Reduce Your Taxes with the Child Care Tax Credit

If you paid someone to care for a person in your household last year while you worked or looked for work, then you may be able to take the Child and Dependent Care Tax Credit and reduce the amount of tax owed.

Here are 12 facts you should know about this important tax credit:

  1. Child, Dependent or Spouse. You may be able to claim the credit if you paid someone to care for your child, dependent or spouse last year.
  2. Work-related 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.
  3. Qualifying Person. The care must have been for “qualifying persons.” A qualifying person can be your child under age 13. A qualifying person can also be your spouse or dependent who lived with you for more than half the year and is physically or mentally incapable of self-care.
  4. Earned Income Required. 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. Please call if you have any questions about what qualifies as earned income.
  5. Credit Percentage / Expense Limits.The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on the amount of your income. Your allowable expenses are limited to $3,000 if you paid for the care of one qualifying person. The limit is $6,000 if you paid for the care of two or more.
  6. Dependent Care Benefits. If your employer gives you dependent care benefits, special rules apply. For more information about these rules, please call the office.
  7. Qualifying Person’s SSN.You must include the Social Security Number of each qualifying person to claim the credit.
  8. Keep Records and Receipts. Keep all your receipts and records for when you file your tax return next year. You will need the name, address and taxpayer identification number of the care provider. You must report this information when you claim the credit.
  9. Form 2441. File Form 2441, Child and Dependent Care Expenseswith your tax return to claim the credit.
  10. Joint Return if Married. Generally, married couples must file a joint return. You can still take the credit, however, if you are legally separated or living apart from your spouse.
  11. Don’t overlook vacation and summer camps.Day camps are common during the summer months. Many parents pay for day camps for their children during school vacations while they work or look for work. If this applies to you, your costs may qualify for a federal tax credit that can lower your taxes.
  12. Certain Care Does Not Qualify.You may not include the cost of certain types of care for the tax credit, including:

We at Schaumburg CPA offer a complete range of International Taxation, Tax and Consulting Services. We are here not only to understand your needs but excelling on solutions to satisfy your needs. We are staying on top of current law changes and developing new relationships on a daily basis to serve your needs. Manendra Kothari is qualified Chartered Accountant from India and qualified and licensed CPA from US. .

Overnight camps or summer school tutoring costs.

Care provided by your spouse or your child who is under age 19 at the end of the year.

Care given by a person you can claim as your dependent.

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Earlier Filing Deadlines in 2017 for Forms W-2 and 1099

Starting in 2017 employers and small businesses face an earlier filing deadline of January 31 for Forms W-2. The new January 31 filing deadline also applies to certain Forms 1099-MISC reporting non-employee compensation such as payments to independent contractors. Also of note is that the IRS must also hold some refunds until February 15.

A new federal law, aimed at making it easier for the IRS to detect and prevent refund fraud, will accelerate the W-2 filing deadline for employers to January 31. For similar reasons, the new law also requires the IRS to hold refunds involving two key refundable tax credits until at least February 15 (also new). Here are details on each of these key dates.

New January 31 Deadline for Employers

The Protecting Americans from Tax Hikes (PATH) Act, enacted last December, includes a new requirement for employers. They are now required to file their copies of Form W-2 submitted to the Social Security Administration, by January 31, as well as Forms 1099-MISC.

In the past, employers typically had until the end of February (if filing on paper) or the end of March (if filing electronically) to submit their copies of these forms. In addition, there are changes in requesting an extension to file the Form W-2. Only one 30-day extension to file Form W-2 is available, and this extension is not automatic.

If an extension is necessary, a Form 8809 Application for Extension of Time to File Information Returns must be completed as soon as you know an extension is necessary, but by January 31. Please carefully review the instructions for Form 8809, and call the office if you need more information.

The new accelerated deadline will help the IRS improve its efforts to spot errors on returns filed by taxpayers. Having these W-2s and 1099s earlier will make it easier for the IRS to verify the legitimacy of tax returns and properly issue refunds to taxpayers eligible to receive them. In many instances, this will enable the IRS to release tax refunds more quickly than in the past.

