Summer Day Camp & Your Taxes

Child and Dependent Care credit may cover more than you think come tax season.  If your child enjoys summer day camps, from arts and crafts to water polo, those expenses generally count as allowable expenses.  The credit was created as a way to help working parents. It serves to reduce the amount of federal income tax due and it varies depending on earned income.  There are several requirements to consider, but many taxpayers overlook these deductions when preparing for tax season. We discussed the specifics of dependent care in Whom May I Claim As a Dependent, and the following provides more specific information for summer day camps.

 There are several requirements to claim day camp expenses under the Child and Dependent Care credit.  Campers must be under the age of 13 and the camp cannot be an overnight one. However, you may select any day camp that you like, even if it’s not the least expensive.  The purpose of sending your child to the camp must be to provide care for the child while parents are working. In this way, camp expenses are comparable to daycare or babysitting fees paid to allow parents to work.  The camper must be you or your spouse’s direct dependent. You also need to pay for the camp above the table. While camp expenses are covered, equipment needed to participate in the camp does not count. If either parent is a stay at home parent or otherwise not actively seeking employment, the family does not qualify for this credit.    Finally, credit is not available if the day camp provider is your spouse, dependent, or the parent of the child.  

The tax credit allowed is 35% of expenses up to $3,000 for one child and $6,000 for 2 or more campers.  At tax time you will need a federal form 2441 attached to your 1040, 1040A, or 1040NR.  In order to claim this credit, you cannot use 1040EZ forms.

To see if the Child and Dependent Care credit is applicable to summer camp fees you may have paid this summer, see IRS Publication 503, Child and Dependent Care Expenses, for more information.


Getting Married and Your Taxes

If you tied the knot in 2018, there are several things you can do now, to make tax season a lot easier.

Before you file your return, be sure to report name changes to the Social Security Administration.  This can be done with a Form SS-5 Application for a Social Security Card. You will also want to report address changes to the US Postal Service, IRS, and your employer.  The IRS will need a completed Change of Address Form 8822. You can stop in at your local post office or visit their website to complete your address change with them.  This step will help to ensure that you receive all of the necessary tax paperwork in time to complete your return and you won’t have to chase it down next year. Remember, you are considered married for the entire tax year, regardless of what date you say “I Do”.

You now have more than 1 person to consider with your W4 paycheck withholding.  Be sure to use the Withholding Calculator to verify which withholding status is best for your new situation.  Then follow-up with your employer to change if needed.

There are some definite positives to be realized through marriage from a tax perspective.  We reviewed many of these advantages in our post Married….the Pros and Cons of Filing Separately.  Filing with a spouse allows a greater deduction for charitable contributions made throughout the year.  Along the lines of charity, you are legally allowed to leave any amount of money to your spouse without estate taxes being inflicted. Similarly, you may give cash or property gifts without worry of gift taxes.  Filing married usually leads to higher returns, takes less time than filing 2 returns, and generally costs less than filing 2 returns. With those larger returns, you can pay off debt, invest some in an IRA, or any of the countless options we shared in Spending Your Refund. Some additional perks include being able to claim two personal exemptions and a higher standard deduction.

There are of course some negatives to consider, as with anything.  Filing married makes you responsible for your new spouse’s old debt.  It will be harder to deduct for medical expenses because of your higher level of combined income.  While these risks should be considered, they’re certainly no reason to prevent walking down the aisle.  Just do your research and be prepared ahead of time……and congratulations!


Jesse Holloway Graphic Designer for Small Business

If you run a small business, advertising is essential.  It serves to help you look professional and get your name out there.  It is important to take the time to put yourself in front of people in your target market. Experienced graphic design and marketing professionals can help you through this process.

This is where Jesse Holloway and Akusuo can help.  Jesse has been a graphic designer for 12 years and in marketing for 5 years. His training began locally as he attended PCA&D for graphic design.  Prior to starting his own business he worked at Clipper Magazine.

