Last Day to File For 2015 Tax Returns

October 17, 2016 is the last day to file 2015 tax returns on extension without a penalty!

Make sure you meet this deadline! Why pay a penalty when you can avoid it!

2013 Tax Return Deadline: April 15, 2014!

Don't forget, this year tax returns without an extension on file, are due April 15, 2014. If you file online, you have until 11:59pm on that day to file. Otherwise your return must be postmarked by April 15, 2014.

If you are sending your return by mail, I ALWAYS recommend mailing it certified return receipt (that green form at the post office). It costs a few bucks but is worth it's weight in gold if you have a problem with your return making it (or not) to IRS in time.

Some helpful tips before you meet with your tax preparer or file your return yourself:

1. Check your info! Make sure names, social security numbers, income amounts are correct and match the paperwork you have (like your social security card, your W2's, bank statements, etc).

2. Create a checklist of items you need every year for your taxes --- specific bank statements or forms, investment or other income related documents, you're W2, important tax ID numbers, receipts and anything else that was helpful. If you do it this year, the following year will make compiling what you need to complete your return a breeze!

3. Don't stress! Tax season can be stressful for everyone, myself included! By creating a list of the things you'll need every year you're already well on your way to a stress-less tax season. Helpful online softwares like Turbo tax can be great for when your return is simple and straightforward. Finding a great CPA or EA (enrolled agent) to give you advice and complete your return accurately will greatly reduce your stress levels. You won't ever wonder if you missed any important deductions or if you've done something wrong.

April 1 has arrived, and this is no joke...taxes are due in 15 days. Don't delay!

The Fiscal Cliff

Now that the election is over, all anyone seems to be talking about is the fiscal cliff. Will the government prevent it? What will it take to reach a deal? But most importantly, what will it mean for the average American come tax time.

What is the fiscal cliff?

The fiscal cliff essentially means that on January 1, 2013 if there is no deal to avoid the cliff, automatic spending cuts will take effect. Additionally, Bush's tax cuts that have been in place for almost a decade will also expire. Most people will agree, no matter which side of the political spectrum they are on, that any deal that will prevent us from going over the cliff will be a combo of tax increases and spending cuts. Everyone is up in arms about a solution for the fiscal cliff since the ramifications of both spending cuts and an increase in taxes will cause major problems. The general repercussion is that for an increase in the amount of taxes an individual pays, he will see less in return in terms of government services.

How will a failure to come up with a solution to the fiscal cliff affect the average American family?

Here is the average tax breakdown the a family pays:

10% of income up to $17,400
15% of income from $17,401- $70,700

The "average" family in the U.S. is made up of 2.6 people, earning around $50,000. As it stands now, the base tax rate this "average" family will pay is $4,845. If the Bush tax cuts expire, this family will pay 15% for all income, which equals to $6,397, or an increase of $1,552. For a family making $50,000 this is a huge blow to their budget. This equates to less spending and less spending, never a good thing to jumpstart an economy.

What about deductions?

While our average family above doesn't actually pay $4,845 in taxes, since there are many deductions that lower the tax amount they pay, another potential ramification of the fiscal cliff is the disappearance of many deductions Americans rely on to lower their taxes. For example, the Child Tax Credit gives around a $1,000 deduction, after January 1, it will be around $500. Another example, the 2% social security tax cut (for the first $110,000 in income) is also scheduled to end on January 1. This equates to, for the average family, a $1,000 tax increase.

What's the solution?

Republicans want to prevent the Bush tax cuts from expiring. Democrats don't want too many spending cuts, especially a disproportionate amount of cuts that will affect lower income Americans. As of today,  both sides of the aisle seem more intent on fighting and getting their way than actually coming up with a viable solution. It reamins to be seen what will happen.

Will the fiscal cliff narrowly be avoided like the debt ceiling last year? Will we go over it and suffer the consequences? Stay tuned. The literal ball will drop at midnight on January 1st, wil the figurative ball drop as well?

