- Life Milestones – How Your Client’s Life Changes Impact Their Taxes
Life Milestones – How Your Client’s Life Changes Impact Their Taxes
Tax returns can be affected by seemingly small life changes. It goes without saying that major life changes will also cause as the preparer of people’s taxes, you need to be aware of how these life milestones affect how taxes are filed. Since you only see clients periodically, here are some changes that your clients might have experienced since the last time that you saw them.’
Life Milestones: How Your Client’s Life Changes Impact Their Taxes
They say that the flap of a butterfly’s wings can cause a tornado. While we are not here to discuss the truth of that statement, it is true that small changes now can cause bigger changes later on. Here is a list of some specific changes that may impact your clients’ taxes.
1 – Starting a New Job or Resigning From an Old One
Getting a new job will affect taxes especially if the two jobs have a big difference in pay. Whether the amount is lower or higher, it will definitely affect the computations for the tax and financial documents. On the other hand, losing a job will also affect taxes if income stops coming in. Also, if you enrolled for unemployment benefits, this will also have an effect on the client’s taxes.
2 – Tying the Knot
Getting married can also impact the filing of taxes because most couples file a joint tax return every year. However, there are certain instances where filing separately will be more beneficial. Regardless, it is crucial that you advise your clients as to how they should file their taxes.
3 – Getting Divorced
There are many factors that come into play when you file for taxes for clients who are divorced. Keep in mind that they will not be able to file a joint tax return when their divorce will be finalized. Also, only the custodial parent (the parent who gets the child for the majority of the year) can claim the child as a dependent.
4 – Having a Baby
When a baby is born, the proud parents will be entitled to the Child Tax Credit. This will be a credit of $2,000 until the child turns 17. Parents can have this tax for each child they have who is under the age of 17. They will also be able to apply for a refund for $1,400 of the credit.
5 – Adopting a Child
Just like with biological children, they will also be entitled to the Child Tax Credit if they choose to adopt. However, one major difference is that they will not be able to apply it toward their tax refunds.
This is not an all-inclusive list of all the life changes that would affect the taxes of your clients. It is a must that you are aware of the instances that may have an effect on their taxes. This way, you will be able to advise them about how to move forward with their taxes after the life event. If you are in charge of preparing the taxes for your clients, you can always rely on Keystone Tax Solutions. We provide reliable tax software
specifically designed for tax preparation. Get yours today!