Here’s a scoop.  Personal tax filing is now barred until 27  January  Lincoln’s Birthday (12 February; hot off the press RIGHT now).  (Business entities can file now.) Each and every year it gets later!  But, that’s not the whole story- many states won’t finalize their forms until the 5^th of February, so there may be further delays barring your tax filing.

The table above should keep you from filing late and getting hit with penalties.  (NOTE:  You must have paid 100-105% of your 2019 tax obligation via estimated tax payments and withholdings by 15 January 2020 to avoid penalties.)

And, now let’s address a tax filing issue that comes up at least 10 times a year among my clients.

https://www.youtube.com/watch?v=WJI1N61grmc

Parents- Don’t let your babies grow up to be cowboys.  Oh, wait.  That’s Waylon Jennings.  Nope, that’s not quite what I wanted to warn you about.

I meant, Parents- don’t let your kids file their own tax returns without talking it over with you!  And, no, I don’t mean if your kids are like mine (way over 26 y old and not in college)- I mean if they are 26 or under.

Too many of these folks are desperate to get back the taxes they paid, so they rush to file tax returns.  Without realizing that the tax filing  can really screw up their mom’s and dad’s accounting.

Of course, if your child is covering more than 50% of their expenses (which means- if they are going to MIT without a scholarship- they need to be making at least $ 28,125 a year), then they can file anyway they want.  (The IRS defines “support” to include food, lodging, clothing,  educational, and medical expenses.)  Because these kids are no longer potential dependents for you.

Yes- I know that the Congress (through the misnamed Tax Cut and Jobs Act of 2017) removed the financial concept of dependency, but there are other aspects of dependency that come into play.  So,  you must discuss tax filing with your kids- often each and every year until they pass the threshold of 26 years of age.

The CARES Act (bet you didn’t remember that’s an acronym for Coronavirus Aid, Relief, and Economic Security Act) yielded folks $1200 per adult ($ 2400 for joint filers) in “stimulus” relief (better known as “I survived the disaster and made less than $ 75 K a year) for 2019 and is about to add another $ 600 ($1200 for joint filers- with more for dependent kids) for 2020.  Those funds are really an advanced credit on taxes- one you can see this year on line 30 of Form 1040 or 1040-S (as in student)- where it’s termed the ‘recovery rebate credit’.

Kids that lost their jobs, kids that had their hours cut- they are desperate for that cash.  But, it’s not all theirs, if mom and/or dad listed them as a dependent.  But, that recovery rebate looks mighty fine to them. It doesn’t help that the IRS encourages kids to claim that credit.

And, if you (the parent) are a single parent, not having a dependent screws up your filing HEAD-OF-HOUSEHOLD (HOH) status- which incurs much lower tax rates than does an individual. (Consider the up to  $ 4000 in additional taxes!)  Then, there’s the education credits and, perhaps, even the EITC (earned income tax credit) that is placed in jeopardy should the child choose single tax status without parental discussion.

That $600 for junior or missy (‘stimulus’ credit) needs to be weighed against the $3584 EITC credit for one qualifying child, the $ 2500 AOTC (American Opportunity Tax Credit- an educational credit), and/or the $ 2000 LLC (Lifetime Learning Credit- another educational credit).  Not to mention the above-covered HOH status.

Should the child have jumped the gun, they must file an amended tax return – plus return the stimulus credit to the IRS.  Oh- and until that’s fully processed, mom or dad won’t be getting their credits reduced from their tax bill.  That could be an EIGHT week wait or more- not exactly the kind of financial stress folks need added to their concerns during the pandemic.

However, if mom or dad (their taxsble income crossed the ~ $85K threshold)  is only getting the dependent care credit ($ 500) because they don’t qualify for other deductions/credits (these are income limited)- then the adult child may be perfectly fine filing as a single taxpayer.  (If the child is a dependent, they indicate same to the IRS on Form 1040 that they are dependent of another.)

Now that could be one less problem this year.