The Affordable Care Act

I am always getting questions about the tax provisions provided by the Affordable Care Act.

Below is a great article from the IRS explaining the Affordable Care Act and the tax provisions implemented through it. It's a bit lengthy and as always with government, a bit confusing. So if you have any questions, feel free to call me to chat or to set up an appointment at my Granada Hills office to see how it can apply to you!

You can reach me at (818) 368-5374 or via my website: http://www.astonesthrowsite.com/contact.php

The Affordable Care Act was enacted on March 23, 2010. It contains some tax provisions that are in effect and more that will be implemented during the next several years. The following is a list of provisions for which the IRS has issued proposed and/or final guidance; additional information will be added to this page as it becomes available.

Minimum Value

On April 26, 2012, the Department of the Treasury and IRS issued Notice 2012-31, which provides information and requested public comment on an approach to determining whether an eligible employer-sponsored health plan provides minimum value. Starting in 2014, whether such a plan provides minimum value will be relevant to eligibility for the premium tax credit and application of the employer shared responsibility payment. 

Information Reporting on Health Insurance Coverage

On April 26, 2012, the Department of the Treasury and IRS issued Notices 2012-32 and 2012-33, which invited comments to help inform the development of guidance on annual information reporting related to health insurance coverage. The information reporting is to be provided by health insurance issuers, certain employers that sponsor self-insured plans, government agencies and certain other parties that provide health insurance coverage.

Disclosure of Return Information

On April 27, 2012, the Department of the Treasury and the IRS issued proposed regulations with rules for disclosure of return information to be used to carry out eligibility determinations for advance payments of the premium tax credit, Medicaid and other health insurance affordability programs. The proposed regulations solicit public comments.

Small Business Health Care Tax Credit

This new credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees. Learn more by browsing our page on the Small Business Health Care Tax Credit for Small Employers and our news release.

Health Flexible Spending Arrangements

Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be reimbursed from Flexible Spending Arrangements (FSAs) or health reimbursement arrangements unless a prescription is obtained. The change does not affect insulin, even if purchased without a prescription, or other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles. This standard applies only to purchases made on or after Jan. 1, 2011. A similar rule went into effect on Jan. 1, 2011, for Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs). Employers and employees should take these changes into account as they make health benefit decisions. For more information, see news release IR-2010-95, Notice 2010-59, Revenue Ruling 2010-23 and our questions and answers. FSA and HRA participants can continue using debit cards to buy prescribed over-the-counter medicines, if requirements are met. For more information, see news release IR-2010-128 and Notice 2011-5.

In addition, starting in 2013, there are new rules about the amount that can be contributed to an FSA. Notice 2012-40 provides information about these rules and flexibility for employers applying the new rules and requests comments about other possible administrative changes to the rules on FSA contributions. The Notice provides instructions on how to submit comments.

Proposed Regulations Issued on Medical Device Excise Tax

On Feb. 3, 2012, the IRS and the Treasury Department issued proposed regulations on the new 2.3-percent medical device excise tax (IRC §4191) that manufacturers and importers will pay on their sales of taxable medical devices starting in 2013. Additional information is available in the Medical Device Excise Tax FAQs.

Health Insurance Premium Tax Credit

Starting in 2014, individuals and families can take a new premium tax credit to help them afford health insurance coverage purchased through an Affordable Insurance Exchange. Exchanges will operate in every state and the District of Columbia. The premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums. On May 18, 2012, the IRS issued final regulations which provide guidance for individuals who enroll in qualified health plans through Exchanges and claim the premium tax credit, and for Exchanges that make qualified health plans available to individuals and employers.

The portion of the law that will allow eligible individuals to use tax credits to purchase health coverage through an Exchange is not effective until 2014.

