Summer Camp

Summer Camps & Tax Credits!! No Really :)

Parents are stressed in so many ways now-a-days, work, school and summer – what to do with the kids while I work!  However there may be at the least, some tax relief available.   And if you haven’t yet filed your 2016 taxes… don’t forget last summers camps!

Here’s the  IRS Special Edition Tax Tip 2014-16, June 11, 2014

Many parents pay for childcare or day camps in the summer while they work. If this applies to you, your costs may qualify for a federal tax credit that can lower your taxes. Here are 10 facts that you should know about the Child and Dependent Care Credit:

  1. Your expenses must be for the care of one or more qualifying persons. Your dependent child or children under age 13 usually qualify. For more about this rule see Publication 503, Child and Dependent Care Expenses.
  2. Your expenses for care must be work-related. This means that you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse meets this rule during any month they are a full-time student. They also meet it if they’re physically or mentally incapable of self-care.
  3. You must have earned income, such as from wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care. This rule also applies to you if you file a joint return. Refer to Publication 503 for more details.
  4. As a rule, if you’re married you must file a joint return to take the credit. But this rule doesn’t apply if you’re legally separated or if you and your spouse live apart.
  5. You may qualify for the credit whether you pay for care at home, at a daycare facility or at a day camp.
  6. The credit is a percentage of the qualified expenses you pay. It can be as much as 35 percent of your expenses, depending on your income.
  7. The total expense that you can use for the credit in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.
  8. Overnight camp or summer school tutoring costs do not qualify. You can’t include the cost of care provided by your spouse or your child who is under age 19 at the end of the year. You also cannot count the cost of care given by a person you can claim as your dependent. Special rules apply if you get dependent care benefits from your employer.
  9. Keep all your receipts and records. Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your tax return.
  10. Remember that this credit is not just a summer tax benefit. You may be able to claim it for care you pay for throughout the year.
Coffee Couple

Claiming your Boyfriend or Girlfriend on your return? Yes, You can!! (Maybe)

Did you know that you can claim your Boyfriend or Girlfriend (Partner) on your Personal Tax return!!   However there are a few criteria you must meet in order to take advantage of this little known rule.

In order to take advantage of this, your partner must meet the following tests…

  1. The Partner must be a U.S. Citizen, Resident Alien or a Resident of Canada or Mexico
  2. Can not be the Qualifying Child of the taxpayer
  3. You must have lived together the entire year as a member of your family and cohabitation must not be against the law in your state (FYI in Wisconsin, it’s not, I just looked)
  4. She/He can’t have earned over $4,050
  5. You must have paid more than ½ her/his living expenses during 2016
  6. And, he/she must not be able to be claimed by anyone else (ie his/her parents, grandparent, etc)

 

12-7-2016a

Don’t Skip These Business Year-Enders

“In The Loop” Magazine

Nov – Dec, 2016 Issue

Don’t Skip These Business Year-Enders

 It’s a fact, there’s only a few weeks left of the year, and they will likely be hectic for you and your business. Before you dive into the holiday season and relax, it’s important to get your business in good shape for tax season—or you’ll be feeling the pain come January. Here’s a list of business “year–enders” that you should tackle now so you can enter 2017 feeling in control and stress-free.

1. Determine employee bonus payments and withhold the required tax amounts.
If you’re rewarding your employees with bonuses, don’t forget about tax. Bonuses are subject to income tax withholding, FICA and FUTA taxes—just like regular pay.

2. Pay your vendors and contractors in full by year end.
For contractors, you may have to submit a W-9 form, and you’ll also need to give each contractor a 1099-MISC form by January 31.

3. Prepare your records for local, state and federal payroll.
Make sure you have everything up-to-date and comply with all payroll regulations, including any recent changes.

4. Review your balance sheet and profit and loss statement.
Taking a look at your assets, liabilities and equities will give you an idea of how well your business performed this year and help you identify any areas that you need to improve. In addition, your income statement will list each revenue-generating item, along with your tax-deductible expenses. This is a useful way to look at your profit and loss for the year.

5. Analyze your cash Flow.
Use cash reports to understand how much cash you have on hand. Cash flow is crucial, so if you’re having trouble controlling it, please reach out to our firm for help.

