There are many tips to help single mothers save money on taxes. Some of them are common sense, others require just a little bit of knowledge of tax issues. A single mom can take advantage of each of these benefits without cost and with just a little bit of effort. Each choice she makes in order to change her tax liability will have an effect she may not desire, but it is her decision.
Increasing Number of Exemptions
A single mother working for an employer will have to fill out a Form W-4 that will tell the employer how much to withhold from her pay for federal taxes. If she is currently claiming a zero on the W-4, it means that more money will be taken out for federal withholding. If the single mom is facing a cash crunch through the year and needs just a little more income each week, it's a simple matter of changing the number of exemptions on the W-4 form. A single mother can claim herself and her child for a total of two exemptions which will increase her take home pay.
The effect of claiming more exemptions during the year will be to reduce the total amount of the income tax refund she will receive at the end of the year. It could, in some cases, result in her owing taxes at the end of the year; but if it's a matter of a cash flow problem that is immediate and pressing, she may not have a better option.
Claiming Advanced Earned Income Credit
If a single mother's income is below $32,000 annually, chances are she will receive the Earned Income Tax Credit. The credit can be as high as $3,000 for one child and almost $6,000 for two children. This amount is usually received at the end of the year in the form of a refund. The IRS created what they called the Advanced Earned Income Tax Credit. The total amount of what the single mother would receive at the end of the year is divided by 12 and distributed in her regular pay checks. To participate in this credit, all she has to do is fill out a Form W-5 and give it to her employer. This form, unlike the W-4, must be refiled each tax year.
Like the option above, this will result in a reduction of the total income tax refund and possibly in owing taxes at the end of the year, though this is unlikely.
Child Care Deduction
Single mothers need to work to support their children, and in order to do so, they often need someone to care for their children while they are working. Any money paid for child care so that the mother can work is considered deductible. A legal child care center will provide a statement at the end of the year for tax purposes. The statement must include the tax identification number of the center if it is a business, or a social security number if the care provider is an individual. It must also include the address where the child care took place and the amount of money paid for the child care.