Exchanges will offer individuals a choice of health plans that meet certain benefit and cost standards. The Department of Health and Human Services (HHS) administers the requirements for the Exchanges and the health plans they offer. Additional information about the Exchange can be found at www.healthcare.gov and in IRS REG-131491-10 issued on Aug. 12, 2011.

Health Coverage for Older Children

Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. This expanded health care tax benefit applies to various work place and retiree health plans. These changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit. This also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return. Learn more by reading our news release or this notice.

Excise Tax on Indoor Tanning Services

A 10-percent excise tax on indoor UV tanning services went into effect on July 1, 2010. Payments are made along with Form 720, Quarterly Federal Excise Tax Return. The tax doesn't apply to phototherapy services performed by a licensed medical professional on his or her premises. There's also an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee. For more information on the tax and how it is administered, see the Indoor Tanning Services Tax Center.

Reporting Employer Provided Health Coverage in Form W-2

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for tax-year 2012 and beyond, until the IRS issues final guidance for this reporting requirement.

The amount reported does not affect tax liability, as the value of the employer excludible contribution to health coverage continues to be excludible from an employee's income, and it is not taxable. This reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers.

More information about the reporting can be found on Form W-2 Reporting of Employer-Sponsored Health Coverage.

Adoption Credit

The Affordable Care Act raises the maximum adoption credit to $13,360 per child, up from $13,170 in 2010 and $12,150 in 2009. The adoption tax credit is refundable for tax year 2011, meaning that eligible taxpayers can get it even if they owe no tax for that year. In general, the credit is based on the reasonable and necessary expenses related to a legal adoption, including adoption fees, court costs, attorney’s fees and travel expenses. Income limits and other special rules apply. In addition to attaching Form 8839, Qualified Adoption Expenses (see instructions), eligible taxpayers must include with their 2011 paper tax return one or more adoption-related documents to avoid delaying their refund. Taxpayers may also be asked, after filing their returns, to substantiate any qualified adoption expenses they paid.

For other information, see our news release, tax tip, questions and answers, flyer, Notice 2010-66,Revenue Procedure 2010-31, Revenue Procedure 2010-35 and Revenue Procedure 2011-52.

Medicare Shared Savings Program

The Affordable Care Act establishes a Medicare shared savings program (MSSP) which encourages Accountable Care Organizations (ACOs) to facilitate cooperation among providers to improve the quality of care provided to Medicare beneficiaries and reduce unnecessary costs. More information can be found in Notice 2011-20, which solicited written comments regarding what additional guidance, if any, is needed for tax-exempt organizations participating in the MSSP through an ACO. This guidance also addresses the participation of tax-exempt organizations in non-MSSP activities through ACOs. Additional information on the MSSP is available on the Department of Health and Human Services website.

The Centers for Medicare and Medicaid Services has released final regulations describing the rules for the Shared Savings Program and accountable care organizations. Fact Sheet 2011-11 confirms that Notice 2011-20 continues to reflect IRS expectations regarding the Shared Savings Program and ACOs, and provides additional information for charitable organizations that may wish to participate.

Qualified Therapeutic Discovery Project Program

This program was designed to provide tax credits and grants to small firms that show significant potential to produce new and cost-saving therapies, support U.S. jobs and increase U.S. competitiveness. Applicants were required to have their research projects certified as eligible for the credit or grant. IRS guidance describes the application process.

Submission of certification applications began June 21, 2010, and applications had to be postmarked no later than July 21, 2010, to be considered for the program. Applications that were postmarked by July 21, 2010, were reviewed by both the Department of Health and Human Services (HHS) and the IRS. All applicants were notified by letter dated October 29, 2010, advising whether or not the application for certification was approved. For those applications that were approved, the letter also provided the amount of the grant to be awarded or the tax credit the applicant was eligible to take.

The IRS published the names of the applicants whose projects were approved as required by law. Listings of results are available by state.

Learn more by reading the IRS news release, the news release issued by the U.S. Department of the Treasury, the page on the HHS website and our questions and answers.

