Find Out How To Make Your Child Care Expenses Work For You

Get tax credits this summer for your dependent care and Child Care Expenses

A lot of adults pay for day camps or child care during the summer months when they have to go to work. If you are a parent who covers these costs, you may be qualified to receive a federal tax credit that will reduce your taxes. Following are several important facts about the Child And Dependent Care Tax Credit:

  1. You must be paying child or dependent care costs for at least one qualifying person. Dependent children or those who are below the age of thirteen will often qualify. To learn more about this rule, see the IRS publication 503 for Child and Dependent Care expenses.
  2. These expenses have to be related to your work. Thus, you must pay for this care in order to maintain a job or look for one. If you and your spouse are filing a joint return, this rule will also apply to your spouse. A spouse can meet this requirement in any month in which he or she is enrolled as a full-time student. A spouse can also meet this requirement if he or she is mentally or physically incapable of self-care.

  3. It will be necessary to have earned income, such as monies that come in the form of wages, tips or your normal work salary. If filing jointly with your spouse, this individual must also have income as well. Any month that your spouse is enrolled as a full-time student or incapable of caring for his or her self, this can be counted as earned income. This rule is also applicable to you if filing jointly. Check out IRS publication 503 for additional info.

Child Care Expenses
PublicDomainPictures / Pixabay
  1. If you are married you will need to file jointly in order to use this credit. This rule is not applicable, however, if you have left your spouse and live separately or if you are legally separated.

  2. You could be qualified for this credit whether you pay for child care at home, at a day camp or at a daycare facility.

  3. The credit is representative of a percentage of the qualified child or dependent care expenses that you pay. It can be up to 35% of your expenses, as determined by your income level.

  4. The total expense that is applicable for this credit annually is limited. $3k is the limit for one qualified individual and $6 is the limit for two parties or more.

  5. School tutoring costs, summer school costs and overnight camp charges are not qualified expenses. You will not be able to include the costs of care if this care is provided by a a child below the age of 19 or by your spouse. You may not claim a child as a dependent and claim the cost of any care that this child provides. There are special rules concerning dependent care benefits that employers provide.

  6. Diligently maintain your records and receipts. Take note of the address, name and employer identification number or social security number of the individual who provides care. This information will need to be reported when filing your return and claiming this credit.

Strange But Legitimate Tax Deductions from TurboTax.com

Strange But Legitimate Tax Deductions from TurboTax.com

Tax season is anticipated by some and dreaded by others. For accountants and tax professionals, however, it can be a time of amusement. Tax professionals are used to helping people get the maximum deductions on their taxes, but there are some deductions that take the cake. TurboTax professionals often highlight the odd, but legitimate, tax deductions that they see every year.

A boy in a children's swimming pool.
A boy in a children’s swimming pool. (Photo credit: Wikipedia)

Fido’s New Pad Can Pad Your Refund

Did you know that you can claim a deduction for moving expenses for your pet? If you are relocating for a new job, you can deduct the cost of your moving expenses, including extra expenses incurred to move your pet.

Swimming in Cash

Many people think of swimming pools as expensive investments that drain money from your bank account. If you, however, have a medical condition that is relieved through swimming, you may be able to deduct the cost of maintaining your pool as a medical expense.

Lose Weight, Gain Money

If your doctor has recommended weight loss as a means to improve your health, you may be able to deduct the cost of medical weight loss treatments.

Your “Enlargement” Can Result in a Refund Enlargement

An exotic dancer was able to claim breast enlargement surgery as a business expense. She argued that enhancing her appearance allowed her to earn more money in her business.

Tax professionals see it all between January and April. When you are ready to file your taxes, the professionals at TurboTax.com can help you to get every deduction and the maximum refund on your taxes.

Learn to do Your Own Accounting From Day One

The thought of doing your own bookkeeping is pretty daunting right? That’s the general consensus. Having your own business involves enough work as it is. Why not just leave the accounting bit to the professionals. Fair enough. If you never want to deal with tax offices and worry about learning financials so be it. But you would be surprised how easy it can be.

These days there are superb accounting package and courses. You can sort out your tax online. Even the small things like recording invoice amounts into an excel sheet can save you precious time and money with your accountant.

The first thing you should do is set up a system where everything is filed in the right place every month. All money coming in and out should be recorded on computer, like in an excel sheet. Make sure all your files have dividers for each month. Then get your office organised with the following:

Cash Books

Keep bank statements in a file and print electronic bank statements and file them (these help to cross reference what you have recorded). At the end of the month input this onto your computer in the excel table, or similar.