6. Tally up your estimated tax payments for the year.
If your business is like most small businesses, you’ve paid quarterly estimated tax payments throughout the year. Keep track of what you’ve paid, so that you have those numbers ready for your taxes and so you know how much you’ll owe after year end.

7. Review all of your payroll information.
Now’s the time to make sure that you have all of your employee information current and securely stored. In addition, make sure that you have the people who work for you correctly classified to avoid a payroll audit and penalties.

8. Take stock of how well you met your goals for the year.
Take some time to consider if you achieved everything you intended to last year. If so, great. If not, try to find out why. Making goals for the coming year can help keep you motivated as your business grows. Review them regularly to stay on track.

These “year-enders” are important steps to help you prepare to close out 2016 and look ahead to the coming year. Once you’ve checked off the list, enjoy some well deserved downtime.

Source: Xero.com

11-28-2016

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11-17-2016a

Important changes coming in 2017 to deadlines for business tax filings

Important changes coming in 2017 to deadlines for business tax filings including:

  1. W-2 and 1099 filings are due on January 31, 2017 – This is 30 to 60 days EARLIER than past years. These forms are still due to your employees and contractors by January 31, so it is still a good idea to prepare and file these early.
  2. Partnerships, LLPs and Multi-Member LLCs (filing Partnership Form 1065)  – Shorting filing period – Need to be filed by March 15 or the 15th day of the third month following the end of the organization’s fiscal year end. The previous deadline for this return was April 15. Extensions are available for up to six months, filed no later than September 15, 2017.
  3. S-Corporations Form 1120S – No change to filing deadline or extensions.  Returns for these entities are still due in March 15th or the 15th of the Third month following the organizations Fiscal year end.
  4. C-Corps filing Form 1120 Previously filed on March 15th now get an extra 30 days with the new Due Date of April 15th or the 15th day of the fourth month following the end of the organization’s fiscal year. Extensions can be filed no later than September 15. After 2026, C-Corporation extensions will be available for up to six months after the initial due date.
  5. Trust and Estate filing Form 1041 the extension due date has changed from September 15 to September 30.
  6. Exempt Organizations filing Form 990 now have only one extension until November 15.

If you have any questions about the above changes please do not hesitate to contact our office.

W-4 image

Filling out your Federal W-4 Form

If your employer hasn’t already, they should have given you a new W-4 form to update your Withholding exemptions. These should really be updated each year and adjusted according to what your tax liability was for the prior year. Now, being it’s only January, you most likely won’t have your W-2 or Tax Returns completed yet for last year but if your filing status has changed … ie you got married, had a child or other dependent, or possibly bought a house… you should go through the step by step calculation to see if you have your exemptions correct.

What is an exemption? A Withholding Exemption is a deduction from your gross income that reduces your period income by a given dollar amount when calculating your Federal and State income tax on that payroll amount. Example: If you are paid weekly, 1 exemption is equal to $43.30 (rate for 2016) so if you claimed 3 exemptions and were paid $500 per week, your TAXABLE income for Income tax purposes would be $370.10 ($500 less 3x$43.30 or $129.90). The exemption amount changes depending the frequency you are paid. The annual value of each exemption is $2,250 so if you are paid monthly, your exemption amount would be equal to $187.50 PER EXEMPTION (or $2,250 divided by 12).

How many exemptions should I claim? Don’t get carried away on claiming exemptions! The more exemptions you claim, the less is withheld in Federal and State income taxes on each paycheck. Although this may sound like a great idea, it could end up leaving you with a very large tax bill at the end of the year when you finally do your tax returns. Try to match your exemptions to what your liability actually is so that you come out with a Zero net tax, in other words No Tax Due but No Tax Refund either. This may be something you want to consult with your tax accountant on. I know a lot of people think that if they have more withheld that means a nice large check at the end of the year but I don’t agree with this savings plan. Set up a Savings account and put those funds in an account that you have access to in the event you have an emergency and need access to your money! Remember if you give it to the Government, you’ll need to wait to get it back. Wouldn’t you rather collect interest on that money and have it available if you need it?