Group Health Plan Requirements

The Affordable Care Act establishes a number of new requirements for group health plans. Interim guidance on changes to the nondiscrimination requirements for group health plans can be found inNotice 2011-1, which provides that employers will not be subject to penalties until after additional guidance is issued. Additionally, TD 9575 and REG-4003810, issued by DOL, HHS and IRS, provide information on the summary of benefits and coverage and the uniform glossary. Notice 2012-59provides guidance to group health plans on the waiting periods they may apply before coverage starts. Other information on group health plan requirements is available on the websites of the Departments of Health and Human Services and Labor and in additional guidance.

Tax-Exempt 501(c)(29) Qualified Nonprofit Health Insurance Issuers

The Affordable Care Act requires the Department of Health and Human Services (HHS) to establish the Consumer Operated and Oriented Plan program (CO-OP program). It also provides for tax exemption for recipients of CO-OP program grants and loans that meet additional requirements under section 501(c)(29). IRS Notice 2011-23 outlined the requirements for tax exemption under section 501(c)(29) and solicited written comments regarding these requirements as well as the application process. Revenue Procedure 2012-11, issued in conjunction with temporary regulationsand a notice of proposed rulemaking, sets out the procedures for issuing determination letters and rulings on the exempt status of organizations applying for recognition of exemption under 501(c)(29).

An overview of the CO-OP program is available on the Department of Health and Human Services website.

Medicare Part D Coverage Gap “donut hole” Rebate

The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D recipients who have reached their Medicare drug plan’s coverage gap. This payment is not taxable. This payment is not made by the IRS. More information can be found at www.medicare.gov.

Additional Requirements for Tax-Exempt Hospitals

The Affordable Care Act added new requirements for charitable hospitals. (See Notice 2010-39 andNotice 2011-52.) On June 22, 2012, the IRS issued proposed regulations which provide information on the requirements for charitable hospitals relating to financial assistance and emergency medical care policies, charges for emergency or medically necessary care provided to individuals eligible for financial assistance, and billing and collections. Comments on the proposed regulations are requested by Sept. 24, 2012.

Form 990, Schedule H, for tax year 2010 was revised to include a new Part V, Section B, to gather information on hospitals' compliance with the new requirements and on related policies and practices. To give the hospital community time to familiarize itself with the types of information the IRS is requesting, Part V, Section B of Schedule H was made optional for the 2010 tax year (seeAnnouncement 2011-37).

The IRS considered public input and made revisions to Part V, Section B for tax year 2011 (see theForm 990, Schedule H and instructions). Hospitals are required to complete all parts and sections of Schedule H for tax year 2011, with the exception of lines 1-7 of Part V, Section B, which relate to community health needs assessments (see Notice 2012-4). These lines are optional for 2011. The IRS continues to welcome public input on the new requirements for charitable hospitals under the Affordable Care Act.

Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers

The Affordable Care Act created an annual fee payable beginning in 2011 by certain manufacturers and importers of brand name pharmaceuticals. On Aug. 15, 2011, the IRS issued temporary regulations and a notice of proposed rulemaking on the branded prescription drug fee. The temporary regulations describe the rules related to the fee, including how it is computed and how it is paid.

On Nov. 4, 2011, the IRS issued Notice 2011-92 which provides additional guidance on the branded prescription drug fee for the 2012 fee year. 

Modification of Section 833 Treatment of Certain Health Organizations

The Affordable Care Act amended section 833 of the Code, which provides special rules for the taxation of Blue Cross and Blue Shield organizations and certain other organizations that provide health insurance. IRS Notice 2010-79 provides transitional relief and interim guidance on the computation of an organization’s taxpayer’s Medical Loss Ratio for purposes of section 833, the consequences of nonapplication and changes in accounting method. Notice 2011-04 provides additional information and the procedures for qualifying organizations to obtain automatic consent to change its method of accounting for unearned premiums. Notice 2011-51 extends the transitional relief and interim guidance provided in Notice 2010-79 for another year to any taxable year beginning in 2010 and the first taxable year beginning after Dec. 31, 2010. Notice 2012-37 extends the transitional relief and interim guidance provided in Notice 2010-79 for another year to any taxable year beginning in 2012 and the first taxable year beginning after Dec. 31, 2012.