Jesse enjoys coming up with creative solutions to help small businesses achieve a professional look. To meet this need, he offers graphic design and marketing services. He has also been known to help out with 3D modeling of products.  One unique part of Akusuo’s business model is their willingness to barter services. Trading services is how Jesse and ITP Taxes LLC were first introduced. Both businesses were at the beginning stages of development and the exchange of services was a great start for both organizations.

To find out more about how Jesse and Akusuo can help your business, Jesse can be reached via email at jesse@akusuo.com.

 

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“ITP, LLC is supporting local small business owners through this post.  The experiences described are personal to particular users, and may not necessarily be representative of all users of the products and/or services.  We do not claim, and you should not assume, that all users will have the same experiences. Your individual results may vary. We are not affiliated with the organization referenced and are not paid or compensated for this publication.”


Steve Ulrich Marietta’s Own Escape Room Host

Steve Ulrich is fortunate to have not just one, but five jobs that many would consider to be “dream careers”.  His businesses include two video-related companies: My Digital Conversion and Wilkum Studios, an escape room: First National Escape, a co working space: First National Coworking, and an outdoor ice cream café: Mulberry Thrill. He manages these companies with the assistance of his wife Abby out of an 1875 Victorian Bank in Marietta. If this isn’t enough, he enjoys serving as an adjunct professor of Video Production at Lebanon Valley College!

With a degree in Film Studies & English Literature from the University of Pittsburgh and a second degree in Business Administration from Albright College in Reading, PA, Steve is able to combine his passion for film and business.  His resume includes 13 years of freelance post-production with shows airing on PBS, Discovery Channel, TLC, NBC, and National Geographic, and 10 years of independent production through his company Wilkum Studios, providing all of your video production needs locally, including videography, 360 videography, motion graphics, voice-over, color correction, encoding for web or mobile, and custom music.  

At My Digital Conversion, Steve and his employees can transfer your film, audio, photos, and videos to digital CD, DVD, thumb drive, hard drive, or the web.  They can create custom slideshows and videos where you play the part of the “director.” Reminder: Christmas is right around the corner and custom DVDs and videos make a great Christmas gift!  

First National Coworking is one of the more unique co working spaces in the country, if not the world. A variety of eclectic, historical, and functional spaces serve the business needs of individuals and groups such as: small business owners who do not (yet) have their own private space, those traveling for business, teams who require conference space outside of their normal offices, students and writers.

First National Escape is an exciting variation on your typical escape room.  Located in an authentic 1875 Victorian Bank, the object is to break into the vault and collect as much money as possible in an hour before getting caught.  The artifacts found in the vault are antiques that span the age of the original bank from 1875 to 2000. The escape room provides more than your typical venue of this type.  If you are looking for a day with friends or family or to build up your corporate team, First National Escape offers common areas to relax and drink a cup of coffee, or conference areas that can comfortably fit up to 30 people.  From there, you can explore the rest of historic Marietta including the newly completed Northwest Lancaster County River Trail. This 14-mile long mostly flat paved trail is very popular for bikers and hikers and offers beautiful views of the Susquehanna River, White Cliffs, and bald eagle nests.

And if you happen to be on the Northwest Lancaster County River Trail, take a break and enjoy some ice cream or iced coffee at Mulberry Thrill, served out of the former Drive-Thru Teller Window located at the rear of the bank at 100 West Market Street in Marietta. All ice cream sandwiches are homemade, and they also offer classic novelties that you would find in an ice cream truck in the 1970s, along with some modern gluten-free and dairy-free items.

Whether you are in charge of planning your next company team building experience, producing a video, or in need of assistance converting those old delicate family memories into something digital, contact Steve to find out how he can help!  He is available by email at  stephenulrich@wilkumstudios.com

 

 


“ITP, LLC is supporting local small business owners through this post.  The experiences described are personal to particular users, and may not necessarily be representative of all users of the products and/or services.  We do not claim, and you should not assume, that all users will have the same experiences. Your individual results may vary. We are not affiliated with the organization referenced and are not paid or compensated for this publication.”