Invoices

You will need 2 separate files for these. One for your company sales invoices and one for invoices which have been made out to your company. Separate each file into paid and unpaid. As the amount gets paid, mark the invoice paid with the date it was paid and move it into the paid section of your file. Again, at the end of the month input this onto your computer sheet.

Expenses

Make sure your staff and you keep all expense slips. From petrol to stationary anything spent on the company from your own pocket needs to be claimed back at the end of the month. Your driver must have a log book where mileage is recorded with the date and client visited. All petrol slips must be handed in with this log book at the end of the month.

If an employee needs cash in advance for expenses then a petty cash box must be topped up at the beginning of every month. Every time money is taken out the box, a note must be made and put in the box. The employee should sign this and they should also bring the invoice afterwards.

Again this must be recorded each month on a computer spread sheet.

Following these guidelines will prepare you for the end of the financial year calculations.

Donna Van Wyk writes on behalf of Oxbridge Academy, a provider of long distance accounting courses, among other study programs.

Travel v Entertainment Expenses for the Small Business Owner

Tax time is a very stressful time for a great majority of people. Small business owners can be especially nervous. “What form do I use? Is this the right attachment? What is a business expense, and what isn’t? What type of expense is this one? Can I prove if necessary? Is this fully deductible as a legitimate business expense, or can I claim only a portion of it?” Boil all those common questions down to the core issue that will prove or disprove legitimacy and type, and the battle is almost won. The most common mistakes small business owners make, though, is correct categorization of travel and entertainment expenses and how to properly document those receipts.

Entertainment v Travel Food Expenses

This is one of the most commonly misdirected-expense categories for businesses. The difference in deduction categories centers around purpose, timing and environment.

If you attend a seminar that causes you to travel away from your home city, for example, your transportation mode is a travel expense. If you drive a vehicle, that means your car rental and insurance costs are business travel expenses. Your fuel is also a deduction, but it may not at 100 percent; check with the IRS for current deduction percentages. Include mileage in your annotations.

Your hotel room rental amounts are travel expenses, but your food and drink bills may not be, and this is where people make costly mistakes.

If you pick up the tab for lunch during that seminar, and the intent and agenda during that meal was to discuss business, that’s a business lunch deductible under travel expenses. However, if you are “schmoozing” clients or colleagues, that is not a travel expense but an entertainment expense even if it’s during the same time frame or location as the seminar. Categorize it as such.

Receipt Documentation

No longer is the IRS accepting just names, location and dates as proof of business deductions on taxes. You must also note a brief outline of what was discussed. No confidential or proprietary information has be recorded permanently on that receipt, but you must outline the gist of the content.

For example, as you drive from Denver, Colorado, to Lincoln, Nebraska, you stop for lunch in a diner. On that meal receipt, you ensure the date and the restaurant name is on the receipt. If the name of the server is noted, all the better. On the back, you note, “Meal during drive to…” and note the organization and reason you’re headed there. That is a travel expense.

If you travel with a client or colleague when you stop, and if you discussed the conference you will attending, that’s a travel expense. If you talk about families, hobbies or non-business topics, that bill is an entertainment cost.

Home v Away

Many small business owners do not know that you don’t have to be traveling away from your home city to incur travel-related or entertainment-related, tax-deductible expenses. You just won’t have a plane ticket to declare.

Mileage you drive a private vehicle can accumulate quickly. So can the amount of fuel that you use and its accompanying cost. Keeping accurate mileage and fuel consumption records can be tedious, boring and dreaded. It’s entirely necessary, however.

Whether you keep at-moment records or you use the voice memo option in your mobile phone to note starting-trip mileage, stop mileage, the cost of fuel at the time and your purpose in traveling – a very, very crucial element, your written records and your receipts for any money spent during that trip from start to finish, are exceptionally crucial. “Guestimates” are not acceptable to the Internal Revenue Service. The IRS has increased its investigation into deduction verification, and if you cannot present acceptable documentation, toss your deduction into the “due with interest and penalty” pile.

Summary

Be thorough. Be complete. Be conscientious, and be accurate. If you are, you can be assured that your tax filing will be less intimidating and fraught-filled than it used to be. Remember: It is far better to have a documented receipt that you don’t need than it is to discover too late that you really should have kept better expense records.

by Jaye Ryan, who loves writing about responsible financial management and taxes for Octopus Loans.

Some Weird Small Business Deductions

So, the holidays are over and you’re adding up your books (you’d BETTER be adding up your books-tax time is coming!). You know full well to add up your monthly income and common deductions like EI and CPP for your employees. But what are some deductions that you may have missed that could be costing hundreds of dollars? Here are some weird small business/self employed deductions that may never have occurred to you.

