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:
- 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.
- 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.
- 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.
- 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.
- You may qualify for the credit whether you pay for care at home, at a daycare facility or at a day camp.
- 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.
- 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.
- 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.
- 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.
- 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.
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…
- The Partner must be a U.S. Citizen, Resident Alien or a Resident of Canada or Mexico
- Can not be the Qualifying Child of the taxpayer
- 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)
- She/He can’t have earned over $4,050
- You must have paid more than ½ her/his living expenses during 2016
- And, he/she must not be able to be claimed by anyone else (ie his/her parents, grandparent, etc)
“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.