The Federal Tax Credits Blog

Archive for the ‘Dependent Care Tax Credits’ Category

Question: Can I be penalized for filing an amended tax return (1040)?

I am anticipating a sizeable refund (I am married with three children. We pay daycare expenses and I had some tuition expenses for going back to college). I do our taxes every year, so I am reasonably able to forecast a refund amount. Due to the AMT changes, I will not be able to file the dependent care expense form or the education credit form until February 11th. We have some bills that we need to catch up on, and I want to try to get me refund back sooner. I am thinking about NOT filing these two forms for now, and get a lower refund to pay the bills. I would file an amended form to get the rest of the refund. Is there any reason why I should consider NOT doing this? Can I be penalized? I’d doing it this way to catch up on important bills that really should not be delayed. Thank you.

Answer: The IRS will not assess a penalty if you file a return showing a higher tax liability than necessary. You are generally allowed 3 years from the end of this year’s tax season to amend your return, show the additional amount you have overpaid, and claim the remainder of your refund.

Even if the IRS expects to be ready to handle current changes on February 11, there is no guarantee they will be ready on that date. The IRS may also pay interest on the amount they are holding, if the delay is significant.

It’s perfectly acceptable to file a return claiming as much of your refund as possible, then file 1040X to claim the rest of your money you have overpaid during the year. It’s not your fault that the IRS is not ready with the forms you need to claim your money.

Five forms are affected by the delay:
• Form 8863, Education Credits.
• Form 5695, Residential Energy Credits.
• Form 1040A’s Schedule 2, Child and Dependent Care Expenses for Form 1040A Filers.
• Form 8396, Mortgage Interest Credit.
• Form 8859, District of Columbia First-Time Homebuyer Credit.

Good luck.

Help for grandparents raising grandchildren

You’ve done your job.

Considerations for Senior Taxpayers

Question: Flexible spending (cafetieria plan) option: Good or bad?

I signed up for a dependent care FSA this year. The total amount available per calendar year is $5000.00 and I chose the whole amount. I get paid weekly, so, I have $96.15 taken out of each paycheck.

My son’s daycare is $145 per week. I know that I will use the $5000 prior to year end so am not worried about “using it or losing it”. However, I was wondering if this is a good plan and how it will affect my child tax credits when I do my tax return next year? Also want to know if this account can also be used for my son’s medical prescriptions & Dr. visits? I heard that you may not be able to if you have only a dependent care plan set up.

Do you ultimately feel the FSA is a good advantage and why?

Thanks

Answer: You cannot use FSA-Dependant Daycare for Unreimbursed Medical Expenses (UME). However, if your employer offers an FSA for daycare, they probably also offer a similar program for UME (either a cafeteria plan or a Health Savings Acct).

This program will not effect your child tax credit, but it will effect your Dependant Daycare tax credit (you probably lost it). But the benefits you see from using the 125 plan, usually far outweigh the Dependant Daycare tax credit. Because you did the 125 plan, your tax refund will be smaller, however, you probably saved more than that throughout the year.

With the Daycare tax credit, you probably would have saved $600-$1050 (depending on your income level, higher your income, the lower the credit). With the 125 plan, you probably saved $950-$1950 over the course of the year, higher the tax bracket, higher the savings. Even though your tax refund may be smaller, you are getting larger paychecks.

To know for sure if this is a good plan for you, I would have to know a bit more information about your taxable income, but for a vast majority of taxpayers, the Cafeteria plan that you are doing is a good deal.

Queasing over Quantitative Easing, Part IV

By David Merkel. In my last post on this topic, I went over the orthodox and unorthodox monetary policy responses to the crisis in the US. Here were the orthodox options: Read more » »

Bipartisan Meeting on Health Reform: Part 2

Question: Would traditional IRA be better?

My husband and I are both in our early 30’s. We are probably peaking at our salaries now and are in the 25% tax bracket. Also, our AGI (adjusted gross income) is such that certain deductions are starting to be phased out for us (student loan interest, dependent care credit, child care credit). I would expect for us to be in a lower tax bracket at retirement, relying mainly on investment income and social security income.

We would like to start contributing the maximum to IRA’s for each of us. Currently, that would be $8,000 per year for both of us. I have almost convinced myself that a traditional IRA would be better for us given our circumstances. Any thoughts or advice (from professionals, preferably)?
No, neither one of us are self-employed and neither one of us have retirement plans at our places of employment.