Medical Loss Ratio (MLR)

Beginning in 2011, insurance companies are required to spend a specified percentage of premium dollars on medical care and quality improvement activities, meeting a medical loss ratio (MLR) standard. Insurance companies that are not meeting the MLR standard will be required to provide rebates to their consumers beginning in 2012. For information on the federal tax consequences to an insurance company that pays a MLR rebate and an individual policyholder who receives a MLR rebate, as well as information on the federal tax consequences to employees if a MLR rebate stems from a group health insurance policy, see our frequently asked questions.

Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers

The Affordable Care Act amended section 162(m) of the Code to limit the compensation deduction available to certain health insurance providers. The amendment goes into effect for taxable years beginning after Dec. 31, 2012, but may affect deferred compensation attributable to services performed in a taxable year beginning after Dec. 31, 2009. Initial guidance on the application of this provision can be found in Notice 2011-2, which also solicited comments on the application of the amended provision.

Employer Shared Responsibility Payment

Starting in 2014, certain employers must offer health coverage to their full-time employees or a shared responsibility payment may apply. Information may be found in news releases IR-2011-92and IR-2011-50 and Notices 2011-73, 2011-36 and 2012-17. Additionally, Notice 2012-58 expands upon and modifies previous guidance and describes safe harbors that employers may use to determine whether certain workers are full-time employees and to establish that coverage is affordable at least through the end of 2014. Notice 2012-59 provides related guidance for group health plans on the waiting periods they may apply before starting coverage.

Patient-Centered Outcomes Research Institute

The Affordable Care Act establishes the Patient-Centered Outcomes Research Institute. Funded by the Patient-Centered Outcomes Research Trust Fund, the institute will assist patients, clinicians, purchasers and policy-makers in making informed health decisions by advancing clinical effectiveness research. The trust fund will be funded in part by fees paid by issuers of health insurance policies and sponsors of self-insured health plans.

On April 12, 2012, the IRS and the Treasury Department issued proposed regulations on this fee. The IRS and Treasury request comment on the proposed regulations by July 16, 2012. Comments may be submitted electronically, by mail or hand delivered to the IRS. Additionally, a public hearing is scheduled for August 8, 2012. The preamble to the proposed regulations provides instructions on how to submit comments and participate in the public hearing.

For More Information

For tips, fact sheets, questions and answers, videos and more, see our Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance page.

Summer Camp Deductions?

I recently came across a great article for parents on summer camp expenses and if what you purchase for your kids for camp is deductible. As summer comes to an end, this question might be on your mind or something to file away for next summer. This article contains great info on whats deductible, what's not and how to claim those deductions on your taxes. Check out this article on Forbes here, or read the article below!

Paying For Summer Camp: Is Any Of It Deductible?

My son starts summer camp tomorrow. And this is what I have learned as a parent about summer camp: it’s expensive. Super expensive.

Last week, I took all three kids to Dick’s Sporting Goods to stock up on camp items: shin guards, mouth guards, cleats, shin guard covers (who knew?), new hockey stick… The list for all three was pretty long. Long enough that I had to put the shiny new Mizunos that caught my eye back on the shelf; they’ll have to wait. This trip was all about stocking up on camping equipment for the kiddos. And it was insane.

I happened to run into a mom that I knew at the store. Her cart was piled higher than mine. Her son was headed to football camp and apparently the requirements for pads and other gear were completely different from what he wears during the regular season. So, she, like me, was spending more than expected to get him ready.

