A question that I am often asked this time of year as my clients are sending their child off to college for the very first time is: Can I still claim my college student child as a dependent on my income taxes?
Most of the time the answer is yes. But there are some qualifications for that.
You may still claim your son or daughter if they are under the age of 24 at the end of the year and enrolled in college on a full-time basis (that is determined by how many credit hours their school considers full-time). They need to have attended college full-time for at least five months out of the year.
He/she must live with you for more than one half of the year (please note that he or she is considered as having lived with you while temporarily away from home due to education, illness, business, vacation or military service).
If your child works while attending school, his/her earnings cannot have provided more than one half of his or her own support. (T
his is rarely an issue.)
If a student meets these four tests, the parents may claim the exemption if the student meets the general dependency tests under section 152(b).
It is very IMPORTANT to note this next part:
If your child is going to file his/her own tax return (as they may choose to do if they are working while attending school), and you plan to claim them as an exemption on your personal taxes, when he/she fills out their personal tax return, make sure they DO NOT check box 6a in the first section of form 1040 because you will be claiming them. If they do claim themselves on their own return, it will lead to discrepancies and the need to amend both your return and their return.
Can you still claim your college aged child on your tax return?
Independent Contractor versus Employee
Independent contractor versus employee. There is a fine line but it’s a line that you need to seriously consider when determining how you classify and pay those who work for or with you. If you do not adhere to the rules of classification, the consequences can cost you and your business a great deal in fines, penalties and back taxes.
Click on the link below to help your determination. If you have any questions or concerns about this, please feel free to ask. We’re here to help.
Internal Revenue Service 20 point Checklist for Independent ContractorMistakenly classifying an employee as an independent contractor can result in significant fines and penalties. There are 20 factors used by the IRS to determine whether you have enough control over a worker to be an employer. Though these rules are intended only as a guide-the IRS says the importance of each factor depends on the individual circumstances-they should be helpful in determining whether you wield enough control to show an employer-employee relationship. If you answer “Yes” to all of the first four questions, you’re probably dealing with an independent contractor; “Yes” to any of questions 5 through 20 means your worker is probably an employee.
- Profit or loss.Can the worker make a profit or suffer a loss as a result of the work, aside from the money earned from the project? (This should involve real economic risk-not just the risk of not getting paid.)
- Investment. Does the worker have an investment in the equipment and facilities used to do the work? (The greater the investment, the more likely independent contractor status.)
- Works for more than one firm. Does the person work for more than one company at a time? (This tends to indicate independent contractor status, but isn’t conclusive since employees can also work for more than one employer.)
- Services offered to the general public.Does the worker offer services to the general public?
- Instructions.Do you have the right to give the worker instructions about when, where, and how to work? (This shows control over the worker.)
- Training.Do you train the worker to do the job in a particular way? (Independent contractors are already trained.)
- Integration.Are the worker’s services so important to your business that they have become a necessary part of the business? (This may show that the worker is subject to your control.)
- Services rendered personally.Must the worker provide the services personally, as opposed to delegating tasks to someone else? (This indicates that you are interested in the methods employed, and not just the results.)
- Hiring assistants.Do you hire, supervise, and pay the worker’s assistants? (Independent contractors hire and pay their own staff.)
- Continuing relationship.Is there an ongoing relationship between the worker and yourself? (A relationship can be considered ongoing if services are performed frequently, but irregularly.)
- Work hours.Do you set the worker’s hours? (Independent contractors are masters of their own time.)
- Full-time work.Must the worker spend all of his or her time on your job? (Independent contractors choose when and where they will work.)
- Work done on premises.Must the individual work on your premises, or do you control the route or location where the work must be performed? (Answering no doesn’t by itself mean independent contractor status.)
- Sequence. Do you have the right to determine the order in which services are performed? (This shows control over the worker)
- Reports.Must the worker give you reports accounting for his or her actions? (This may show lack of independence)
- Pay Schedules.Do you pay the worker by hour, week, or month? (Independent contractors are generally paid by the job or commission, although by industry practice, some are paid by the hour.)
- Expenses.Do you pay the worker’s business or travel costs? This tends to show control.
- Tools and materials. Do you provide the worker with equipment, tools, or materials? (Independent contractors generally supply the materials for the job and use their own tools and equipment.)
- Right to fire. Can you fire the worker? (An independent contractor can’t be fired without subjecting you to the risk of breach of contract lawsuit.)
- Worker’s right to quit. Can the worker quit at any time, without incurring liability? (An independent contractor has a legal obligation to complete the contract.)
Living YOUR dream
Do you find yourself dreading the payroll, the paperwork, the bookkeeping that awaits you at the end of the day, the week or the month?
You love what you do, your business….it’s your passion! But those mounds and piles of receipts, bank statements, invoices stress you out. And so you toss them in the proverbial shoebox or stuff them away in the file cabinet and think you’ll get to it later but later never comes. Well, later comes when your tax accountant needs it at the end of the year and then you’re scrambling.
But alas, help is here. We can help you with that seemingly daunting task. We can meet with you, at your business, on a weekly, monthly or quarterly basis and handle that paperwork, do the entries and give you accurate reports. We can also handle your payroll for you on whatever schedule you and your employees are accustomed to.
Our rates are extremely reasonable. We love doing what we do, and by doing what we do, we allow you more time and energy to do what you love to do. It’s a win-win situation.
Call or email me today and let’s discuss what our services can do for you and your business so you can go back to living your dream and following your passion without stressing yourself out over those tasks you angst.
280-4209 or lorikane2000@yahoo.com
The Bottom Line Accounting 