 If you’ve ever had to care for a sick, elderly or disabled person, you know it can be difficult financially as well as emotionally. A recent study found that many caregivers are forced to make financial sacrifices, including delaying retirement, in order to help their loved ones.
Luckily, there are three key federal income tax breaks available to help lighten the financial burden on caregivers. Here are some tips to help take advantage of them: Tip #1: Use the “family” credit This is a $500 tax credit that you can claim for each dependent other than children under age 17. This credit is generally for relatives and others who are members of your household and for whom you provide more than half of their support. The credit begins to phase out at $400,000 for married joint filers and $200,000 for individual filers. Tip #2: Use the medical expense deduction Caregiving often comes with medical expenses. The good news is that you can claim a deduction for the medical expenses you pay for your dependents. The threshold for claiming the medical expense deduction is 7.5 percent for the 2022 and 2023 tax years, meaning that you can deduct any medical expenses higher than 7.5 percent of your adjusted gross income. Bonus tip: You can still claim the deduction for medical expenses for a relative even if that person wouldn’t otherwise be classified as a dependent (such as when they don’t live in your household), as long as you provide more than 50 percent of their support. In the case where multiple people together provide more than 50 percent of the support for a relative, you can collectively decide who gets to take the deduction as part of a multiple support agreement. This is useful when, for example, siblings share the cost of caring for elderly parents. Tip #3: Use the Child and Dependent Care Credit If you are working while acting as a caregiver for a dependent, you may be able to use the Child and Dependent Care Credit to offset part of the cost of their care. The dependent must be physically or mentally incapable of caring for themselves and live in the same home as you for more than half the year. Depending on your income, the credit can be applied against 20% to 35% of qualified expenses, up to a total maximum credit of between $600 and $1,050 for one dependent. Bonus tip: Both you and your spouse must be working during the year to claim this credit. If your employer provided any dependent support as part of a benefits package, the amount of the credit is reduced by that amount. If you have any questions about the tax benefits available to you, don’t hesitate to get in touch. "Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs. We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA
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What to do if your e-filed tax return is rejected by the IRS More than 90% of individual tax returns are now filed electronically, and usually the process goes smoothly. When an e-filed tax return is rejected, however, e-filing can become more complicated.
Common causes for rejected tax returns Simple filing errors. Most rejections are caused by things such as misspellings, typos on Social Security numbers, or missing forms. When an e-filed tax return is rejected, the IRS e-filing system sends back rejection codes. These codes are specific to lines on the tax return and descriptions of the problem are readily available. Most of these errors can be easily corrected. Dependent errors. This error occurs when someone else has claimed a dependent on a previously filed tax return. This often occurs with divorced and unmarried couples who each claim the same child on their tax return. The IRS does not take sides in this situation, they simply accept the earlier-filed return and reject any subsequent returns. Identity fraud. Someone else has already filed a tax return using your Social Security number. What to do Most errors are simple and easily corrected, which paves the way for resubmitting your tax return for e-filing without much additional delay. However there are two instances that require your immediate attention. When either of these occur, you may need to file your tax return via physical mail and work to correct the error for future tax filings: 1.) Dependent errors. A dependent can only be claimed on one tax return. If a dependent is already claimed on another individual’s tax return you will need to provide proof that the dependent belongs on your return. If this happens, contact the other party who claimed your dependent and ask them to amend their return. Let them know that you’re filing your tax return correctly claiming the dependent. Your filing will target both tax returns for a potential IRS audit. This audit risk often is enough motivation to correct the problem. 2.) Identity Fraud. Criminals using stolen information submit tax returns electronically in an effort to steal your tax withholdings. Fraudulently claimed refunds are then automatically deposited into thieves’ bank accounts. Unfortunately, you may discover the theft when your e-filed tax return is rejected. If this happens to you:
While solving the cause for a rejected e-filed tax return can be a headache, the sooner the problem is addressed, the sooner your refund can be received. "Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs. We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA Whether someone travels for work once a year or once a month, figuring out travel expense tax write-offs might seem confusing. The IRS has information to help all business travelers properly claim these valuable deductions.
Here are some tax details all business travelers should know Business travel deductions are available when employees must travel away from their tax home or main place of work for business reasons. A taxpayer is traveling away from home if they are away for longer than an ordinary day’s work and they need to sleep to meet the demands of their work while away. Travel expenses must be ordinary and necessary. They can't be lavish, extravagant or for personal purposes. Employers can deduct travel expenses paid or incurred during a temporary work assignment if the assignment length does not exceed one year. Travel expenses for conventions are deductible if attendance benefits the business. There are special rules for conventions held outside North America. Deductible travel expenses include:
Self-employed individuals or farmers with travel deductions
Travel deductions for the National Guard or military reserves National Guard or military reserve servicemembers can claim a deduction for unreimbursed travel expenses paid during the performance of their duty. Recordkeeping Well-organized records make it easier to prepare a tax return. Keep records such as receipts, canceled checks and other documents that support a deduction. Share this tip on social media -- #IRSTaxTip: Understanding business travel deductions. http://ow.ly/GCuA50MKYke "Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs. We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA The risk of having kids file their own tax returns If you have children younger than 19 years old (or 24 if a full-time student), you should coordinate the filing of their taxes with yours. HOW they file, though, is a matter of tax law.
The problem Your child is away for college. You try to file your family tax return on April 14th after finally receiving all the required documentation. Unfortunately, your e-filed tax return is rejected because your college student filed their own tax return and received a nice refund. Now you have a mess on your hands. You must file an extension, file an amended tax return for your child, return a refund, and potentially paper file your tax return. A matter of law The dependency rules and kiddie tax laws are clear and must be followed. If you have a dependent child as determined by the tax code, you will need to conduct the tax calculations to determine what is taxed at your child’s tax rate and what will be taxed at your higher tax rate. The same is true for which tax return receives what level of standard deductions. This requires coordination of your tax filings with that of your dependent children. Suggestions
Consider using the tax filing process to introduce your young adult to the benefits of tax planning. You never know, it could save you money as well as the hassle of undoing an improperly filed tax return. "Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office. The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs. We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com. Mia Verc, CPA; Janice Papais, CPA |
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