Answer: Personally I would go with the Roth. If you’re going to max it out either way, the Roth will be better for you in the long run. Say you max out your IRA for the next 20 or 30 years and end up with $1.5 million. If that money is in a Roth, you can withdraw the entire balance–you have $1.5 million. If that money is in a regular IRA, you can only withdraw around $1.2 million, assuming you’re in the 20% bracket. Is the minor tax deduction you’ll get each year really worth losing out on $300,000 in retirement funds?

Besides, you’re assuming tax rates stay the same. I think we’ll all be in higher tax brackets in 20-30 years because the government will have to raise them. 25% or 30% might seem very low when we retire! I’d rather not worry about that and pay taxes now.

How Investors Can Adjust to Expiring Tax Provisions

A set of tax provisions that are scheduled to expire at the end of this year will change the tax landscape for many investors who will need advice on how to adjust.

Peter Newman, Scott Borden, Michael Lee: Economics 2009

Married couples who are separating generally ask two most common questions frequently. These questions are “How much child support will I have to pay?” and “How much child support will I receive?” In order to help answer these questions, the Florida child support calculator was created. However, one should remember that these calculators are only for information and educational purposes only.

This is because the amount of the child support, a judge may order for a particular case of separation or divorce may be different from the amount that may be estimated by the calculator. Generally, while using these calculators, it is assumed that all the dependent children will primarily live with only one parent. If there is a joint physical custody or split custody of the children, then the help of the calculator cannot be taken. Also these calculators do not take into account any adjustments that may be possible for the children who are not subject to the custody order, but are living with one of the parent’s all the same.

Therefore all these factors as well as others may totally affect a child support order issued by a court. So for most of the time these calculators will assume that all the children shall primarily and actually stay and live with only one parent. As a matter of fact, calculation of child support in Florida is always based on the income of both the parents. Expenses that have been made or may be made in future, do not affect the calculation of the support amount. However, exceptions are made, when there are reductions based on other children you support, medical expenses of the concerned party who has to make the payment and other expenses that are made, or to be made under extraordinary circumstances.

With these exceptions, you are bound to pay the amount that has been calculated as per the standard Florida guidelines. While assuming the income that will be used to calculate the payment of the child support by the Florida child support calculator, the amount of income that will remain after taking out the alimony amount, will be taken into account.

Therefore alimony payments made will also reduce the amount of child support.

While calculating the income, only the income of the parents is taken for calculating purposes. Child support can also be modified to an extent. This happens whenever the income changes. In such cases the child support has to be recalculated and modified accordingly.

In accordance to the rules, you are allowed to file for a modification, whenever child support would change by $50 or by 15%. For using the calculator, you have to press the calculator tab and then calculate how much basic child support will be for each parent.

While calculating the child support, the court has to take many factors into consideration, for example:

Start your federal tax return earlier to cash in on 2009 changes

(ARA) – About 71 million American households (47 percent) will owe no federal income tax for 2009 thanks, in part, to the American Recovery and Reinvestment Act (ARRA), according to estimates by the nonpartisan Tax Policy Center. The other 53 percent of us will have to pay.

8/4/09: White House Press Briefing

Payday Loans £1000 is an option available through the loans industry, which allow income-dependent advances for those needing a monetary float between paychecks. For example: if a car breaks down and one doesn’t have the funds to fix the car, they can get an advance. These loans are usually offered at very high interest rates as and need to repay when the borrower receives their next paycheck.

As the name suggests, this credit offers £1000 for fifteen to thirty one days. It is equally beneficial for the borrower as well as applicant. Now, there in no need to worry to borrow money during emergency and for lender to get their money with interest without waiting too long, or without taking too much of a risk.

People who have bad or no credit are eligible to receive this lending as long as they have stable employment that signify the repayment ability. In addition to providing employment documentation and ID proof, the borrower must also provide bank account information.

Those individuals survive on “paycheck to paycheck” make up the largest customer base for Payday Loans £1000. It is unfortunate that the people with the least amount of money are being charged the highest fees and interest rates for loans. Interest rates are directly determined by a borrower’s credit score.

It is suitable that a borrower search other options for quick funds if they have higher credit scores. The main benefit of this lending is the speed with which a borrower receives the funds. The entire process without hassle is 15 minutes. There are no other programs that can offer a borrower their desired funds in few minutes like Payday Loans £1000.

Payday Loans £1000 is equally beneficial for the people suffering from bad credit history and score as lender here doesn’t consider the credit history and collateral. This type of credits is short term solution to long term problems. If an individual is unable to make it financially to the next paycheck on a consistent basis, then they either need to obtain higher paying employment or adjust their lifestyle according to their present salary. But these loans were not established to promote additional superfluous spending.

Tax Tips

Breaking News:  No Tax season is coming up, and here are some helpful answers to your personal filing questions from the Internal Revenue Service. read more

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