Summer has just arrived, and there is a tax break that working parents should know about. Many working parents must arrange for care of their children under 13 years of age (or any age if disabled) during the school vacation period. A popular solution — with a tax benefit — is a day camp program. The cost of day camp can count as an expense toward the child and dependent care credit. But be careful; expenses for overnight camps do not qualify. Also, not eligible are expenses paid for summer school and tutoring programs.
For an expense to qualify for the credit, it must be an “employment-related” expense; i.e., it must enable you and your spouse, if married, to work, and it must be for the care of your child, stepchild, foster child, brother, sister or step-sibling (or a descendant of any of these) who is under 13, lives in your home for more than half the year and does not provide more than half of his or her own support for the year. Married couples must file jointly, and both spouses must work (or one spouse must be a full-time student or disabled) to claim the credit.
If you would like to make a substantial tax-deductible charitable donation this year, but have the ability to spread the actual distribution of funds to specific charities over a number of years, a donor-advised fund (DAF) may fill that need. There are any number of reasons individuals choose DAFs, including making a substantial charitable donation in an exceptionally high-income year, to overcome the standard deduction, or as part of their estate plan. Here are some details about DAFs that will help you decide if you can gain any benefit from a DAF.
What is a DAF? – A DAF is a separate fund (account) set up within a public charity (sponsoring organization) to which a donor contributes cash or non-liquid assets. The donor then advises the sponsoring organization on how to invest and ultimately distribute the funds from the account as charitable gifts over the course of many years.
Qualified tuition plans (QTPs) provide a means for family members and others to save for the future educational needs of children. Investment earnings within a QTP account are tax deferred and not taxable when withdrawn if used to pay qualified tuition and certain other expenses.
Each individual’s contribution to a QTP (also sometimes referred to as a “Section 529 plan”) on behalf of a designated beneficiary is treated as a gift subject to the normal gift tax rules. Thus, no gift tax return is required for any contributor if the contribution is equal to or less than the amount of the gift tax annual exclusion for the year of the gift, which for 2019 is $15,000.
Special Election – When a donor’s total contribution to a QTP for the year exceeds the annual exclusion amount, the donor may make a special election treating the contributed funds as if they had been contributed ratably over a five-year period starting with the year of the contribution.
Back in 2009 Congress created a tax credit for the purchase of electric vehicles as a stimulus for car companies to manufacture “green” vehicles and as an incentive for consumers to purchase electric vehicles. Although there is no specific date in the future when this credit will expire, there is a limit to the number of vehicles each manufacturer can sell that can qualify for the credit.
That limit is not a set number of vehicles, but rather a credit phaseout by manufacturer that is triggered when the manufacturer sells the 200,000th electric vehicle. Here is how the credit phase-out works:
As much as the Internet has changed our lives for the good, it has also opened us up to threats from crooks from all over the world. They are smart and always coming up with a new trick to separate you from your hard-earned dollars or with an illegal way to use your stolen ID. They apply for loans and credit cards with stolen IDs, file fraudulent tax returns, make purchases with stolen credit card info, and tap into your bank account with stolen account information, and the list goes on. As a result, everyone needs to be very careful and mindful of the tricks used by these scammers to not end up becoming a victim.
This office is committed to using safeguards that protect your information from data theft. To further protect your identity, you can also take steps to stop thieves. This article looks at a variety of tricks and schemes crooks use to dupe individuals, along with actions you can take to avoid being scammed, keep your computer secure, avoid phishing and malware, and protect your personal information.
Because people are living longer now than ever before, many individuals are serving as care providers for loved ones (such as parents or spouses) who cannot live independently. Such individuals often have questions regarding the tax ramifications associated with the cost of such care. For these individuals, the cost of such care may be deductible as a medical expense.
Incapable of Self-Care – For the cost of caring for another person to qualify as a deductible medical expense, the person being cared for must be incapable of self-care. A person is considered incapable of self-care if, as a result of a physical or mental defect, that person is incapable of fulfilling his or her own hygiene or nutritional needs or if that person requires full-time care to ensure his or her own safety or the safety of others.
Divorce is a traumatic event in anyone’s life, and the tax aspects are frequently overlooked, which can add to the distress. The following is an overview of many of the commonly encountered tax issues associated with divorce.
Family Court – All too often, family law courts make rulings that contradict federal tax law, causing confusion and inequities in divorce actions since family court rulings cannot trump federal tax law. A common occurrence is when a family court awards physical custody of a child to one parent and tells the other spouse he or she can claim the child as a dependent. However, federal tax law is very clear that the dependency goes to the custodial parent, regardless of what the family court had to say. However, if this is the arrangement that the divorcing couple actually wants, the custodial parent can provide the noncustodial parent with an IRS form relinquishing the dependency (more on this below).