 


Tax Cuts and Jobs Act

In August I was fortunate to present to a group of business professionals the exciting topic of the 2017 Tax Cuts and Jobs Act (TCJA).  This act brought about several changes and I spoke about the larger implications to taxpayers and businesses.

One of the changes with the TCJA were the taxable income brackets, which are now broader.  Meanwhile, most tax percentages decreased. The net result meant a lower tax percentage for most taxpayers and paying less tax overall.  The following chart shows the difference between tax years for those filing married jointly.

 

2017 Taxable Income 2018 Taxable Income
10% $0 – $18,650 10% $0 – $19,050
15% $18,651 – $75,900 12% $19,051 – $77,400
25% $75,901 – $153,100 22% $77,401 – $165,000
28% $153,101 – $233,350 24% $165,001 – $315,000
33% $233,351 – $416,700 32% $315,001 – $400,000
35% $416,701 – $470,700 35% $400,001 – $600,000
39.6% $470,701 or more 37% $600,001 or more

 

In addition to the percentage and income bracket changes, there were several other impacts to come from this act.

Individual:

  • On the positive side, the standard deduction almost doubled from $12,700 to $24,000.  This change means fewer people will be taking itemized deductions at tax time as we have discussed in early entries.
  • The Child Tax Credit doubled from $1,000 to $2,000 and the phased out for the credit has been raised to $400,000.
  • 529 Education Plans now encompasses elementary and secondary public or private schools.  
  • Personal exemptions have been eliminated
  • Alimony is no longer allowed as a deduction by the payer, nor as income for the receiver effective on divorces beginning after 12/31/18.

 

Business:

  • C Corporations now pay a flat 21% of their taxable income which is a change from a varied rate before.  The rate before ranged from 15 to 35% depending upon taxable income.
  • Depreciation has seen some big changes as well.  The Section 179 expense allowed was $500,000 and that has been raised to $1,000,000.  The Phase-out threshold for depreciation has increased by the same amount to $2,500,000.  
  • The new 20 percent QBI deduction, is a powerful tool that will reduce the taxes associated with income from many pass-through businesses. This may encourage pass-through businesses to stay in their current form, rather than converting to a C Corporation.

At the end of my presentation, I provided 4 real life client examples comparing their tax situation in 2017 against how it will look with the new changes.  If you are interested in learning more about how the TCJA will impact you, my door is open!


Vacation Tax Deductions

While the official end of summer has come, your vacation travel doesn’t have to stop.  Especially if you are able to turn that trip into a tax deduction.

Perhaps the easiest way to claim a tax break on a vacation is by attending a seminar or conference related to your current profession.  Work can include seminars, conferences, meeting a potential client or business partner, and doing research in your field. This is a win win as you are improving yourself while enjoying the destination of your dreams.  It is necessary to spend four or more hours a day in professional development and you will also need records of attendance. But that leaves 20 hours for surfing, sailing, and fun! Before leaving on your trip you must have at least one work related engagement planned and set.  This allows you to fulfill the IRS “prior set business purpose” rule.

If the primary purpose of your trip is work, then you can write off your travel costs.  When looking at travel expenses, airfare and driving are both covered. Airfare is covered for you but not family or friends who accompany you.  However, if the destination is close enough to drive, then $0.50 a mile is allowed. When driving you may bring other passengers with you and the mileage is still deductible.  Days spent traveling are counted as work days as well.

Lodging stays for the work days are also tax deductible.  As an added bonus, book ending the weekend between Friday and Monday work days allows for the lodging and food expenses accrued over the weekend to be covered.  Reimbursable are lodging expenses for you only. If a second room or room with additional beds are required to house your family, you will only be reimbursed at the rate for a single room.  

Your personal meals are deductible at 50%, but if you bring family on the trip their meals are not included. With the exception of lodging, receipts are not required for expenses less than $75.  However, documentation, such as a travel diary, will be needed to claim the deduction. When in doubt, more is better to make sure you can claim your trip. The key is thorough documentation throughout the trip.  

