Should You File An Amended Return?

This tax season came and passed but you managed to get your taxes done just in time. However, before you could kick back and relax you realized that something was not right. Maybe you got a new W2 in the mail or you realized you could have saved money if you changed your filing status. It’s something that happens to the most careful taxpayers and sometimes it is out of your control. That is why the IRS allows you to amend your return in order to fix the mistakes you made the first time around.

If you do realize that you made a mistake or could have saved more money, don’t just chalk it up to bad luck and wait for the following year. If your mistake causes an inaccurate tax return, you could get in trouble with the IRS. If you could have saved money, don’t waste an opportunity to get that money back.

When to Amend

There are several reasons you might want to file for an amended return. Here are a few things that, if forgotten, should definitely alert you that an amendment is in order:

  • You forgot to claim an additional dependent. Maybe you didn’t realize your elderly aunt who lives with you qualifies as a dependent or maybe you got caught up in replicating your return from last year and you forgot about your new born child! Either way, a dependent can be a significant tax deduction. Conversely, if a child moves out or no longer qualifies you should remove them as a dependent. If you don’t, the IRS will have an issue.
  • Reporting the right filing status is very important. For instance, if you are a single mother with dependents, you should probably be filing as a head of household rather than a single. The right filing status may make you eligible for more deductions.
  • If you receive a new or updated W2 that would change the amount of income you claimed you need to file an amendment. Incorrect or inaccurately reported income is a major red flag for the IRS and may trigger an audit.
  • Forgetting to add or make changes to deductions is an appropriate reason to review your taxes and amend them. You might be overpaying by large margins. Also, if the deductions you did claim are inaccurate this also needs to be corrected.

How to Amend

When you amend you tax returns pay close attention to the details. The IRS will go over an amended return more closely and with more scrutiny than a regular return. To amend your return first you must fill out a new long Form 1040 and be careful not to leave out any necessary information or documents.

Next fill out your 1040X. Make sure you have your original and your new 1040 close by as you complete the 1040X; they need to match line by line. After you are finished, explain your changes on the Part III section. Use simple and clear language but don’t leave out any necessary information.

If you need help or if you are confused about this or any other tax process, contact a professional. Levy & Associates is a group of professional tax specialists who may be able to help with your tax issues. Don’t leave money behind and don’t leave errors in your return. If you made a mistake or left something out, fix it before the IRS fixes it for you.

Filing your taxes online – #HRBTaxChat with H&R Block Canada, @KrystalAtWork, and @ThirtySixMonths

Heads up: I’m super excited to host a twitter chat with Give Me Back My Five Bucks and Thirty Six Months and H&R block. Here are the deets:

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I’m particularly excited to file my taxes this year because I’m expecting a large refund. Because I went back to school for my MBA in September, my regular income stopped and I immediately accumulated a whack of tuition credits (the first term of my MBA cost over $10,000 in tuition & fees — that would have paid for two years of my Bachelors degree!).

The reduction in my income for the last quarter of 2013 and paying for my education myself will ensure I get an income tax refund this year. 

Since I hadn’t finished using up my tuition credits form my undergraduate degree, I’m starting think my perpetual love affair with higher education might help me keep taxes down until I’m 30. I want a point that this isn’t a reason to go back to school, but it definitely makes the costs easier to manage. The Canada Revenue Agency website explains what and how much you can claim for education.

I always file my taxes myself and I always do so online.

Why? It’s easy. Online tax forms will do calculations automatically as you fill out the forms with your T4. There’s no busting out the calculator and figuring out which line is which yourself, the program will do it for you. Most people hate filing their taxes because it’s tedious and confusing, but using an online program takes the headache out of it.

Using tax software results in less chance of error on your tax return,

and filing online means you can receive your return in as little as 2 weeks

I know some people like to have an accountant do it or they give it to their parents or whatever, but this is unnecessary for the majority of people who’s income is straightforward. Part of taking responsibility for your finances is understanding how taxes work, so it’s good experience to file your return yourself.

If you earn money as a blogger in Canada, Save Spend Splurge wrote a comprehensive post on how to declare your income as a blogger for tax purposes. 

I’ve filed with HR & Block for the past 3 years, but I used TurboTax before that and found them comparable. Both of these are affordable programs, and if you’re a student like me, the software is usually free!

What am I planning to do with my refund?

Hopefully make a dent in next year’s tuition payments! Seriously though, I’m hoping to dump half of it into savings then use the rest to scratch my travel itch and take a vacation abroad. I’m pretty excited picking out a place to go!

