By Tom Breedlove, Breedlove & Associates
It’s that time of year again…tax season is officially upon us. We realize that most humans discard all tax information from their brain the minute they finish their returns. So, here are a few reminders/tips for this tax season:
- By early February, you should receive a Form W-2 from each employer that paid you $1,700 or more during the year. (If an employer gives you a Form 1099, they have misclassified you as an independent contractor – which is illegal for the family and increases your tax burden). Your W-2 should reflect the total amount of the wages paid to you throughout 2011 and also show the taxes that have been withheld from your paychecks throughout the year. If you do not receive your Form W-2s by mid-February, you should contact your employer. If you’ve had a change of address, it’s your responsibility to notify each employer (or former employer) you worked for during 2011.
Note: If a family did not pay you $1,700 or more during 2011, they are not obligated to give you a Form W-2. However, the IRS still expects you to report those wages. On Form 1040, you should enter “HSH” and the total amount of all unreported wages on the dotted line next to box 7. On Form 1040EZ, the same instructions apply, but the unreported amount is entered on the line next to box 1.
- By the end of February, your employer will file a copy of your W-2 with the Social Security Administration. This will credit your earnings record, which will directly affect how much you are paid during retirement. The greater your earnings record, the more golden your Golden Years will be.
- By April 17 (the IRS tax filing deadline is April 17th this year due to a holiday), you will need to file income tax returns with the IRS and your state (in most states). You’ll use the Form W-2s you received from your employers to complete the 1040 or 1040-EZ. You can file using the paper forms, a software product like TurboTax, or the IRS’s e-filing program (it’s free if your Adjusted Gross Income is less than $57,000). For more information about the FreeFile program, visit http://www.irs.gov/efile/article/0,,id=118986,00.html?portlet=106
- Many nannies – especially those who are single and have a child – qualify for the Earned Income Tax Credit (EITC or EIC), which can substantially reduce your income tax obligation. To see if you qualify, refer to the back of your Form W-2 or visit http://www.irs.gov/individuals/article/0,,id=96406,00.html