  • Cost of replacing materials. If you’re a writer/artist/photographer, etc and you need to buy new equipment, you can claim the new piece as a tax deduction. Even repairs can be deducted! Feel a little better about that new laptop now? (I know I do!)
  • Utilities/Telephone. If you work at home, you can claim a small percentage of your utility bills as business expenses (after all, you need power, heat and phone or internet to work!) Keep track of each bill because you may see a bit of it coming back to you.
  • Pet food. Did you know that if your animal is a service animal or are outdoor animals which guard your livelihood in some way, you may be able to deduct the cost of feeding the animals?
  • Child care. Even if you work at home and farm out the little monkey to a daycare or babysitter, you may be able to deduct the costs as a business expense so long as you worked while the kid was away.
  • Trips. If you headed off to a convention on entrepreneurship or on something related to your business, you may be able to deduct a good portion of your costs.
  • Transit passes. Don’t drive to see your clients but take the bus instead? Buy monthly passes, keep the receipts and claim them. Anyone can take advantage of this green friendly deductions, not just business owners.
  • Charity. Donating to others not only feels good, but can give you a good deduction come tax time.
  • Home maintenance. If you put in a new office for your business, new furniture, new plumbing, new power or something else that improves your business, you will be able to claim the expenses on your taxes. Neat huh?
  • Moving. If you’re moving to get closer to business opportunities, you can claim the move as a deduction. And don’t forget your pets! You can also claim expenses related to them such as pet carriers, vaccinations and having to pay deposits on hotel rooms
  • Erm… enhancements. That’s right, if you work in the… entertainment… business, you may be able to deduct a fairly busty amount from your taxes. But you have to show that the enhancements actually helped your work.

In short, keep receipts from anything even remotely related to your small or self-employed because you just never know when a small pile of minor expenses can add up to a solid deduction on your taxes this spring!  If you’re unsure, you could always ask a qualified Canadian accountant or even get more specialized and search through specialty regional websites for the exact thing you want such as Halifax tax planning.

Little Deductions You May Miss

You need to know what deductions may be possible even when you hire someone else to do your taxes. A quick look over the tax codes on the IRS.gov website will help you determine all of the deductions you need to be considering.

Top Deductions that are Missed

1.     Expenses that are NOT reimbursable by the company. Any expenses that are incurred during the tax year and that are considered ordinary and necessary for your industry can be used as a deduction on your taxes (at least a portion).

a.     Depreciation on work computers

b.     Dues paid to professional societies

c.     Chamber of commerce membership

d.     License fees for your business or occupation

e.     Tools and supplies used in work

f.      Work related education

g.     Union dues or other related expenses

2.     Most people overlook the potential of the deducting expenses associated with working at home. The Business Use of Home deduction can be applicable when your home is your principle place of business or when the space is used EXCLUSIVELY for business purposes. A portion of home expenses can be deducted when these criteria are met. The amount deductible will be determined by the percentage of home space used for business purposes.

a.     Real estate taxes

b.     Deductible mortgage interest

c.     Utilities

d.     Insurance

e.     Repairs

3.     Mileage on a vehicle can be deducted for a number of different reasons. The amount that is allowed will be determined by the activities, but the numbers can add up to substantial savings. Be sure to keep a written record of all mileage you intend to claim on your taxes.

a.      Business mileage – keep up with the trips you take for meetings, events or supply runs. Any time that you use your vehicle for business related purposes you can add that mileage to your totals. The business mileage has the highest allotment by the IRS.

b.      Charitable mileage would be those miles you put on your vehicle when driving in the service of a charitable organization.

c.      Medical mileage would be those miles put on the vehicle when visiting the doctor, dentist or other medical specialist.

4.     Casualty, disaster and theft losses may be overlooked by many people when it comes to taxes. The amounts you can claim on your taxes are only those above any payments made by insurance companies. You will along be able to claim a portion of those totals. These loses are generally deductible for the year they occurred. Property located in a federally declared disaster area may meet different guidelines.

Knowing all that you can about the tax code will help you find even little deductions that you might be missing. A tax professional can make it easier to weed through all of the tax code. Some of the deductions seem little until you begin to add them all up. Counting a penny here and a penny there will help you save big money in the long run.

The key to making the most of your tax deductions is documentation. Keep well organized records of your actions and activities (for your business as well as your personal activities). It will be easier for you to sort through the records when they are in order. Good documentation will help you discover any of those little deductions you may have otherwise missed. The more deductions you uncover the lower you will be able to push your tax bill.

 

Nick Maddux has been in the finance industry for 3 years; he contributes to blogs that deal with insurance deductions and where to get a free credit score report.