Trips outside of the United States have some additional considerations, as do conventions.  IRS Publication 463 contains additional details on deductible expenses on a work / play vacation.


Bennett Mayer Tour Driver for Adventure!

Regardless of the season, Warm Wind Tours wants you to “come play with us”.  This locally owned and operated touring company offers luxury packages to exciting destinations at affordable prices.  Just take a look at their current listings and you can find four seasons worth of adventure! There is not much that is prettier than New York Wine Country in the fall.  Looking to visit New York City during the Christmas season? Or are you already planning ahead for next summer? If so Warm Wind has got you covered with southern beach and sailing trips.

Warm Wind Tours got its name from creator and owner Bennett Mayer who has been driving bus groups for many years.  Bennett began sailing with a friend 30 years ago in a Hobie 16 named “Chinook”. He learned that Chinook was an Indian word for warm wind.  Because of the happiness and fond memories Bennett has of those sailing years, Warm Wind Tours got its name when the venture began In February 2018.  He uses the “come play with us” slogan because that’s how he wants his customers to feel. Playing carefree and having fun! Bennett enjoys working with people and his satisfaction comes from seeing and helping people smile and have a good time.

Warm Wind Tours has a beautiful and very user friendly website for booking tours and learning more about the company.  Bennett is also available by email at bennett@warmwindtours.com or phone at 717-629-4242 to help you plan your getaway!

 

 


“ITP, LLC is supporting local small business owners through this post.  The experiences described are personal to particular users, and may not necessarily be representative of all users of the the products and/or services.  We do not claim, and you should not assume, that all users will have the same experiences. Your individual results may vary. We are not affiliated with the organization referenced and are not paid or compensated for this publication.”

 

 


2018 Standard Tax Deductions for Individuals

The 2018 tax law changes introduced a much larger standard tax deduction than ever before.  At $12,000 for single taxpayers and $24,000 for married filers, this standard deduction may slowly do away with itemized deductions.  When filing, you may claim the largest deduction.  Either the standard deduction available to you based on your filing status or the sum of your itemized deductions.  The standard deduction involves less work as it alleviates the burden of accounting for and reporting all of the individual items. But for some, itemized deductions may still yield the greatest return.  

In March we discussed Workplace Tax Deductions that are available, depending on your career.  Volunteering can also create some opportunities for itemized deductions as we explored in June.  Additionally we’ve shared tax breaks that are available to students in 2018.  Here we look at some additional personal tax deductions to consider if you are planning to itemize deductions.

Financial expenses accrued throughout the year are often viable as deductions, so save your receipts for financial services.  Examples include the cost of preparing your income taxes. This includes tax software and filing fees or preparation fees if you see a professional.  Additionally, money spent for financial planning, can be claimed as well. By preparing for your financial future through financial planning services or creating a living will, you can also enjoy the benefits of financial returns in the present when deducting these expenses.  

Pumps and aids for nursing moms are just some of the reimbursable medical expenses that can be realized, depending on your medical needs throughout the year.  In order to claim medical expenses as an itemized deduction, they most total more than 7.5% of your AGI (adjusted gross income). This amount increases to 10% in 2019 and will mean only those with high medical expenditures will be able to realize these deductions.

Finally, if you are paying mortgage interest on a loan secured by your residence, whether it be a first or second home, this is acceptable as an itemized deduction.  You cannot claim payments on the principal nor can you claim if you have not been making payments.

For a  full list of available deductions with explanations, the IRS website is a great place to check out:  https://www.irs.gov/credits-deductions-for-individuals.  Remember to save receipts and paperwork throughout the year to make deducting easier at tax time!

Did you know that your vacation may be tax deductible as well?  We will explore this in greater detail in the next installment.


Jason Mundok Certified FileMaker Developer

Jason Mundok has been planning, designing, developing and deploying custom business applications for his clients since 2000. He is a certified FileMaker developer with extensive experience helping clients from a wide variety of industries design solutions, streamline business processes, and increase productivity.  New to FileMaker? FileMaker is a custom database platform for Mac, Windows, iPad, and iPhone. FileMaker has been a valuable information management tool across business, government, and educational industries for more than 30 years.