When it comes to taxes, there is good news and bad news to be had with respect to summer camp.

I’ll give you the bad news first: almost everything that you bought in order to send your kid to camp is non-deductible. That includes:

• Sports equipment. It’s personal in nature and not deductible, even if it’s required.
• Clothing. Again, it’s personal in nature even if specifically required. And yes, even if those are clothes that your child would never, ever wear outside of camp.
• Fans and furniture for overnight camp. Still, personal in nature and not deductible.

Now for the good news: some of the expenses involved in simply getting ready for camp are deductible. That includes:

• Physicals. The cost of a physical or well exam is deductible; you do not have to be sick in order for the visit to be deductible.
• Shots. Vaccines and immunizations are considered preventative care and are deductible.
• Fees for doctors. Most doctors charge a fee to complete forms for camp now. If those are part of your medical care, they are deductible.

Remember that medical expenses are deductible only if you itemize on a Schedule A and only to the extent that the total medical expenses paid during the year exceeds 7.5% of your adjusted gross income (AGI). You’ll find your AGI on line 37 of your federal form 1040:

 

And more good news: some of the costs of camp may qualify as child and dependent care expenses. Those expenses can be used to claim a credit on your federal form 1040 at line 48:

 

Credits are desirable because they are dollar for dollar reductions in the amount of tax due. In comparison, deductions are simply reductions in your taxable income.

To claim the child and dependent care credit, you must have qualifying expenses. Generally, that means that the expenses must be used for child and dependent care of a qualifying child while the child’s parent or parents work or look for work. The amount of the credit is based a percentage of work-related expenses and can be up to 35% of your expenses.

Following are some tips for sorting out how camp expenses might (or might not) qualify:

1. Overnight camp is fun for the parents but doesn’t qualify for the credit. I enjoy a break away from the kids overnight as much as the next girl. But for tax purposes, the cost of sending your child to an overnight camp is never considered a work-related expense for purposes of the credit.
2. Soccer camp might be okay. Ditto for Legos and drama camp. The cost of sending your child to a day camp may be a qualifying expense even if the camp specializes in a particular activity. You’re not required to choose the cheapest child care option (not that you have to seek out the most expensive, either, since the credit is limited) so feel free to send your kid to the geekiest, sportiest, most dramatic, most artsy camp you want.
3. Tax forms matter. To claim a credit for child care expenses, you’ll need to attach a federal form 2441 (downloads as a pdf) to a federal form 1040, federal form 1040A, or form 1040NR. You cannot file a federal form 1040EZ or federal form 1040NR-EZ and claim the credit.
4. Stay at home and unemployed spouses (unless looking for a job) make you ineligible for the credit. Okay, this is unpopular. But it is what it is. The child care credit is classified for tax purposes as “work-related.” To qualify for the credit, you must pay child and dependent care expenses so that you and your spouse, if married, can work or look for work. However, if you don’t find a job or if you don’t have any earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment for the year, you may not claim the credit.
5. As much as I’d love for you to, you can’t pay for my kids to go to camp and claim the credit. For tax purposes, expenses that you pay for summer camp must be for child considered a “qualifying person.” In most cases, this means your dependent child under the age of 13 (some exceptions apply). It may be appealing to ship off your neighbor’s kids, your best friend’s kids – or those of your favorite tax attorney – for the summer but those expenses won’t count for purposes of the credit.
6. Find your kid’s Social Security card. To claim the credit, you must include your child’s name and Social Security number. I’ll be the first to admit that I haven’t memorized the Social Security numbers for all of my kids but I know where to look for them. You should, too. If you don’t have this information on your return, you may lose the credit. The same goes for an ITIN (more info on those here).
7. Summer camp isn’t the same as setting up a tent in your backyard and calling it Camp Erb. You have to make payments to an actual child care provider who will be identified on your tax return by name, address and bona fide tax ID number. So, yes, that means paying above the table and reporting those payments appropriately. In addition, your summer camp provider cannot be your spouse, your qualifying child’s parent or your dependent; if the provider happens to be your own child, he or she must not be claimed as your dependent and must also be at least 19 years old by the end of the year.
8. Ice cream is delicious but may not be a qualifying expense. Qualifying expenses at camp are those that focus on child care and do not usually include the cost of food and clothing (see above) as well as “extras.” However, if you can’t actually separate those costs out from the rest of the care – and if they are considered incidental to the care – you may be able to include them.
9. Changing your mind is okay but won’t result in a tax break. Nobody signs up for summer camp in summer. It’s like applying for college: you have to start early. Many camps start filling up in January, so you have to send in deposits early. I don’t know about you but I’m not that organized… If your schedule changes or if you find a place your child likes better, that’s okay, but any money that you may lose because you’ve put it down as a deposit won’t qualify as a child care expense. Similarly, if you pay in full for camp early, you can’t include the cost as a child care expense until the child care is actually received.
10. It’s not a donation if your kids don’t actually go to camp. What if you change your mind – as mentioned above – and your child doesn’t go and the payment is already made to a charitable organization (like the YMCA or church)? If the payment is not refundable, that doesn’t change anything: you can’t re-characterize it after the fact. Money is lost, lesson is learned. But if the payment is refundable and you choose to redirect it (meaning you tell the organization to keep it and use it as a donation), you may be able to re-classify the payment as a charitable donation. If that’s the case, get a receipt.
11. Getting there may be half the fun but likely not a qualifying expense. If there are transportation costs associated with summer camp – whether by bus, subway, taxi or car – the costs may qualify as an expense for purposes of the credit if the camp takes the child to or from the place where the child care is provided. However, the costs that you spend on your own transportation to get your child to summer camp will not qualify as an expense for purposes of the credit.