There is an excellent chance that even if you’re an expert in your particular industry, you’re probably not an expert in small business finances. This may not seem like that big of an issue on the surface. However, in order to make the best decisions possible for your company, you need to have complete and accurate information to work from. It’s easy to see how failing to grasp the financial side of the equation can quickly cause problems everywhere else.
For example, just because your company looks profitable on the surface doesn’t necessarily mean that this is the case. In fact, there are a number of clear ways in which your SMB might not be as profitable as it could be that are certainly worth exploring.
The tax code places limits on the amounts that individuals can gift to others (as money or property) without paying taxes. This is meant to keep individuals from using gifts to avoid the estate tax that is imposed upon inherited assets. This can be a significant issue for family-operated businesses when the business owner dies; such businesses often have to be sold to pay the resulting inheritance (estate) taxes. This is, in large part, why high-net-worth individuals invest in estate planning.
Exemptions – Current tax law provides both an annual gift-tax exemption and a lifetime unified exemption for the gift and estate taxes. Because the lifetime exemption is unified, gifts that exceed the annual gift-tax exemption reduce the amount that the giver can later exclude for estate-tax purposes.
Annual Gift-Tax Exemption – This inflation-adjusted exemption is $15,000 for 2018 and 2019 (up from $14,000 for 2013–2017). Thus, an individual can give $15,000 each to an unlimited number of other individuals (not necessarily relatives) without any tax ramifications. When a gift exceeds the $15,000 limit, the individual must file a Form 709 Gift Tax Return. However, unlimited amounts may be transferred between spouses without the need to file such a return – unless the spouse is not a U.S. citizen. Gifts to noncitizen spouses are eligible for an annual gift-tax exclusion of up to $155,000 in 2019 (up from $152,000 in 2018).
Congress uses tax deductions and tax credits to influence taxpayers’ actions. For instance, it seeks to stimulate taxpayers to reduce their energy consumption and moving away from the use of fossil fuels. In this article, we explore the benefits and drawbacks of two major incentives: the home-solar credit and the electric-vehicle credit.
Tax credits come in two types: refundable and nonrefundable. Refundable tax credits apply even for taxpayers who owe no tax. On the other hand, nonrefundable tax credit can only offset actual tax liability; any excess is lost (or, in some cases, carried over for a limited number of years until used up).
Solar Power – The credit for installing solar-energy systems for generating electricity or heating water at a first or second home is currently a whopping 30% of the cost of the solar installation. However, the credit amount is scheduled to begin phasing out after 2019, dropping to 26% in 2020 and 22% in 2021; after that point, the credit will expire. The unused credit does have a limited carryover and can be added to the allowable credit in the subsequent year.
If you are a neat-nick and your tax return for last year has been completed and filed, you are probably thinking about getting rid of the tax records related to that return. On the other hand, if you are afraid to dump old records, you are probably looking for a box to put them in so you can store them away. Well, you do have to keep them for a period of time but not forever.
Generally, tax records are retained for two reasons: (1) in case the IRS or a state agency decides to question the information on your tax returns or (2) to keep track of the tax basis of your capital assets, so that you can minimize your tax liability when you dispose of those assets.
With certain exceptions, the statute of limitations for assessing additional taxes is three years from the return’s due date or its filling date, whichever is later. However, the statute in many states is one year longer than that of federal law. In addition, the federal assessment period is extended to six years if more than 25% of a taxpayer’s gross income is omitted from a tax return. In addition, of course, the three-year period doesn’t begin elapsing until a return has been filed. There is no statute of limitations for the filing of false or fraudulent returns to evade tax payments.
Tax reform made a lot of changes, some of which impacted employees’ fringe benefits. This article reviews the most frequently encountered fringe benefits, including those that were and were not impacted by tax changes. These changes can affect both a business’s bottom line and its employees’ deductions.
BENEFITS IMPACTED BY TAX REFORM
Qualified Transportation Fringe Benefits – Qualified transportation fringe benefits include parking, transit passes, commuter (van pool) transportation, and bicycle commuting.
- Qualified parking – The tax-free fringe benefit for qualified parking is still available to employees and is capped at $265 per month for 2019, up from $260 in 2018.
- Transit Passes – The tax-free fringe benefit for transit passes is also still available to employees, up to $265 per month for 2019, an increase from $260 in 2018.
- Bicycle Commuting – Unfortunately, tax reform did away with the $20-per-month tax-free reimbursement for the cost of an employee commuting to work on a bicycle.
- Commuting – Tax reform killed the monthly commuting fringe benefit (which was $260 in 2018) except when necessary for ensuring the safety of an employee. When allowed, the maximum amount is the same as the transit pass fringe benefit.