If you are looking for help developing a custom business solution for your organization, Jason is your guy.  He believes that creating and nurturing strong client relationships is the foundation for a successful project. For Jason, this begins with open and honest communication to create a collaborative environment.  In order to facilitate this communication, he utilizes a framework which includes the following components:

  • Feature Planning – collaboratively create a list of what you would like to do with the system or what you will expect the system to do automatically
  • Release Planning – define the project timeline and establish all project logistics such as meeting schedules, communication channels, and expectations
  • Development Cycles – plan, create, test, and review a subset of features and provide budget and status updates every two weeks
  • Beta Testing – move the system into your environment for authentic user testing
  • Deployment – convert your data and roll the system into production

Combining this framework and the FileMaker database platform, Jason has successfully completed numerous projects over the past 18 years.  His projects have ranged from small business solutions on up to creative applications for billion dollar corporations.

In addition to Jason’s work experience, he has had numerous opportunities to write and speak about developing custom business applications and managing development projects.  Jason has presented around the United States and has written for several publications. These opportunities include publication in FileMaker Advisor Magazine, speaking engagements at national FileMaker Developer Conferences, and seminar presentations in New York City and Philadelphia.  

To find out more about how Jason can help your business create solutions, streamline processes, and create solutions he can be reached via email at jason@jasonmundok.com or phone at 717-606-2992.


Starting Over: Budgeting for Success

Our first two topics in the starting over series explored growing trends in changing careers and divorce, especially as they occur later in life.  As part of both trends we discussed budgeting as a key component to success.  In March, we explored budgeting ideas in Your Family Budget.  In this final installment of the starting over series, we will go a little more in depth on the topic of budgeting.

Whenever possible, prepare for big upcoming changes such as career switches or divorce, by saving six months to 1 year of living expenses.  Even when you don’t have an impending change on the horizon, it is important to maintain a 6-12 month safety net for the unexpected and unplanned.  Prepare for the worst and you will be able to breathe easier throughout the process.

The first step towards saving 6-12 months of expenditures is to know what this dollar amount is.  This requires creating an honest budget to determine what 6-12 months of living expenses equal for you.  With a budget, not only will you have a guide for savings, you will also have a clear picture of how much you need to earn going forward.  This is particularly helpful in the event of a new career or separation with different household income.

When starting a budget, you don’t have to recreate the wheel.  There are budget calculators and budget formulas already in place, tried, tested, and proven successful.  Several of these budget calculators are shared in “Your Family Budget”.

One of the most popular budgeting formulas was created by Elizabeth Warren and it is known as the “50/30/20 Budgeting Rule”.  As with any formula, your first step is to itemize your monthly expenditures, being sure to list and include everything. Next list your monthly income.  Using Warren’s formula, you will then want to breakdown your income payments with 50% going towards needs, 30% towards wants, and 20% into savings OR paying off debt.  

A need is defined as something you need to live such as housing, groceries, electric, or water.  Minimum monthly payments toward debt are also considered needs. While a 30% allocation going towards wants may seem to be a lot, wants include things you might not consider to be in this category.  For example, many consider their monthly phone plan to be a need, but it really constitutes an extra – along with going out to eat, and cable or Netflix subscriptions.  Before making a purchase, stop and think.  Is this something I need or is this something I want?  Splurging on wants every now and again is fine, but establish some boundaries.  For example, agree that you will take care of a want once a month and determine a dollar amount to spend ahead of time when you’re creating your budget.  

It’s also important to sit down with your budget regularly to make sure you are still on track and to verify that the budget created still works as time changes.  A good time to review your budget is when you are paying monthly bills or when you receive your paycheck. A budget, once created, is a working plan that can have the flexibility to change as needed and should be an active part of your financial routine.  Don’t create it and forget about it!