The January 31 deadline has long applied to employers furnishing copies of these forms to their employees and that date remains unchanged.

Some Refunds Delayed Until at Least February 15

Due to the PATH Act change, some people will be getting their refunds later than they have in the past. The new law requires the IRS to hold the refund for any tax return claiming either the Earned Income Tax Credit (EITC) or Additional Child Tax Credit (ACTC) until February 15.

Furthermore, by law, the IRS must hold the entire refund, not just the portion related to the EITC or ACTC.

Even with this change, taxpayers should file their returns as they normally do. Whether they are claiming the EITC or ACTC or not, taxpayers should not count on getting a refund by a certain date, especially when making major purchases or paying other financial obligations. Typically, the IRS issues more than nine out ten refunds in less than 21 days; however, some returns may be held for further review.

Please call if you have any questions about the earlier filing deadlines for Forms W-2 or 1099.

Www.SchaumburgCPA.Info is an official blog of Manen Kothari CPA. To ensure compliance with the requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. One should consult their tax advisor before any of the information contained herewith applied to their individual tax situations. SK Tax Associates, Schaumburgcpa.info, or Manen Kothari cannot be held responsible for any general information stated above.

Manen Kothari, CPA serves in Schaumburg, Mount Prospects, Glendale Heights, Bartlett, Barrington and Chicago as well as other areas of Rolling Meadows, Naperville, Des Plaines, Elk Grove Village, Skokie and Addison, Downers Grove CPA. We are also efficient in showing you the detailed deductions that can help you to limit your tax liabilities for the next few years to come as long as we are at union with your business.

Contact us now: 847.524.0001

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Ensuring Financial Success for Your Business

Can you point your company in the direction of financial success, step on the gas, and then sit back and wait to arrive at your destination?

Not quite. You can’t let your business run on autopilot and expect good results. Any business owner knows you need to make numerous adjustments along the way – decisions about pricing, hiring, investments, and so on.

So, how do you handle the array of questions facing you?

One way is through cost accounting.

Cost Accounting Helps You Make Informed Decisions

Cost accounting reports and determines the various costs associated with running your business. With cost accounting, you track the cost of all your business functions – raw materials, labor, inventory, and overhead, among others.

Note: Cost accounting differs from financial accounting because it’s only used internally, for decision making. Because financial accounting is employed to produce financial planner for external stakeholders, such as stockholders and the media, it must comply with generally accepted accounting principles (GAAP). Cost accounting does not.

Cost accounting allows you to understand the following:

  1. Cost behavior. For example, will the costs increase or stay the same if production of your product goes up?
  2. Appropriate prices for your goods or services. Once you understand cost behavior, you can tweak your pricing based on the current market.
  3. Budgeting. You can’t create an effective budget if you don’t know the real costs of the line items.

Is It Hard?

To monitor your company’s costs with this method, you need to pay attention to the two types of costs in any business: fixed and variable.

Fixed costs don’t fluctuate with changes in production or sales. They include:

  • rent
  • insurance
  • dues and subscriptions
  • equipment leases
  • payments on loans
  • management salaries
  • advertising

Variable costs DO change with variations in production and sales. Variable costs include:

  • raw materials
  • hourly wages and commissions
  • utilities
  • inventory
  • office supplies
  • packaging, mailing, and shipping costs

Tip: Cost accounting is easier for smaller, less complicated businesses. The more complex your business model, the harder it becomes to assign proper values to all the facets of your company’s functioning.

If you’d like to understand the ins and outs of your business better and create sound guidance for internal decision making, consider setting up a cost accounting system.

Need Help?

Please call if you need assistance setting up cost accounting and inventory systems, preparing budgets, cash flow management or any other matter related to ensuring the financial success of your business.

Www.SchaumburgCPA.Info is an official blog of Manen Kothari CPA. To ensure compliance with the requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein. One should consult their tax advisor before any of the information contained herewith applied to their individual tax situations. SK Tax Associates, Schaumburgcpa.info, or Manen Kothari cannot be held responsible for any general information stated above.

Contact us now:  847.524.0001

For More Information Visit:  http://schaumburgcpa.info/