Of course, there are still no tax breaks for water balloons, marshmallow sticks or lightning bug jars… But be sure to include those things in your plans anyway. Enjoy your kids – and your summer!

Tax Tips Newsletter

We recently sent out our latest Tax Tips and News newsletter to all of our clients.

In it you'll find great information on making estimated tax payments, tax incentives for installing energy efficient windows in your home, tax exemptions for your children who are full time students, identity theft and much more.

If you have any questions about these issues or anything else, give me a call at 818-368-5374!

Check out the newsletter here.

What to look for in a Tax Professional

The IRS recently published a list of things you should look for in a tax professional. They are a great reminder to anyone looking for a professional to prepare their tax return.

*All quotes below are taken from the article referenced above.

1. Check the preparers qualifications. “New regulations require all paid tax return preparers to have a Preparer Tax Identification Number. In addition to making sure they have a PTIN, ask if the preparer is affiliated with a professional organization and attends continuing education classes. “

I have a PTIN, a preparer tax identification number, a requirement of all paid tax return preparers. I am also a member of both the NAEA (National Association of Enrolled Agents) and the CSEA (California Society of Enrolled Agents). I also have a Professional Financial Planning Designation award by UCLA. I take continuing ed classes yearly to maintain my license.

2. Check the preparers history for any questionable activities. “Check to see if the preparer has a questionable history with the Better Business Bureau and check for any disciplinary actions and licensure status through the state boards of accountancy for certified public accountants; the state bar associations for attorneys; and the IRS Office of Enrollment for enrolled agents.”

Check with the Better Business Bureau or IRS, ask me for referrals or check out my reviews on yelp.

3. Ask about service fees. “Avoid preparers who base their fee on a percentage of your refund or those who claim they can obtain larger refunds than other preparers.”

In general you should avoid preparers whose fees are based on the percentage of the refund you receive. My fees are based on services provided, the amount of work involved in your return and hourly, depending on your situation, NEVER on the refund you receive.

