What New Parents Need to Know About Tax Preparation
The tax deadline has been delayed to July 15th due to the recent COVID-19 outbreak, meaning you have more time to sort through any complexities surrounding filing. One of the life changes that can affect your taxes is becoming a new parent. If you’re not sure how to reflect this in your documentation, the following tax preparation guide offers advice.
3 Tax Preparation Tips All New Parents Should Know
1. Keep Your Child’s Social Security Card Handy
You have the right to list your child as a dependent on your return. To do this, though, you’ll need to have their Social Security information on-hand.
As the parent, you’re responsible for ensuring your baby is registered with the Social Security Administration and has been issued a number before tax season starts. Most often, this occurs while parents are still at the hospital with their newborn.
2. Reevaluate Your Withholdings
If you work for a company, you’ve likely noticed that taxes are automatically withheld from each paycheck. Having a baby qualifies as a deduction, though, which means your employer won’t have to take out as much to satisfy your tax contributions. After you have your little one, request a new W-4 and fill it out accordingly.
3. Reconsider Your Savings Efforts
Having a savings account is important at any juncture in life. But once you become a parent, it becomes even more crucial. Investing in an education savings or health savings account will not only help you prepare for your child’s future, but it will also offer you tax benefits when the time comes to file. For example, the funds you put into a 529 or Coverdell Education Savings Plan are tax-deferred, meaning that any interest that you accumulate there will not be taxed until it is taken out.
If you need assistance with tax preparation, turn to Selph and Friday, CPA in Texarkana, TX. Since 1986, these knowledgeable accountants have provided residents throughout the area with a broad range of effective, insightful services. Visit their website to learn more about their team. Call (903) 792-0281 to schedule a consultation today.
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