You asked, we answered! Due to the amazing response of tax questions that we received ahead of the podcast with Maggie Klokkenga, CPA, CFP®, we knew that we couldn’t answer them all in Mailbag. Instead, we asked Maggie to answer your questions. We have split them up by topic. So, without further ado, Maggie answers your tax filing-related questions.
How do I contact the IRS to help me file my taxes for free?
Free File for IRS: go to www.irs.gov, and click on the button: File Your Taxes for Free.
Which software is recommended to file taxes, especially for first-timers?
NerdWallet recently wrote on their choices for the best tax software in 2019. They listed that TurboTax was the easiest to use, TaxAct was their budget pick and H&R Block had the best support options. Many of these tax software companies also offer a free file of your federal tax return. The IRS offers Free File software, which allows a taxpayer to file their federal and state taxes for free if their income is below $66,000.
I have two daughters, ages 19 and 21, who have summer jobs. Both are still dependents. Can you clarify when they need to file taxes, when to file on their own versus on my tax return?
You can claim your daughters’ income on your own individual tax return only if the income was unearned, not earned from the summer jobs. Your daughters are not required to file their own tax returns unless their earned income is greater than $12,000 each. However, you may want to file tax returns for them in order to get the taxes back. You can still claim each of your daughters as dependents on your own tax return even if they file their own.
That brings up a major change from TCJA that really was not discussed in other media. Instead of using the parents’ marginal tax rate to tax the unearned income (called the kiddie tax), the tax brackets used are now the same brackets as what trusts and estates use. The reason why this is major is that trusts and estates quickly get to the top tax rate of 37% with only $12,500 of taxable income, versus a married parent who is filing a joint return needs over $600,000!
I lived in Florida for three months this year before moving to Colorado for the remainder of the year. In filing my taxes, TurboTax wants me to file two state forms, but I never had to file a Florida state tax return before. Do I need to now that I was split between two states?
Typically, when you move from state to state, you need to file two part-year tax returns, one for each state. However, Florida does not have a state income tax, so before purchasing any state tax returns from TurboTax, I recommend contacting their customer support and asking the same question.
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Or have a question related to taxes and IRAs or 529s? See Maggie’s previous Q&A.