Don't forget to save receipts
  
The kids are out of school and summer is well underway. Make sure you understand the rules regarding the tax deductibility of summer activities and related daycare expenses through the use of the Child and Dependent Care Credit. Collecting those receipts now can save plenty during tax time.
 
What is deductible?
 20 to 35% of qualified un-reimbursed expenses with a maximum amount of $3,000 for one person and $6,000 for two or more qualifying persons.
 
How it works
 To receive the credit you must;

• Have a dependent under the age of 13 or have a spouse or dependent who is physically or mentally unable to care for themselves
• Have earned income (wages) to support the dependent
• The expenses allow for care while you work or look for work
• Have qualified expenses
• Financially support and maintain a home for the dependent
• If married, both you and your spouse must be working or looking for work.

Some summer-time tips
 Daycare expenses are the most common qualifying expense for the Dependent Care Credit.

1. In-home daycare during the summer months also qualifies. Your sitter cannot be a dependent, a spouse or someone under the age of 19.
2. Day camps qualify for the credit.
3. OVERNIGHT camps and summer school/tutoring do NOT qualify
4. Track the mileage of qualified transportation to and from any qualified activity. For instance, if your daycare provider takes the kids on a field trip, the mileage would be part of the qualified activity.
5. Even cooking and housekeeping expenses can count if at least partly for the protection and safety of a qualifying person.
6. Placing your child in a day camp while one of you volunteers at a charity would not work in determining qualified dependent care expenses.

 
Don’t forget to get the provider’s name, address, and Social Security Number/Tax ID number. Also retain and receipts and canceled checks to support your proof of payment. This information will be required when you fill out your 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 Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

Don't forget to look at the retirement specials on the tax menu

Wouldn’t it be nice to check out of the workforce early and not have to worry about having enough money for retirement? While good financial planning can help you get there, leveraging the tax code as part of your retirement plan is also a good idea. Here are some tax tips that could help you reach your early retirement goal.
 

• Maximize tax advantaged retirement accounts. Retirement accounts like traditional IRAs and 401(k)s allow qualified taxpayers to save pre-tax money, invest the funds, and not pay taxes until the funds are withdrawn during retirement years. The IRS still receives its tax on your income and earnings, but they delay receiving the funds until you withdraw them in the future. In other words, the IRS allows you to invest their potential tax receipts along with your money and will take its share of your investment earnings at a later date.

 

• Leverage the catch-up provisions within retirement accounts. Most retirement accounts allow older taxpayers to invest even more money in these retirement savings accounts. The key retirement fund limits for 2020 are:
  • 401(k), 403(b), 457: $19,500 ($26,000 if 50 or over)
  • Traditional/Roth IRAs: $6,000 ($7,000 if 50 or over)
  • SIMPLE IRA: $13,500 ($16,500 if 50 or over)

 

• Consider Tax-Free Retirement Choices. Roth IRAs and Roth 401(k)s are an interesting alternative to other qualified retirement plans. Within Roth accounts you invest money in your plan with after-tax dollars, but any earnings are tax-free as long as you follow the withdrawal rules. While this lowers your potential initial investment, you have created a source of funds that can earn money without being taxed in the future. If you expect tax rates to go up during your retirement years, perhaps a Roth IRA should be included in your retirement portfolio.

 

• Roth Rollovers. You may also roll money from most qualified retirement accounts into Roth retirement accounts. When you do this, you must pay the tax on the funds rolled over, but the rollover makes any future earnings within this account tax-free as long as you follow the distribution rules.

 

• Consider Health Savings Accounts and their catch-up provisions. Health Savings Accounts allow you to set aside money to pay for qualified health expenses in pre-tax dollars. To be eligible to set up this type of savings account, you must be enrolled in a qualified high deductible medical insurance plan. The good news is that unused funds can be invested and carried forward to future years. These funds can then be used to augment your retirement plan.

 

• Consider state taxes. Part of your retirement plan should be understanding where you wish to live. It is important to note that states are not created equal on this front. Many states have no state income taxes, while others like Hawaii are in excess of 10%. And you must project where your chosen state might be in the future. Many states are also trying to take the position that you must pay them state taxes on all retirement plan withdrawals from money earned while you lived in their state, even though you moved ten years ago! This problem will not go away as long as governments continue spending on programs in excess of tax collections.

