1. Dependents In most cases, a child can be claimed as a dependent in the year they were born.
2. Child Tax Credit You may be able to take this credit on your tax return for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see our website.
3. Child and Dependent Care Credit You may be able to claim the credit if you pay someone to care for your child under age 13 so that you can work or look for work. For more information see Child and Dependent Care Expenses on our website.
4. Earned Income Tax Credit The EITC is a benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. For more information see Earned Income Credit.
5. Adoption Credit You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. Taxpayers claiming the adoption credit must file a paper tax return because adoption-related documentation must be included. For more information see the instructions for IRS Form 8839, Qualified Adoption Expenses.  More information on this credit is at JohnsCreekCPA.com.
6. Children with Earned Income If your child has income earned from working they may be required to file a tax return. For more information see IRS Publication 501.
7. Children with Investment Income Under certain circumstances a child’s investment income may be taxed at the parent’s tax rate. For more information see IRS Publication 929, Tax Rules for Children and Dependents or call us at 678.889.9548.
8. Higher Education Credits Education tax credits can help offset the costs of education. The American Opportunity and the Lifetime Learning Credit are education credits that reduce your federal income tax dollar-for-dollar, unlike a deduction, which reduces your taxable income. For more information see Tax Benefits for Education.
9. Student loan Interest You may be able to deduct interest you pay on a qualified student loan. The deduction is claimed as an adjustment to income so you do not need to itemize your deductions. For more information see Tax Benefits for Education.
10. Self-employed health insurance deduction If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage after March 29, 2010, for any child of yours who was under age 27 at the end of 2010, even if the child was not your dependent. For more information see our website.

1. If you get a bill this summer for late taxes, you are expected to promptly pay the tax owed including any penalties and interest. If you are unable to pay the amount due, it is often in your best interest to get a loan to pay the bill in full rather than to make installment payments to the IRS.
2. You can also pay the bill with your credit card. The interest rate on a credit card or bank loan may be lower than the combination of interest and penalties imposed by the Internal Revenue Code. To pay by credit card contact one of the following processing companies: Official Payments Corporation at 888-UPAY-TAX (also www.officialpayments.com/fed) or Link2Gov at 888-PAY-1040 (also www.pay1040.com) or RBS WorldPay, Inc at 888-9PAY-TAX (also www.payUSAtax.com).
3. You can pay the balance owed by electronic funds transfer, check, money order, cashier’s check or cash. To pay using electronic funds transfer you can take advantage of the Electronic Federal Tax Payment System by calling 800-555-4477 or online at www.eftps.gov.
4. An installment agreement may be requested if you cannot pay the liability in full. This is an agreement between you and the IRS to pay the amount due in monthly installment payments. You must first file all returns that are required and be current with estimated tax payments.
5. If you owe $25,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at IRS.gov.
6. You can also complete and mail an IRS Form 9465, Installment Agreement Request, along with your bill in the envelope that you have received from the IRS.  The IRS will inform you usually within 30 days whether your request is approved, denied, or if additional information is needed. If the amount you owe is $25,000 or less, provide the highest monthly amount you can pay with your request.
7. You may still qualify for an installment agreement if you owe more than $25,000, but a Form 433F, Collection Information Statement, is required to be completed before an installment agreement can be considered. If your balance is over $25,000, consider your financial situation and propose the highest amount possible, as that is how the IRS will arrive at your payment amount based upon your financial information.
8. If an agreement is approved, a one-time user fee will be charged.  The user fee for a new agreement is $105 or $52 for agreements where payments are deducted directly from your bank account.  For eligible individuals with incomes at or below certain levels, a reduced fee of $43 will be charged.
9. Taxpayers who have a balance due, may want to consider changing their W-4, Employee’s Withholding Allowance Certificate, with their employer. There is a withholding calculator available on IRS.gov to help taxpayers determine the amount that should be withheld.

For more information about installment agreements and other payment options, contact David & Langford CPA at 678-889-9548 or visit us at our website at www.johnscreekcpa.com

1. Recordkeeping Take advantage of paperless recordkeeping for financial and tax records. Many people receive bank statements and documents by e-mail. This method is an outstanding way to secure financial records. Important tax records such as W-2s, tax returns and other paper documents can be scanned onto an electronic format. You can copy them onto a ‘key’ or ‘jump drive’ periodically and then keep the electronic records in a safe place.   We recommend using an online backup service such as Mozy or Carbonite (we use Carbonite) to automatically back up the contents of your home computers.
2. Document Valuables The IRS has disaster loss workbooks for individuals that can help you compile a room-by-room list of your belongings. Similar workbooks are available from insurance companies and the American Red Cross.  One option is to photograph or videotape the contents of your home, especially items of greater value. You should store the photos in a safe place away from the geographic area at risk. This will help you recall and prove the market value of items for insurance and casualty loss claims.
3. Update Emergency Plans Emergency plans should be reviewed annually. Individual taxpayers should make sure they are saving documents everybody should keep including such things as W-2s, home closing statements and insurance records. Make sure you have a means of receiving severe weather information; if you have a NOAA Weather Radio, put fresh batteries in it. Make sure you know what you should do if threatening weather approaches.
4. Count on Your CPA In the event of a disaster, your CPA stands ready to help. We retain copies of all client returns both onsite and at remote backup.  In addition, the IRS has valuable information you can request if your records are destroyed. If you have been impacted by a federally declared disaster, you may receive copies or transcripts of previously filed tax returns free of charge by submitting Form 4506, Request for Copy of Tax Return, or Form 4506-T, Request for Transcript of Tax Return, clearly identified as a disaster related request.