Are you expecting a refund or to have to pay this year when it comes to taxes? Are you planning to splurge or save your refund if you get one?

No matter your tax situation or how you’re filing, please join us in the #HRBtaxchat next Tuesday! =)

Wanna save money? Get married young!

Truth time: 80% of the reason I decided to write this article is because I knew Bridget would go into stat overload when she saw it. I know, I know. There is a 50% divorce rate, that percentage increases for younger couples, yadda yadda yadda.

(Bridget: ….. lol, Erin.)

In my introduction post, one reader pointed out that I am the youngest writer on the site but the only one that is married. While more of my peers are getting engaged and married now, it was not normal when I got married at the tender age of 20. From a purely statistical standpoint, getting married at such a young age is a terrible idea. (Right, Bridget?) However, it does come with some serious financial benefits.*

- Financial aid. If your parents make a decent income but aren’t helping you with tuition, you get screwed over in financial aid. I didn’t have an issue getting loans (evidenced by the $40,000 of student loan debt I managed to accumulate), but grants were much harder to come by. As soon as I got married, financial aid was based solely upon mine and my husband’s income. Two college kids aren’t really flush with cash so I started getting the maximum amount of grants. If only I didn’t take out additional student loans to pay for…whatever the hell I blew them on.

- Double the (meager) income. College students do not make anything much. But when you go from one meager income paying for your crap apartment to two meager incomes paying for your crap apartment, it really does make a difference. Same goes for utilities, cable, Internet, what have you. Aren’t roommates the same thing? No, because unless you are super close you will need extra space, i.e. a second bedroom. Which costs extra money. Also, they get mad when you eat their food. I prefer the “what’s yours is mine” relationship that can typically only be found in committed relationships.

- Taxation. When you are making the salary of one adult combined but claiming the exemptions of two, your tax liability is slim to none. It’s beautiful. While popping out children young can also be beneficial for tax purposes, I don’t recommend this as a way to save money (to the dismay of my mother and MIL). I’m not sure if you know this, but the cost of a child actually outweighs the $3,800 exemption. I’m pretty sure that only pays for like three weeks of diapers…

So that’s my financial advice for the day to you young college students. Just get married!**

Did you get married young? Do you have any additional financial benefits to share? Everyone else: share your favorite “raining on someone else’s parade” statistic!

*I am well aware that marrying young can come with a host of downsides as well, many of which are financial. But in a world of hyper-responsible PFers, I wanted to offer the rebel perspective. Because let’s be honest, we aren’t always going to make our decisions based on statistics and plenty of us “irresponsible youngins” turn out just fine.

**Please do not get married young just because you want to reap the financial benefits or because I’m your idol and you want to be just like me. Marriage is kinda a big deal and should not be taken lightly. Unless you are a celebrity, in which case it’s not really a big deal. Go nuts.

Bridget: remember this:

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Broke People, Unite! It’s Tax Time in North America!

As American readers and writers in the personal finance realm, we know more things about the finances of people in other countries than any of our American peers would ever want to know. More specifically, we have access to tons of great Canadian personal finance writers that keep talking about RRSPs and TFSAs and other acronyms that most Americans have never heard of and probably never will. Meanwhile, the Canadians are reading about our 401(k)s and IRAs (which they probably already knew about because everyone knows everything about us, right? ‘Murica!)

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Well today I’m going to go over a bit of information on taxation for low income earners – those individuals in college or recent graduates – for both countries. As an American tax accountant, I pretty much know everything there is to know about the tax code*. And I’m basically an expert on Canada too as I’ve watched a lot of Degrassi and I went there once when I was four.

Disclaimer: This information is applicable for the 2012 Tax Year. Don’t read this in 2025 and get mad because the tax rates are up to 60% but I said 15%.

#1: Tax Rates. Both Canada and the U.S. are on progressive tax systems, meaning that the more you make, the higher the percentage of tax you have to pay. In the United States, marginal tax rates range from 10% – 35% federally. Most states and many localities tax residents again at varying rates. In Canada, marginal tax rates range from 15% – 29% federally and then anywhere from 5.06% – 21% provincially/territorially, depending on where you live. Federal and Provincial/Territorial tax is administered by the CRA, unless you live in Quebec – a province that is apparently too good for the CRA. Calm down, Frenchie.

Both Canada and the U.S. have standard deductions/exemptions/credits that assist lower income people in lowering their taxable income. While I would love to explain exactly how taxable income is calculated, I won’t for the sake of brevity. Ain’t nobody got time for that! Suffice it to say, there are serious tax benefits to being low income and both countries have tax systems in place to keep very low earners from paying any federal tax.