4. Ask if they offer electronic filing. “Any paid preparer who prepares and files more than 10 returns for clients must file the returns electronically, unless the client opts to file a paper return.”

I prepare all my returns electronically using my PTIN number unless the client requests a paper return or the situation warrants it.

5. Make sure the tax preparer is accessible. “Make sure you will be able to contact the tax preparer after the return has been filed, even after the April due date, in case questions arise.”

The core of my business if providing quality service to my clients, just ask them! I am always available by phone or appointment to answer your questions or explain parts of your return you don’t understand until you are satisfied.

6. Provide all records and receipts needed in order to prepare your return. “Reputable preparers will request to see your records and receipts and will ask you multiple questions to determine your total income and your qualifications for expenses, deductions and other items. Do not use a preparer who is willing to electronically file your return before you receive your Form W-2 using your last pay stub. This is against IRS e-file rules.”

I never complete a tax return without all the required documentation. I like my job and intend to keep it. Therefore I do not use illegal means or cut corners when preparing a return for a client. If I don’t have something I need, I’ll ask for it and will not file until I receive what is necessary to complete your return appropriately.

7. Never sign a blank return. “Avoid tax preparers that ask you to sign a blank tax form.”

Frankly any tax preparer who would ask a client to do this is insane. I always prepare a completed and professional prepared return before asking the client to sign. All my clients have the opportunity to review this return both on their own and with me, to ask any questions and clarify any points in the return. You sign when you are confident to do so.

8. Review the entire return before signing it. “Before you sign your tax return, review it and ask questions. Make sure you understand everything and are comfortable with the accuracy of the return before you sign it.”

See question 7 above!

9. Ensure the preparer signs the return with his/her PTIN number. “ A paid preparer must sign the return and include their PTIN as required by law. Although the preparer signs the return, you are responsible for the accuracy of every item on your return. The preparer must also give you a copy of the return.”

I sign every one of my returns, including my daughters return, with my name and PTIN number. You receive a copy of your return, both to review it before signing as well as to keep for your own records.

10. Report abusive preparers to the IRS. “You can report abusive tax preparers and suspected tax fraud to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 from www.irs.gov or order by mail at 800-TAX-FORM (800-829-3676).”

I often have clients who have come to me from previous tax preparers who have done a bad job or caused problems for them with the IRS. There is nothing I enjoy more than helping these clients get out of any mess they are in and giving them the reassurance that with me, there will be no problems or issues. I haven’t been in business for 28 years for nothing. I care about my clients and strive to give them the best service and the best work. If you have been a victim of an unprofessional tax preparer I encourage you to take the advice of the IRS and report them.

What happens when my home forecloses?

With the Mortgage Forgiveness Debt Relief Act of 2007 you are able to exclude income due to foreclosure or mortgage restructuring.

The Act is valid on discharged debt on their primary residence (not on a second home or vacation home) from 2007 through 2012. Up to $2 million or $1 million if you are married, filing separately, is eligible for forgiveness through this Act. Note that your lender by law is usually required to submit a form (Form 1099-C) noting the forgiveness of the debt you previously owed (if the forgiven loan is over $600).

To put it simply, the remainder or balance of your debt is generally taxable income for your tax return. If the original loan was $200,000 and you have paid back $100,000 to date, if the lender is not able to collect the remaining balance $100,000 can be considered taxable income.

There are exceptions to this Act and your professional tax preparer is able to evaluate your individual circumstances and judge whether or not this rule can apply to you. For example, if you file bankruptcy or insolvency this Act will not apply to you.

If you are able to exclude forgiven debt from your income, you must complete and attach form 982 with your tax return. Your tax preparer is qualified to fill this form properly on your behalf.

Please give me a call if you would like assistance or click here: Granada Hills Accounting, we can help.

You can read the Mortgage Forgiveness Debt Relief Act in full on the IRS website here. (Link = http://www.irs.gov/individuals/article/0,,id=179414,00.html)