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Child Tax Benefits


EITC Refunds Slow

Big-tax-refundChanges in tax law may cause a delay in receiving tax refunds for early tax filers.  New in 2017, the 2015 Protecting Americans from Tax Hikes (PATH) Act has moved up the Forms W-2 filing deadline for employers and small businesses to January 31st from the previous end-of-February deadline.  The new deadline also applies to certain Forms 1099.  The new January 31st deadline is designed to help the IRS spot errors in early returns filed by taxpayers.  Having the Forms W-2 and 1099 sooner makes it easier to verify legitimate tax returns and send out refunds.

However, the changes will mean that early tax filers who apply for certain tax credits should expect that their refunds will arrive later than in past years.  If you claim the Earned Income Tax Credit (EITC) or the Additional Child Tax Credit (ACTC), the law prevents the issuing of the refund(s) until February 15th.

The way the calendar dates occur this tax season, even if a qualifying taxpayer has a refund issued on the first available day, February 15th, the money may not arrive even through a direct deposit until the week of February 27th.  Financial institutions need a few days to process the deposits and many do not process payments on weekends or holidays.  The President’s Day holiday on February 20th will also delay processing.  If a taxpayer has requested their refund to be paid by check, the delay in receiving payment could be several days or weeks longer, even into March.


2016 Individual Income Tax Filing Season Launches January 23

Taxtime graphicThe tax season for processing 2016 federal income tax returns begins Monday, January 23, 2017.  The tax day deadline will be April 18th this season, to adapt to the Easter holiday weekend.

The IRS says it would start accepting electronic tax returns on January 23rd and it anticipates more than 153 million individual tax returns to be filed.  This, as Congress is expected to continue tight budget constraints on the agency under a new administration.  Taxpayer advocates warn taxpayers to expect delays in processing, more computer-driven automatic correspondence audits (letters that are sent by computers to taxpayers when a tax return issue raises a flag without a preliminary review by human eyes), and extremely long wait times should a taxpayer need to connect with the agency to ask a question or respond to a correspondence audit.

Taxpayers may also be affected by a new law that requires the IRS to hold tax refunds claiming the Earned Income Tax Credit and the Additional Child Tax Credit until February 15th.  The IRS says the delays are due to the additional time needed for these tax refunds to be released and processed through financial institutions.  Factoring in weekends and the President’s Day holiday, the IRS is warning many affected taxpayers may not have actual access to their tax refunds until the week of February 27th, if they have filed a completed tax return by the end of January.  

For more information on the status of a refund, a taxpayer may use the online resource called "Where's My Refund?".


Kids and Tax Breaks: The "Perfect" Match

If you have kids, you have tax breaks, maybe more than you know. In 2015, Congress passed “Tax Extenders” legislation and within it were three permanent extensions related to children. These tax breaks are out there to be taken, so we are providing a summary version to help you determine if you can use them.

The $1,000 child tax credit that so many taxpayers claim, and even count on, is not going to reduce or disappear. Having survived through extensions since the amount was set in 2003, it will now always be $1,000 per child.

My Family_jpgIt will help to know the following information for the next child-related benefit:  A 2009 refundable credit of 15% of earned income in excess of $3,000 was slated to jump to a qualifying amount of $10,000 in 2017.  Not any more—the $3,000 threshold has also been made permanent, providing extra help for millions of families.

Have kids in college? Once again there’s “forever” help, as related credits have been ensured and thresholds lowered through the Enhanced American Opportunity Tax Credit extension. Taxpayers can count on a $2,500 tax credit for four years of post-secondary education, instead of the $1,800 credit that would have taken place in 2017. Lower qualifying thresholds would have also happened in 2017, and now they will stay at $80,000 (single) and $160,000 (married, filing jointly).

And, did you know that there are other child credits in the tax system that you might qualify for like child and dependent care expenses and even summer day camps? If you didn’t, be assured that we do and are ready to help you see if you qualify.

If you need more information, please contact one of our tax preparation experts at McRuer CPAs.


