Common Tax Errors Made by New Parents and How to Avoid Them
This article outlines common tax mistakes new parents make, such as neglecting to obtain a child's SSN, missing out on the Child Tax Credit, not updating withholding forms, and overlooking adoption and childcare credits. It provides practical tips to help new parents maximize their tax benefits and avoid costly errors, ensuring they gain every available financial advantage during this important life stage.
Many government programs offer tax benefits to new parents, providing financial relief during the challenging early years of parenthood. However, many parents are unaware of how to properly claim these benefits. This article highlights common tax mistakes made by new parents and offers tips to prevent them.
Not obtaining a Social Security Number (SSN) for the child: Securing an SSN for your child promptly is essential, as it enables you to access various tax credits and benefits.
Overlooking the Child Tax Credit (CTC): The Child Tax Credit offers up to $1,000 per qualifying child under 17. If the credit exceeds your tax liability, you may qualify for a refund via the Additional Child Tax Credit (ACTC). Parents can claim this credit even if the child is born late in the year, as long as they are under 17 during the tax year.
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Failing to adjust tax withholdings: Many new parents forget to update their W-4 forms to reflect their new family status. By requesting a new W-4 from their employer and indicating their dependent status, they can ensure proper tax withholding and maximize potential credits and rebates.
Neglecting adoption tax credits: Adoptive parents qualify for substantial federal adoption credits, potentially up to $13,400. This benefit can be spread over five years, easing the financial load of adoption. To qualify, the adopted child must be under 18 years old.
Overlooking childcare expenses for credits: If parents pay for childcare, they might be eligible for the Child and Dependent Care Credit, which can cover up to $3,000 for one child or $6,000 for multiple children. Many are unaware of these savings opportunities.
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