 

• Consider additional deductions and benefits. There are also a number of other benefits that should be considered as you reach retirement age. These include:
• the additional standard deduction when you reach age 65
• the credit for being elderly/disabled
• the timing of when to commence Social Security benefits
• the impact of Medicare and Medicaid plans
• the potential taxability of retirement benefits including Social Security and pension plan income

​
"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 Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

Now that many taxpayers have filed their federal tax returns electronically and the IRS is back to processing paper tax returns sent by mail, they’re eager for details about their refund. When it comes to refunds, there are several common myths.
 
Getting a refund this year means there’s no need to adjust withholding for 2020
 
To help avoid a surprise next year, taxpayers should make changes now to prepare for next year. One way to do this is to adjust their tax withholding with their employer. This is easy to do using the Tax Withholding Estimator. This tool can help taxpayers determine if their employer is withholding the right amount. This is especially important for anyone who got an unexpected result from filing their tax return this year. This could have happened because the taxpayer’s employer withheld too much or too little tax from the employee’s paycheck in 2019.
 
Calling the IRS or a tax professional will provide a better refund date
 
Many people think talking to the IRS or their tax professional is the best way to find out when they will get their refund. The best way to check the status of a refund is online through the Where’s My Refund? tool or the IRS2Go mobile app.
 
Taxpayers can call the automated refund hotline at 800-829-1954. This hotline has the same information as Where’s My Refund? and IRS telephone assistors. There is no need to call the IRS unless Where’s My Refund? says to do so.
 
Ordering a tax transcript is a secret way to get a refund date
 
Doing so will not help taxpayers find out when they will get their refund. Where’s My Refund? tells the taxpayer their tax return has been received and if the IRS has approved or sent the refund.
 
Where’s My Refund? must be wrong because there’s no deposit date yet
 
Updates to Where's My Refund? ‎on both IRS.gov and the IRS2Go mobile app are made once a day. These updates are usually made overnight. Even though the IRS issues most refunds in less than 21 days, it’s possible a refund may take longer. If the IRS needs more information to process a tax return, the agency will contact the taxpayer by mail.
 
Taxpayers should also consider the time it takes for the banks to post the refund to the taxpayer’s account. People waiting for a refund in the mail should plan for the time it takes a check to arrive.
 
Where’s My Refund? must be wrong because a refund amount is less than expected
 
There are several factors that could cause a tax refund to be larger or smaller than expected. Situations that could decrease a refund include:
• The taxpayer made math errors or mistakes
• The taxpayer owes federal taxes for a prior year
• The taxpayer owes state taxes, child support, student loans or other delinquent federal non-tax obligations
• The IRS holds a portion of the refund while it reviews an item claimed on the return
 
The IRS will mail the taxpayer a letter of explanation if these adjustments are made. Some taxpayers may also receive a letter from the Department of Treasury's Bureau of the Fiscal Service if their refund was reduced to offset certain financial obligations.

"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 Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

Most taxpayers ignore the federal estate tax, thinking they will never be touched by it. Unfortunately, you do this at your own peril. Why? Because states often have this tax AND politicians have a habit of frequently changing the rules. The best approach for all taxpayers is to understand the basics of the estate tax. Here is a quick summary of common questions you should be able to answer.
 
Q. Who pays estate taxes?
A. The tax is levied against the estate of a deceased person, which is considered a separate legal entity by the IRS. But the surviving family is effectively responsible for paying the estate tax because it cuts into their inheritance.
 
Q. What is included in the taxable estate?
A. Your estate includes personal property owned at the time of death, such as a home, cars, cash, collectibles and investments. Investments include securities, real estate, bank accounts and retirement accounts. The total taxable estate is the value of these assets minus deductible expenses and debts.
 
Q. How are assets valued?
A. The value for tax purposes is generally the property’s fair market value (FMV) on the date of death. Therefore, the basis for computing gain or loss is stepped up to this value. For example, if Diane Monet paid $10,000 for a painting and it’s worth $25,000 at her death, the estate value is $25,000. There are other valuation options in addition to FMV, so this area can get complicated in a hurry.
 
