Keep in Mind the Child and Dependent Care Credit this Summer

From the IRS –

Keep in Mind the Child and Dependent Care Credit this Summer

Day camps are common during the summer months. Many parents enroll their children in a day camp or pay for day care so they can work or look for work. If this applies to you, your costs may qualify for a federal tax credit. Here are 10 things to know about the Child and Dependent Care Credit:

1. Care for Qualifying Persons.  Your expenses must be for the care of one or more qualifying persons. Your dependent child or children under age 13 generally qualify.

2. Work-related Expenses. Your expenses for care must be work-related. In other words, 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 are physically or mentally incapable of self-care.

3. Earned Income Required. You must have earned income. Earned income includes 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.

4. 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.

5. Type of Care. You may qualify for the credit whether you pay for care at home, at a daycare facility or at a day camp.

6. Credit Amount. The credit is worth between 20 and 35 percent of your allowable expenses. The percentage depends on your income.

7. Expense Limits. The total expense that you can use in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.

8. Certain Care Does Not Qualify. You may not include the cost of certain types of care for the tax credit, including:

  • 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.

9. Keep Records and Receipts. Keep all your receipts and records for when you file taxes 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 on Form 2441, Child and Dependent Care Expenses.

10. Dependent Care Benefits. Special rules apply if you get dependent care benefits from your employer.

Keep in mind this credit is not just a summer tax benefit. You may be able to claim it at any time during the year for qualifying care. IRS Publication 503, Child and Dependent Care Expenses, provides complete details on all the rules. Get it anytime on IRS.gov.

Don’t Forget to Report Certain Foreign Accounts to Treasury by the June 30 Deadline

From the IRS –

Don’t Forget to Report Certain Foreign Accounts to Treasury by the June 30 Deadline

WASHINGTON—The Internal Revenue Service today reminded taxpayers who have one or more bank or financial accounts located outside the United States, or signature authority over such accounts that they may need to file an FBAR by Thursday, June 30.

By law, many U.S. taxpayers with foreign accounts exceeding certain thresholds must file Form 114, Report of Foreign Bank and Financial Accounts, known as the “FBAR.” It is filed electronically with the Treasury Department’s Financial Crimes Enforcement Network (FinCen).

“Robust growth in FBAR filings in recent years shows we are getting the word out regarding the importance of offshore tax compliance,” said IRS Commissioner John Koskinen. “Taxpayers here and abroad should take their foreign account reporting obligations very seriously.”

In general, the filing requirement applies to anyone who had an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2015. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them. The form is only available through the BSA E-Filing System website.

In 2015, FinCen received a record high 1,163,229 FBARs, up more than 8 percent from the prior year. FBAR filings have grown on average by 17 percent per year during the last five years, according to FinCen data.

The IRS is implementing the Foreign Account Tax Compliance Act (FATCA), which mandates third-party reporting of foreign accounts to foster offshore tax compliance. FATCA created a new filing requirement: IRS Form 8938, Statement of Specified Foreign Financial Assets, which is filed with individual tax returns. The filing thresholds are much higher for this form than for the FBAR.

The International Taxpayers page on IRS.gov provides the best starting place to get answers to important questions. The website has a directory that includes overseas tax preparers. International taxpayers will find the online IRS Tax Map and the International Tax Topic Index to be valuable resources.

IRS Warns Consumers of Possible Scams Relating to Orlando Mass-Shooting

From the IRS –

IRS Warns Consumers of Possible Scams Relating to Orlando Mass-Shooting

WASHINGTON ― The Internal Revenue Service today issued a consumer alert about possible fake charity scams emerging due to last weekend’s mass-shooting in Orlando, Fla., and encouraged taxpayers to seek out recognized charitable groups.

When making donations to assist victims of last weekend’s terrible tragedy, there are simple steps taxpayers can take to ensure their hard-earned money goes to legitimate charities. IRS.gov has the tools taxpayers need to quickly and easily check out the status of charitable organizations.

While there has been an enormous wave of support across the country for the victims and families of Orlando, it is common for scam artists to take advantage of this generosity by impersonating charities to get money or private information from well-meaning taxpayers. Such fraudulent schemes may involve contact by telephone, social media, e-mail or in-person solicitations.

The IRS cautions donors to follow these tips:

  • Be sure to donate to recognized charities.
  • Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. The IRS website at IRS.gov has a search feature, Exempt Organizations Select Check, through which people may find qualified charities; donations to these charities may be tax-deductible.
  • Don’t give out personal financial information — such as Social Security numbers or credit card and bank account numbers and passwords — to anyone who solicits a contribution. Scam artists may use this information to steal a donor’s identity and money.
  • Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.
  • Consult IRS Publication 526, Charitable Contributions, available on IRS.gov.   This free booklet describes the tax rules that apply to making tax-deductible donations. Among other things, it also provides complete details on what records to keep.

Bogus websites may solicit funds for victims of this tragedy. These sites frequently mimic the sites of, or use names similar to, legitimate charities, or claim to be affiliated with legitimate charities in order to persuade people to send money or provide personal financial information that can be used to steal identities or financial resources.

Additionally, scammers often send emails that steer recipients to bogus websites that appear to be affiliated with legitimate charitable causes.

Taxpayers suspecting fraud by email should visit IRS.gov and search for the keywords “Report Phishing.”

More information about tax scams and schemes may be found at IRS.gov using the keywords “scams and schemes.”