2015 Tax Extenders Summary

After months of uncertainty and speculation, it appears Congress has finally sufficiently collaborated to propose the “Tax Extenders” legislation in which a large number of expired tax provisions will be extended, some permanently.  Some tax credits that would be made permanent include the Child Tax Credit, the American Opportunity Tax Credit and the Earned Income Tax Credit

Of particular interest, it appears Section 179 will be permanently fixed at $500,000 of qualified assets for years in which taxpayers place in service up to $2,000,000 of assets.  For amounts above $2,000,000, the Section 179 deduction is reduced dollar for dollar until $2,500,000, at which time no asset additions are eligible.  Bonus depreciation is temporarily extended at 50% for 2015, 2016 and 2017, then stepped down to 40% in 2018 and 30% in 2019, after which time it is scheduled to be completely phased out.

To find out more information about the specifics of the legislation, here are some online resources:

If you have any questions about how these tax extenders may affect you or your business bottom line, please contact us at McRuer CPAs by calling 816.741.7882 or click here to connect with us online.


New Tax Laws Affecting 2015 Income Taxes

What's new?As we complete and file our 2014 federal income tax returns, this is a good time to make adjustments as needed affecting our current-year 2015 income tax plan.  To help, the IRS has released its list of new income tax changes, rates and updates that are now in effect.

As a reminder, federal income tax is designed to be a pay-as-you-go tax.  You are obligated to pay taxes throughout the year as you earn or receive income, and you may be subject to penalties if you don’t.  You may pay through payroll withholding, or by paying estimated taxes.  

The new updates regarding deductions and exemptions may directly affect the tax you owe.  Consider our tax planning services to give you a year-round tax perspective so the annual tax preparation season will go smoother with fewer surprises.

Standard Mileage Rates:  For taxpayers claiming itemized deductions, including deducting the cost of operating your personal vehicle for business purposes, the standard mileage rate allowed for business miles driven is now 57.5 cents per mile, up from 56 cents in 2014.

The business standard mileage rate is based on a combination of annual averages of fixed and variable costs of operating a vehicle including not only gas and oil, but also depreciation, insurance, tires and average maintenance and repairs.  Some taxpayers may enjoy a greater tax benefit by itemizing their actual annual vehicle costs, but they must choose between the actual costs method and the standard mileage rate deduction.

If you will drive more than usual for medical expenses or because of a move this year, the rate has dropped to 23 cents per mile for this year, down a bit from 2014’s rate of 23.4 cents.  The mileage rate allowed for miles driven in service of a charitable organization remains at 14 cents per mile.

Personal Exemptions ChangesFor 2015, the personal exemption amount has increased for certain taxpayers.  It has increased to $4,000 for taxpayers with adjusted gross incomes at or below $309,900 if married filing jointly or if a qualifying widow(er), $284,050 if a head of household, $258,250 if single, or $154,950 if married filing separately. The allowed personal exemption amount for taxpayers with adjusted gross incomes above these thresholds has been reduced from 2014 and may be calculated using a new Personal Allowances Worksheet.

Itemized Deductions Limitation:  Now in 2015, the total amount allowed for itemized deductions is reduced for taxpayers with adjusted gross income above $309,900 if married filing jointly or a qualifying widow(er), $284,050 if head of household, $258,250 if single, and $154,950 if married filing separately.

Alternative Minimum Tax (AMT) Exemption: The AMT exemption amount is increased to $53,600 ($83,400 if married filing jointly or qualifying widow(er); $41,700 if married filing separately).

Lifetime Learning Credit Income Limits: In order to claim a Lifetime Learning Credit of up to $2,000, your Modified Adjusted Gross Income (MAGI) must be less than $55,000, that’s down considerably from $64,000 in 2014 ($110,000 if married filing jointly, down from $128,000).

Adoption Credit or Exclusion: The maximum adoption credit or exclusion for employer-provided adoption benefits has increased to $13,400.  In order to claim either the credit or exclusion, your MAGI must be less than $241,010.

Earned Income Credit (EIC): You may be able to claim the EIC in 2015 if: three or more children lived with you and you earned less than $47,747 ($53,267 if married filing jointly), two children lived with you and you earned less than $44,454 ($49,974 if married filing jointly), one child lived with you and you earned less than $39,131 ($44,651 if married filing jointly), or a child did not live with you and you earned less than $14,820 ($20,330 if married filing jointly).