Q. How is the estate tax calculated?
A. For federal purposes, the tax is 40% of assets in excess of the federal exemption. The federal exemption for 2020 is $11.58 million. The exemption amount is scheduled to decrease to $5 million in 2026. There continues to be an ongoing debate over what this federal exemption amount should be, so it is a good idea to pay attention to future discussions out of Washington, D.C. to understand how it could impact your estate.
 
Q. Can a married couple double the exemption?
A. Yes. If handled correctly, a couple can effectively shelter up to $23.16 million ($11.58 million times 2) from federal tax in 2020. Remember, this amount is scheduled to be dramatically reduced in 2026.
 
Q. What is an inheritance tax?
A. Not to be confused with an estate tax, an inheritance tax is paid by those who receive the money from the estate of the person who dies. While there is no federal inheritance tax, six states (Iowa, Pennsylvania, New Jersey, Kentucky, Nebraska and Maryland) could tax you if you inherit money.
 
Q. What about state taxes?
A. Eight states and the District of Columbia currently have an estate tax. The exemption amounts in these states vary, with one as low as $1 million! If you live in one of these areas you better know the rules and have a plan: Connecticut, District of Columbia, Illinois, Massachusetts, Maryland, Minnesota, New York, Oregon and Washington.
 
Q. How are gifts to others handled?
A. When you give a gift to someone, the federal government generally does not care. But when the value of all gifts to one person in a given year exceed an annual threshold, you must report this to the federal government. This threshold in 2020 is $15,000. The gift tax rules are currently incorporated into the estate tax system. So careful planning is required in this area, especially if you are providing gifts to help finance various items like someone else's education.
 
Does this cover everything about estate taxes? Not by a long shot. But hopefully by understanding some of the basics, you will have a better idea of knowing when to ask for help.

"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 Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-3720

With the tax filing extension giving you until July 15th to file your return, it is easy to overlook ways to avoid receiving a letter from the IRS. Here are some of the most common tax filing mistakes:
 
Forgetting a W-2 or 1099. The IRS does an effective job comparing W-2s and 1099s they receive from organizations to the amounts you claim on your tax return. If they do not match, rest assured you will receive a notice in the mail asking for clarification.
 
Duplicate dependent reporting. If more than one tax return claims the same person as a dependent, the second return will be rejected. The IRS does not try to determine which tax return is correct. They leave that up to you.
 
Forgetting a name change. If you fail to change your name with the Social Security Administration after getting married and you file a tax return with your new last name, be prepared for either a rejected tax return or an adjusted tax return.
 
Other missing information. When preparing your tax return, often the return is held up because key information is missing. These missing items range from property tax and mortgage interest statements, to confirmations of charitable donations and tuition.
 
Signing the e-file authorization form. Your tax return cannot be e-filed without proper authorization. After reviewing your return, a properly signed Form 8879 must be received.

There are many easy-to-use tools on available on IRS.gov. Even better, they are available 24 hours a day. These tools help people file and pay taxes, find information about their account and get answers to tax questions.
 
Here are a few things that people can do with a quick visit to IRS.gov.
 
Filing a tax return 
Taxpayers who earned $69,000 or less in 2019 can file using free brand-name tax software with IRS Free File. People who earned more and want to do their own taxes can use Free File Fillable Forms. These are the electronic version of IRS paper forms. Either way, everyone has a free electronic filing option.
 
The deadlines to file and pay 2019 federal income taxes are postponed to July 15, 2020. If they need more time to file taxpayers can use IRS Free File through July 15 to electronically request an automatic extention to file until Thursday, October. 15. Taxpayers should remember that an extension of time to file is not an extension of time to pay. Penalties and interest may apply to taxes not paid by July 15.
 
Taxpayers can choose to get an extension by paying all or part of their estimated income tax due and indicate that the payment is for an extension using Direct Pay, the Electronic Federal Tax Payment System, or a credit or debit card. This way they won’t have to file a separate extension form and will receive a confirmation number for their records.
 