For more information on preparing for disasters you can contact us at www.JohnsCreekCPA.com or 678.889.9548.  Try the following links for more resources:

• The American Red Cross
• FEMA
• Online Home Inventory

President Obama Signing the Healthcare Bill Into Law - March 23, 2010

In late March 2010, President Obama signed into law the new health care legislation.  The legislation will affect virtually every individual in one way or another and will significantly impact the preparation of tax returns in the future.  The provisions take effect over a period of years and are categorized by the year they become effective.  Some of the provisions include additional taxes to offset the cost of the health care benefits included in the legislation for lower-income individuals. 

The following is an overview of the provisions that apply to individual taxpayers and small businesses.   

2009
o  Student Loan Forgiveness for Health Professionals – Excludes student loan debt forgiveness from income for certain medical professionals who work in health professional shortage areas.

o  Investment Credit for Therapeutic Discovery Projects – A small company investment tax credit for expenses incurred for qualified investments in qualifying therapeutic discovery projects.

2010
o  Insurance for Uninsured Americans with Pre-Existing Conditions – A Pre-Existing Condition Insurance Plan will provide new coverage options to individuals who have been uninsured for at least six months because of a pre-existing condition.

o  Expanding Coverage for Early Retirees – A program that provides reimbursement to sponsors of participating employment-based plans for a portion of the cost of health benefits for early retirees and their spouses, surviving spouses, and dependents.

o  Providing Free Preventive Care – New plans must cover certain preventive services such as mammograms and colonoscopies without charging a deductible, co-pay or coinsurance.

o  Pre-Existing Condition Exclusions for Children Under Age 19 – For new plans and existing group plans, the new law includes rules to prevent insurance companies from denying coverage to children under the age of 19 due to a pre-existing condition.

o  Elimination of Arbitrary Rescission of Coverage – Insurance companies may no longer retroactively cancel policies because of an “unintentional” mistake on paperwork.

o  Lifetime Limits are Phased Out – Effective for all policies issued after September 23, 2010 and those renewing after this date, there can no longer be lifetime limits placed on health care plans.

o  Annual Dollar Limits – There is a phase out of annual dollar expenditure limits on health plans over the next three years until 2014 when the Affordable Care Act bans them for most plans.

o  Tanning Services Excise Tax – A new 10% excise tax is imposed on the amount paid for any indoor tanning service.

o  Excludable Medical Reimbursements for Older Children – An income exclusion for reimbursements of medical care expenses by an employer-provided accident or health plan is extended to any child of an employee who hasn’t attained age 27.

o  Self-Employed Health Insurance Deduction – Self-employed individuals may include in their tax-deductible health insurance children who have not attained age 27.

o  Tax Credits for Small Employers Offering Health Coverage – Provides a tax credit for an eligible small employer for non-elective contributions to purchase health insurance for its employees.

2011
o  Employer W-2 Reporting Responsibilities – Employers will be required to disclose the aggregate cost of employer-sponsored health coverage to their employees on Form W-2.
   
o  Increased Tax on Nonqualifying HSA or Archer MSA Distributions – The additional tax for making non-medical withdrawals from Health Savings Plans and Archer MSA plans is increased to 20%.

o  Over-the-Counter Medication Restriction for Employer Plans – Over-the-counter medications will no longer qualify for reimbursement.

o  Small Employer Simple Cafeteria Plans – Small employers may provide employees with a “simple cafeteria plan.”

2012
O  Information Reporting Required for Payments to Corporations – Businesses that pay any amount greater than $600 during the year to non-tax-exempt corporate providers of property and services will have to file an information report with each provider and with IRS.

2013
o  Additional Hospital Insurance Tax for High-Income Taxpayers – The Hospital Insurance (HI) tax rate (currently at 1.45%) would be increased by 0.9 percentage points on incomes over a threshold.

o  Surtax on Unearned Income for High-Income Taxpayers – A 3.8% surtax is imposed on net investment income of high-income individuals, estates, and trusts. 

o  Employer Health FLEX-Spending Plan Contributions Limited – Medical reimbursements from flexible spending plans is limited to $2,500.

o  Medical Itemized Deductions Limited – The AGI threshold percentage for claiming itemized medical expenses is increased from 7.5% to 10%.

o  Compensation Deduction Limit for Health Insurance Issuers – Limits companies’ deduction for certain employees’ compensation.

2014
o  Mandatory Heath Insurance Overview – Many of the provisions of the Health Care Legislation are linked to the mandate that everyone becomes insured.  The chart provides an overview of how these provisions interact to achieve that goal.

o  American Health Benefit Exchanges – By 2014, each state must establish an exchange to help individuals and small employers obtain coverage. 

o  Penalty For Not Being Insured – Non-exempt U.S. citizens and legal resident taxpayers will be penalized for failing to maintain at the least the minimum essential health coverage.

o  Premium Assistance Credit – Tax credits will be available for low-income individuals who obtain health insurance coverage with a qualified health plan (QHP) through an “Exchange”.

o  Free Choice Vouchers – Employers who offer minimum essential coverage through an eligible employer-sponsored plan and are paying a portion of that coverage will be required to offer an equivalent value voucher, allowing a qualified employee the option of purchasing coverage through the insurance exchange. 

o  Large Employer Health Coverage Excise Tax – Large employers would be required to pay a penalty if any of its full-time employees were certified to the employer as having purchased health insurance through a state exchange and qualified for either tax credits or a cost-sharing subsidy.

2018
o  Excise Tax on High-Cost Employer-Sponsored Health Coverage – There will be a 40% nondeductible excise tax on insurance companies and plan administrators for any health coverage plan where the premiums exceed certain limits.

Reference Links

• Davis & Langford CPA – Further information on each topic on the website or call us for a personal consultation.
• CCH Coverage of Health Care Reform - Downloadable PDF coverage