The basic rule on exemptions is you get 1 exemption for each person who appears or will appear on your Income Tax Return. However, this basic amount is a TOTAL number of exemptions you can claim. So is you are married with a child, the total basic exemption you can claim on your W-4 is 3. You can split these in any way you’d like between you and your spouse.  If your spouse works too, you and your spouse need to split up the exemptions – if you take all 3, your spouse would need to claim 0. So long as you add up to 3 between the 2 of you, you and your spouse can claim any combination. In addition to the exemption for each person on the return, there are also exemptions you can claim for Child Care, Head of Household, and other Dependent Care expenses.

Should I be claiming Exempt from Withholding Taxes? Unless you are a FULL TIME STUDENT AND/OR your income is LESS than your Standard Deduction and Personal Exemption(s) on your Tax return, you can not claim exempt from withholding – period! This status is meant for tax payers who will have NO Tax Liability in the given tax year. If you claim this and your employer suspects that you do not fall into the category that allows you to claim exempt, they can consider your Form W-4 as invalid and request you complete a new form. However, if you refuse, they can send in your W-4 to the IRS for review. If the IRS reviews your W-4 and determines that you have falsely completed your form, the IRS will send you and your Employer an “INITIAL LOCK IN LETTER”. This letter will indicate that you have 10 days to correct your W-4. However, the IRS can also send you and you Employer a “LOCK IN LETTER” that permanently sets the amount of withholding exemptions you are allowed to claim. And normally, they will set your new withholding Exemptions at Single with 0 Exemptions – insuring the maximum amount of withholding. Under these letters, you can appeal but your employer can not change your withholding without a release from the IRS. Basically, the IRS is punishing you for not withholding federal income taxes based on information they have from your prior years Tax Return and your filed W-2. If you are not sure if you can claim exempt, ask your tax accountant or your Payroll Administrator at you place of work.

Breaking News

Breaking News!

Congress has reached a Budget deal which incorporates and reauthorizes some tax breaks and incentives for individuals and small business.   Below is a list of items that are PERMANENTLY extended!!

The credits being permanently extended include:

  • An expanded Earned Income Tax Credit for low-income earners;
  • The Child Tax Credit for low and moderate income workers;
  • The American Opportunity Tax Credit to help students under age 40 pay college tuition and expenses;
  • Low income housing credits;
  • An expanded research and experimentation credit;
  • Section 179 business expensing, which allows businesses to fully deduct the price of equipment and software investments;
  • State and local sales tax deduction;
  • Tax deductions for food inventory donated to food banks;
  • A deduction for land donated for conservation; and
  • A tax break for individuals to donate to charity from qualified retirement accounts.

Section 179 is the huge one for Businesses!!  Very happy with congress today for seeing the light on this one.  (For further information on Section 179, please see our Blog on 09/09/2015)

Additional items included in this legislation:

  • A compromise over cybersecurity legislation that would encourage businesses to share information with the government about potential cyber threats
  • Permanently reauthorize federal health benefits for emergency personnel who responded to the Sept. 11 terrorist attacks;
  • Put in place new security requirements for a visa waiver program, which the House passed as a standalone bill earlier this month. that has come under scrutiny following the Paris terror attacks. The legislation does not include new restrictions that would prevent Syrian and Iraqi refugees from entering the country, a provision House Republicans had pushed to get in the bill;
  • Freeze funding for the Internal Revenue Service and the Environmental Protection Agency; and
  • Repeal country-of-origin food labeling requirements.
tax-penalty

New Penalties for Failure to File 1099’s

The IRS has strengthened its penalty phase of the reporting requirements.  These penalties are effective beginning January 1st for the 2015 tax year filing period.  The penalties are as follows:

1-30 days late:  $30.00 each penalty per return not filed with a maximum of $500,000.00 per year ($175,000.00 for small business maximum)

30 days – 8/1/2016:  $100.00 each penalty per return not filed timely with a maximum of $1,500,000.00 per year ($500,000.00 for small business maximum)

After 8/1/2016:  $250.00 each penalty per return not filed timely with a maximum of $3,000,000.00 per year ($1,000,000.00 for small business maximum)

Intentionally Disregarded:  $500.00 each penalty per return not filed timely with no maximum limit per year (No maximum limit for small business)

As you can see from the information above, the penalties can be severe.  However, should your supplier not provide you with necessary paperwork, you will not be penalized – SO LONG AS, your attempts to collect the information can be provided and are sufficient to prove that you made attempts to obtain the information.

More than ever, it is important that you are complying with these regulations.