7 of 7

Write now Article Tools

2005 TAX CHANGES THAT REALLY HURT AMERICAN FAMILIES

Many American families's look forward to tax time, for them it may help pay bills or buy clothes for the children. Perhaps they have been waiting on the new car, or that vacation they ordinarily could not afford. There are also those who wait to the very last day to file their return most likely because they will probably owe taxes.

April 15th means many different things to many different people, some found relief in being able to claim those they care for, while others were not so lucky because they had no little tax deductions.
Some folks do not realize the consequences of claiming five people on their w-4 at work until they file their taxes without those five people. There is nothing worse than a tax preparer having to tell their client "I am sorry mr/mrs client but you owe the IRS x-amount of dollars, not to mention the whole problem with the State it is going to cost you additional money. You probably were not prepared for this, by the way they except payment plans. It goes over like a ton of bricks let me tell you.
Prior to 2005, it was acceptable to claim any child whom lived with you the entire year as a dependent regardless of the relationship to the person filing the return. The most common example I can think of would be: a couple lives together as boyfriend and girlfriend; she has three children from her previous marriage and has no idea where their father is these days. She has lived for the last year and a half with the new man in her life and they have a newborn on Dec 31st. Since her pregnancy began the boy friend wanted her to stay home full time with the children because he made enough money to support them. She agrees and does not work for the entire nine months.
In the end the boyfriend could claim her three children and the couple's newborn and he possibly could have claimed her if she made less then the filing requirement for 2005. If the boyfriend made under (37500.00) with 2 children for Federal he may have been eligible for the earned income credit and perhaps some additional child tax credit. This means he would be eligible to use the four children all as dependents and get the max earned income credit as well as the other tax credits possibly making thousands of dollars difference at tax time for that family.
This was a good program and worked well for many years until people started using other people's children as their own. Say the mother did not work

• 1
• 2
• next page >>

Add your voice

Know something about Overview: Federal and state taxes?
We want to hear your view. Write now!