Pay taxes online
Taxpayers can file now and schedule their federal tax payments up to the July 15 due date. They can pay online, by phone or with their mobile device and the IRS2Goapp. Electronic payment options are the optimal way to make a tax payment to support social distancing and speed the processing of payments. This includes IRS Direct Pay, electronic funds withdrawal, and payment by debit or credit card.
 
View federal tax information online
Taxpayers can go to IRS.gov/account and securely access information about their federal taxes. They can access their tax records, review their payment history, and view tax return information for the current year’s tax return as originally filed.
 
Get answers to tax questions
The Interactive Tax Assistant tool can help taxpayers get answer many tax questions.
 
Get answers to Economic Impact Payment questions
There is a special section of IRS.gov where taxpayers can find information about their Economic Impact Payment. Both of these tools are available in English and Spanish.
 
 • Get My Payment – People should use this to check payment status and see the payment type. In some cases taxpayers may be able to provide bank account information for direct deposit.
 
 • Nonfilers: Enter Payment Info Here - This free tool allows eligible people who don't normally file taxes to easily and quickly provide information to register for their payment. Do not use this tool if you are required to file a 2019 tax return.
 
More information:
Economic Impact Payment FAQs
Get My Payment FAQs
 
"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 Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-372

Your tax bill is now due and you may be considering paying the bill with your credit card. Is this a good idea? How does it work?
 
Here is what you need to know
 
The IRS has contracted with a few credit card merchants to offer credit cards as a method of payment. Why not? Most of us are used to paying for merchandise from groceries to sweaters with our credit card. Ah, but there is a catch. Stores (called merchants by the credit card companies) pay a fee that is split between the merchant's credit card bank, the transaction processor, and your credit card company for each credit card transaction. This fee, known as interchange, is not going to be paid by the IRS. You must pay it. So how much is this fee?
 
The processor fee
 
The fee paid by you for paying your tax bill with a credit card is called a convenience fee by the IRS and the credit card processors. The fee is based upon a percent of the amount charged from 1.87% to 1.99% with a minimum charge from $2.50 to $2.69. For example, using OfficialPayments Corporation's fee of 1.99% with a $2.50 minimum fee, a tax bill of:

• $150.00 would cost you $2.99
• $1,000 would cost you $19.90

 
But don't forget, if you do not pay your credit card balance in full you must also include the interest cost of the loan you are taking out courtesy of the credit card company. This incremental interest could be as high as 20+%!
 
The good news? You can use any of the four major credit cards to pay your taxes; Visa, Mastercard, American Express, and Discover. In addition, you can earn miles and points if you use a rewards credit card. Plus, these credit card fees are much lower than they were 8 years ago.
 
The bad news? This payment method adds expense to your tax bill. Plus you are limited to the number of payments you can make using this method to two per year.
 
Better Alternatives?
 
Remember, if you are considering paying your taxes with your credit card and you carry a balance from month to month you are really taking out a loan to pay your taxes. Using this perspective:
 
Is there a better loan somewhere else? Perhaps a short term loan from a bank or credit union makes more sense. Could you borrow the money from a family member? While potentially embarrassing, if you create the proper loan documentation, it might be a good way for that family member to earn a nice interest rate.
 
Consider borrowing from Uncle Sam. There are installment payment plans available for qualified taxpayers. While there is a set up fee, the monthly interest charged by the government is typically much lower than that charged by credit card companies. It is important to review this option as soon as possible to avoid having to pay tax penalties in addition to interest.
 
Use planning to your advantage. Create a plan to pay for next year's tax obligation throughout the year to avoid a repeat of needing funds to pay your tax bill. This may cause some hardship, but saving a little bit more each week through payroll withholdings is usually more manageable for most of us versus a big tax bite in April.
 
While paying your tax bill with a credit card is often one of the most expensive ways to pay your tax, there is another method that is vastly more expensive. This is not paying your bill at all. When seen in this light, using a credit card is vastly less expensive than paying high penalties and interest on unpaid taxes.
 
"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 Rates, Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Monarch Accounting Group, Inc
145 Tower Drive, Suite 4
Burr Ridge, IL 60527
Phone (630) 320-372