To learn more about how the 2015 tax year will affect your income tax planning, contact us at McRuer CPAs.


Child and Dependent Care Tax Credit

If you paid someone to care for a person in your household last year so that you could work or look for work, you may qualify for the Child and Dependent Care Tax Credit.

Child care giverGenerally, to be eligible you must have paid someone to care for your children under age 13, or a dependent or a spouse who is physically or mentally incapable of self-care. You must also have earned income and, if married, your spouse must also have earned income.

The credit is worth between 20% and 35% of your allowable expenses depending upon the amount of your income.  Your allowable expenses are limited to $3,000 if you paid for the care of one qualifying person or up to $6,000 if you paid for the care of two or more.

You must include the name, address and taxpayer identification number of your care provider on your tax return.  Click here to read more information about this tax credit.


Education Expense Relief

The new tax law package has some good news for families who are seeking tax relief for education expenses.

The American Opportunity Tax Credit, a refundable tax credit for undergraduate college expenses, has been expanded for another 5 years to 2017.  This credit provides up to $2,500 on the first $4,000 of qualified education expenses.

Holding booksCoverdell Education Savings Accounts (aka Education IRAs) have been made permanent and now allow higher contribution limits of $2,000 a year.  Money in these accounts grows tax-free and is tax-free when withdrawn if used for eligible education expenses. You can make 2012 contributions through April 15, 2013. 

The Lifetime Learning Credit is available for anyone who is taking a college course.  It allows a nonrefundable tax credit on eligible expenses even if you are only taking one class.  Parents or the student may be able to claim up to $2,000 of qualified expenses.  There is no limit on the number of years the credit can be claimed. 


What To Do with the Money of the Rich

Eleven more billionaires have signed Bill Gates and Warren Buffet’s Giving Pledge, promising publically to give away half their wealth before they die.

Manoj Bhargava, founder of 5-Hour Energy drink; Reed Hastings, Chief Executive Officer of Netflix; Gordon Moore, co-founder of Intel Corporation; and Mark Zuckerberg, founder of Facebook all are onboard to influence and attempt to increase charitable giving while they still have a voice in the distribution of their wealth.


Other wealthy chief executive officers have declined because they are awaiting proof that the Giving Pledge is bringing additional money to causes benefitting the neediest people – as opposed to trusts for the children of the wealthy.

Marc Benioff, founder of Salesforce.com, declined to sign the pledge and donated $100 million to a children’s hospital of his choice. German shipping billionaire, Peter Kramer, questions the power of the super-wealthy shaping issues of public concern such as education and prefers a democratic dialogue that includes government over a private committee. 

Since Gates and Buffet started the effort in 2010, total estimated charitable giving has increased four percent and giving by foundations increased 1.8 percent.*


*SOURCE;  Giving USA Foundation.


Claiming a Child as a Dependent

As you gather your records to complete your tax filing for 2011, you may be among the nearly 55% of all taxpayers who will declare a child as a dependent.  Many children today have grandparents, uncles and aunts, step-parents and adoptive parents who are their primary caregiver and who may claim them as a dependent for a bit of tax relief. 

But there are a number of things to consider before making the claim. 

This is especially important if a child splits their time living with parents in different locations.  For you to claim a child on your tax records as a dependent, the IRS requires that child and you to qualify in five key areas called “tests”. 

The 5 tests for a Qualifying Child that you must consider are:

  1. Relationship
  2. Age
  3. Residency
  4. Support
  5. Joint return

But things aren’t as simple as 1-2-3-4-5.  Even the age of the child that you can claim has a few twists.  For example, a child living with you who is under the age of 19 at the end of the year, that is, December 31st, can be claimed as a dependent as long as you have determined that the child is related to you, a permanent resident, receiving primary care from you and/or is not being claimed by someone else on a separate return.  Whew!  If they are a full-time student they may be claimed if they are under the age of 24, but there are particular qualifications that must be met regarding the kind of education the child is enrolled in.

Having a CPA on your side to consider all the information is key to making certain you receive the tax relief you qualify for and pay only the taxes you owe.   For more information, contact us at McRuer CPAs for a consultation. 

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