Hyden, Miron & Foster, PLLC Law Blog

Friday, September 4, 2015

Summer Tax Considerations Part 2

The summer is still going strong.  While we have already discussed some of the important tax considerations that come with this season of sunshine and swimming in our previous blog Summer Tax Considerations Part 1, we would like to note a few more.

Day Camps

Though day camp attendance is common for children during the summer months, many parents are unaware that the cost of day camp may qualify them for a federal tax credit. This is true if childcare is required while the responsible adult(s) is working or seeking work. In order to qualify for the Child and Dependent Care Credit, the following criteria must be met:

• The filing status of the client(s) must be single, married and filing jointly, head of household or a qualifying widow(er);          
• Day camp expenses must be for the care of a qualified person, usually a child aged 12 or under;   
• The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work;           
• If the credit is to be given to a couple filing a joint tax return, spouses must also be qualified;
• Spouses who are full-time students during the months involved qualify, as do spouses who are physically or mentally incapable of self-care;      
• The taxpayer must have earned income in the form of wages, tips, or self-employment; and
• Married couples must file a joint return, unless legally separated or living apart.

Day camps that specialize in a particular activity, such as soccer, drama, technology, may even be a qualifying expense. The tax credit for day camp is worth between 20 and 35 percent of allowable expenses, depending on income level. Total expenses during one year are limited to $3000 for one child or $6000 for two or more.

Certain types of childcare expenses are excluded from the tax credit, including overnight camps, summer school tutoring expenses, care provided by a spouse, by any person under the age of 19 or by anyone the taxpayer claims as a dependent.      

It is imperative that taxpayers keep receipts and records for their tax return filing, including the name, address and taxpayer ID number of the care provider. This information will have to be entered when they complete Form 2441 -- Child and Dependent Care Expenses.

Get a Jump on the Tax Extension Deadline

Just because October 15th is the last day to file tax returns for which you have requested an automatic six-month extension is no reason to endure the pressure inherent in waiting until the last minute. Assuming all the required tax documents are in your possession, you can use the generally quieter summer months to have your tax returns prepared and filed. Filing months before the autumn deadline can help to avoid unnecessary added stress as the school year begins.

If you are in need of assistance with a tax related matter, the Arkansas tax attorneys at Hyden, Miron & Foster, PLLC, can help.  Contact us at either (501) 482-1787 or (888) 770-1848 to schedule a consultation today.

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