#2: Education Deductions/Credits. Both the U.S. and Canada want to award students for borrowing a lot of money and going to school. The U.S. has the American Opportunity education credit (up to $2,500) and Lifetime Learning education credit (up to $2,000), which are based on qualified expenses paid to an eligible post-secondary institution. Another option is the Tuition and Fees Deduction, which can reduce a student’s taxable income by up to $4,000. For recent graduates starting to pay back their loans, up to $2,500 of student loan interest is deductible annually.

Canadians can claim $400 for each whole or part month in the year in which they were enrolled in a qualifying educational program as long as they were enrolled full-time (or part-time with a disability). They can also claim tuition fees incurred for the courses taken within the year as long as the fees are greater than $100. To offset the ridiculous prices of textbooks, Canadians can claim $65 for each full-time month and $20 for each part-time month. Like Americans, Canadians can claim interest paid on their loans, but they can carry interest forward for 5 years, which is awesome. Americans have to claim it for the year paid but Canadians can defer interest paid to offset higher taxation as they increase their income.

#3: Lottery winnings. Low income earners are not usually satisfied with their low incomes. They want to be rich, quick. So they play the lottery. If Americans win and take the installments, they have to include the annual payments and any amounts received that are designated as interest on the unpaid installments in their gross income. And then there is Canada…

THEY DON’T TAX THEIR LOTTERY WINNINGS. Like, for real. So it would make sense that Americans that play the lottery would want to move to Canada right? Wrong. Because unlike Canada, the U.S. taxes on a citizenship basis, not a residence basis. Move wherever you want Americans, if you are making money there, you are going to have to pay the piper.

Tax season is pretty much the only time of the year that us lower income people get the breaks (unless you are a tax accountant, then the double whammy of mediocre pay and increased stress and anxiety hits you like a ton of bricks. Or feathers. Whatever, it’s a ton.). It’s the one time of the year our student loan debt actually helps us a little. Live it up, broke people! Our time has come.

Whether you hail from the US or Canada, H&R Block At Home Online Taxes is currently offering a discount on their tax preparation software until February 18th, and since you have to file your taxes anyway, now is as good of a time as any.

*I do not know everything about the tax code. Have you ever seen the tax code? I’ve worked in tax a year; you should not expect that much from me. This article is comprised of information from one year of tax preparation experience in a CPA firm, five years of preparing my own tax returns, and Lord Google**.

**C’mon I took this more seriously than Google. Any actual tax information came from www.irs.gov or www.cra.gc.ca. At the very least, I verified what I learned via Google on the aforementioned sites.

This is the first time I’ve paid taxes, ever

It’s tax season which is normally my favorite time of year, since it was always an annual occasion where I receive a cheque that’s usually larger than my monthly income. I’ve taken for granted that I’ve always received a full refund. At 27, I’ve never paid income tax, which isn’t such a bad deal.

Alas, those days are over.

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this sums up exactly how I feel right now

While I have no interest whatsoever in returning to my graduate student stipend or days serving tables part time, I am a little bummed that it’s time to pay the piper. Honestly, I just thought I had more time. I have ample tuition credits, I can claim the interest on my student loans, I’ve made contributions to my retirement, I even have self-employment deductions. For 2012, I paid over $10,000 to tax man so I was trying to be humble and modest and say things like, “yeah I think I’ll get about $6,000 back” because I’m not greedy, you know?

Things that are fun about taxes:

1. Universal healthcare

2. Public Education

3. Roads

4. Parks

5. Libraries and Museums

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Things that are not fun about taxes:

1. Paying them

Since putting my numbers into H&R Block At Home Online (which is what I used last year too), I learned I’ll probably be getting about half that amount back, if that. In my head I had already spent a $6,000 income tax refund. Granted, all of it was going to go towards my student loan, but it would be such a big hit to the balance I was looking forward to being completely debt free ASAP. Now I’m actually going to have pay off thousands of dollars of student loan debt out of my working income and, as you already know, I’ve been sick of paying off my debt for… well, ever since I’ve had it.

I’ve been playing around with H&R Block At Home Tax Software and seeing how much extra I should put into my RRSP to net a greater return, and while I can boost my refund by a few hundred dollars, there’s no way I’m getting out of paying taxes completely. I knew the day would come, I was just hoping it was next year.

It’s hard being a grown-up. You’re poorer than you think.