or wages not reported to or withheld by the employer, or who receive wages from churches exempt from employer Social Security and Medicare taxes.

If filing a return is required by the first test above and the child has no other income besides unearned income, you can avoid a separate filing for your child by making an election described later in this article.

Four tests determine whether or not a dependent child must file an income tax return with the IRS.

Using The De Minimis Safe Harbor Election

The De Minimis Safe Harbor Election allows you to write off business equipment costing less than $2,500 â including cell phones â in the first year you use it for work.

This method of deducting a cell phoneâs purchase price is very simple, since you don’t have to calculate depreciation. You’ll just have to include this election with your tax return. .

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Those Who Want To Change Their Tax Status But Take Caution

While perhaps seen as a more extreme measure, college students could decide to file independently for 2020. Thats only, of course, if they can prove that they provided more than half of their own support in the year. College students living on campus and away from home certainly come close to that threshold, meaning it might be worth examining your finances.

If theyre living at home, and they are a student and they dont work, it would be a harder stretch to say, I am not a dependent, says Mark Steber, senior vice president and chief tax officer at Jackson Hewitt.

Yet, theres plusses and minuses to making such a change. If youre a working college student, filing your own tax return independently could secure you a refund on federal taxes withheld from your paychecks.

But switching your tax status could cause your parents or guardians to miss out on other deductions that might be worth more than the $1,800 stimulus check in the long run. One such instance: If your parent or guardian is single and doesnt have any other qualifying dependents, theyd be bumped from filing with the more tax-friendly head of household status and instead be considered a single filer.

Rules For Qualifying Relative Dependents

A taxpayer must pay for more than half their dependent’s living expenses if they’re an adult, and the dependent must be a U.S. national, resident alien, citizen or a citizen of Mexico or Canada. They must live with the taxpayer all year unless they’re closely related to them, and even then the taxpayer must pay more than half their living expenses elsewhere. An adult dependent can’t have earned $4,200 or more in the 2019 tax year the tax return you would file in 2020.

You’re automatically “independent” if any one of these conditions aren’t met.

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Deducting The Cost Of A New Phone

Now you know how to deduct the business portion of your phone bill. But what if you bought a brand-new phone and want to use it for work at least some of the time?

Cell phones were formerly considered “listed property,” a type of property used for business and personal purposes that the IRS subjects to special rules. As of 2011, this is no longer the case. That means there’s need to keep ultra-detailed logs on your cell phone usage, on a call-by-call level, in order to claim it as a write-off.

Just keep in mind that, as with your monthly bill, you can only write off the business-use percentage of a phone purchase.

Employed And An Independent Contractor: What That Means At Tax Time

Congrats, youre a dedicated employee by day and a self-employed ninja by night. Kudos to you for being able to do all of that extra work because, lets face it, theres no way it is possible to easily balance both. Whatever your reason for earning extra cash, dont forget to dot your is and cross your ts come income tax time. TurboTax Self-Employed helps you file your personal and business taxes together while providing extra guidance through self-employment income and deductions.

When you hold a full-time job, your employer automatically deducts income tax, CPP and EI from your earnings. At the beginning of every year, you receive a T4 slip in the mail, which lets you know how much money you earned during the year and how much CPP, EI and tax you paid. When you receive that slip, tax preparation is so easy since everything you need to know is on that slip of paper.

But when youre self-employed, or earn self-employment income, tax filing is a whole different ballgame. Youre the only one who knows how much money you made that year and its your responsibility to report the accurate amount to the government.

Since the government hasnt charged you income tax on your extra earnings, theyll do so when you file your income taxes.

If youre raking in some extra dough, good for you, but how much you earn makes a difference in your income tax.

Hold onto all your receipts as proof.

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Can I Claim Myself As A Dependent

Editors Note: Have you ever questioned: Can I claim myself as a dependent for tax purposes? You may feel like an independent adult, but in the eyes of the IRS you could still be your parents dependent. And whether or not they claim you can have an effect on your tax return. Learn what a dependent is and if you can claim yourself as one here.

Why You Might Want To Not Claim Your Child As A Dependent

Written by Steven Albers

Understandably, many parents get in the habit of claiming their children as dependents on their federal tax returns. You generally may do so as long as your child is either under age 19 or under age 24 . But there is a reason to not claim your child as a dependent and it has everything to do with higher education.

The two primary college-funding tax credits available are the American Opportunity Tax Credit and the Lifetime Learning credit. The American Opportunity Tax Credit now permanently allows eligible taxpayers to take an annual credit of up to $2,500 for the first four years of postsecondary education. Meanwhile, the Lifetime Learning credit provides up to $2,000 in relief to those eligible.

But these credits are subject to phase-outs that limit eligibility for higher-income taxpayers. For example, for 2020, eligibility for the American Opportunity credit begins to phase out for taxpayers with modified adjusted gross incomes beyond $80,000 or $160,000 . Similarly, eligibility for the Lifetime Learning Credit begins to phase out for taxpayers with MAGIs beyond $59,000 or $118,000 .

Good Reasons

The Right Call

If your dependency exemption is phased out, it will probably make sense not to claim your child as a dependent so he or she can grab a tax credit. But if your child tax credit isnt phased out or is only partially phased out, the decision becomes trickier. We can help you make the right call.

More Resources

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I Was Claimed As A Dependent On Someone Else’s 2019 Return But Was On My Own In 2020 Do I Get A Payment

The short answer is: Yes. If you were a dependent on someone else’s tax return in 2019, but were not in 2020, then you can claim the payments on your own return this year. Assuming you meet the income limits and don’t have dependents of your own, you can expect $1,800.

However, adult dependents age 17 and older do not qualify for either payment and cannot claim them. This includes many college students, disabled Americans and elderly dependents.

Finally, eligible mixed-status families in which some members have Social Security numbers but others, typically one or both parents, do not that did not receive the first payment can claim it on their 2020 return. These taxpayers were initially ineligible to receive checks under the CARES Act, but were included in the second round and can now claim the first payment.

This article was updated to clarify who qualifies as a dependent.

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