“Nearly 6 million Americans — significantly more than first estimated— will face a tax penalty under President Barack Obama‘s health overhaul for not getting insurance, congressional analysts said Wednesday. Most would be in the middle class.

The numbers from the nonpartisan Congressional Budget Office are 50 percent higher than a previous projection by the same office in 2010, shortly after the law passed. The earlier estimate found 4 million people would be affected in 2016, when the penalty is fully in effect.

And the budget office analysis found that nearly 80 percent of those who’ll face the penalty would be making up to or less than five times the federal poverty level. Currently that would work out to $55,850 or less for an individual and $115,250 or less for a family of four.

Average penalty: about $1,200 in 2016.

Starting in 2014, virtually every legal resident of the U.S. will be required to carry health insurance or face a tax penalty, with exemptions for financial hardship, religious objections and certain other circumstances. Most people will not have to worry about the requirement since they already have coverage through employers, government programs like Medicare or by buying their own policies.

The budget office said most of the increase in its estimate is due to changes in underlying projections about the economy, incorporating the effects of new federal legislation, as well as higher unemployment and lower wages.

The Supreme Court upheld Obama’s law as constitutional in a 5-4 decision this summer, finding that the insurance mandate and the tax penalty enforcing it fall within the power of Congress to impose taxes. The penalty will be collected by the IRS, just like taxes.

The new law will also provide government aid to help middle-class and low-income households afford coverage, the financial carrot that balances out the penalty.”

By Ricardo Alonso-Zaldivar

Source:  http://nation.time.com/2012/09/20/tax-penalty-to-hit-nearly-six-million-uninsured-people/

Can you qualify for a tax credit for daycare?

Now that it is June, did you know that your summer day care expenses may qualify for an income tax credit? Many parents who work or are looking for work must arrange for care of their children under 13 years of age during the school vacation. Those expenses may help you get a credit on next year’s tax return.

Here are five facts the IRS wants you to know about a tax credit available for child care expenses. The Child and Dependent Care Credit is available for expenses incurred during the lazy hazy days of summer and throughout the rest of the year.

• The cost of day camp may count as an expense towards the child and dependent care credit. Expenses for overnight camps do not qualify.
• If your childcare provider is a sitter at your home or a daycare facility outside the home, you’ll get some tax benefit if you qualify for the credit.
• The actual credit can be up to 35 percent of your qualifying expenses, depending upon your income.
• You may use up to $3,000 of the unreimbursed expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals to figure the credit.

It’s important that you work with a professional that can help you understand how the various tax credits may help you. Check with your CPA to see if you qualify.

Name: Carol Sanchez, certified public accountant

Age: Young at heart

Years in business: Seven years

Hometown: Framingham

Family: Husband Gene, three children Liam, Kailee and Nikolai

Hobbies: Vacation

Name of business: Sanchez & Santiago, CPAs

Address of business: 186 Main St., Suite 1, Marlborough

Phone number of business: 508-485-2860

Read more: Businessperson profile: Carol Sanchez, CPA – Marlborough, MA – Marlborough Enterprise http://www.wickedlocal.com/marlborough/news/x1310211466/Businessperson-profile-Carol-Sanchez-CPA#axzz1v9t1wb4e

The accounting office of Sanchez & Santiago earned a dominant victory this week when Marlborough Patch asked readers to choose their favorite tax preparer in the Best of Patch Readers’ Choice contest.

“We try to be a very personable company and keep in touch with our clients throughout the year,” said Carol Sanchez. “We don’t just say “come see us once a year, and people appreciate that.”

In a trade that sees many companies operate only on a seasonal basis, Sanchez & Santiago operate a full time business on Main Street in Marlborough, and have an office in Boston where they see clients by appointment.

“Clients can call for advice and we are always here to give it to them,” said Sanchez who operates the company with her business partner Maria Santiago.

With more than 25 votes over the nearest competitor, Sanchez & Santiago took home the comment category as well.

“Carol Sanchez and Maria Santiago are two very professional and diligent tax preparers,” said one reader. “They take their profession very seriously as if they were doing the tax returns for themselves or their love ones.”

Sanchez concluded by thanking the people who took the time to vote.

• if meals are part of a company event (picnic or holiday party),
• snacks provided for the employees at the business location,
• food available to the public for promotional campaigns,
• if provided for more than half of employees for the convenience of the employer. For example, if employer provides meals to keep the employees working late, weekends or on call,
• Meals listed as compensation on the employee’s W2 are 100% deductible,
• Dining invoiced to the client for the actual cost of the meal,
• And, some meals at charity sporting events.

Other than the above, meals would probably be 50% deductible if there is a direct or indirect business purpose. Consult your tax professional for more specific details.

As such, we recommend that your Accounting records have two accounts for Meals and Entertainment: One for the 50% deductible meals and one for the 100% deductible meals. That way, at year-end, your Tax Professional can easily find the 100% Meals.

In all cases, you must have appropriate documentation (a receipt) to substantiate these expenses. The IRS will disallow expenses that do not have appropriate backup documentation.

Secondly, in 2011, the business must answer two questions that were not asked before. “Did you make any payments in 2011 that would require you to file a Form 1099?” So the IRS wants to know who YOU paid and how much. For the most part your business should have completed and sent out a Form 1099 MISC to anyone who is not incorporated and you paid out more than $600 in 2011. Note there are exceptions and additional requirements to this rule. The second question the IRS is asking is: “If yes, did you or will you file the required Form 1099?” Well, what do you think happens if you respond “NO”?

Contact us if you have any questions.

10 things for parents to consider when filing their taxes

1. Dependents – In most cases, a child can be claimed as a dependent in the year they were born. For more information see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
2. Child Tax Credit – You may be able to take this credit for each of your children under age 17. If you do not benefit from the full amount of the Child Tax Credit, you may be eligible for the Additional Child Tax Credit. For more information see IRS Publication 972, Child Tax Credit.
3. Child and Dependent Care Credit – You may be able to claim this credit if you pay someone to care for your child or children under age 13 so that you can work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.
4. Earned Income Tax Credit – The EITC is a tax benefit for certain people who work and have earned income from wages, self-employment or farming. EITC reduces the amount of tax you owe and may also give you a refund. IRS Publication 596, Earned Income Credit, has more details.
5. Adoption Credit – You may be able to take a tax credit for qualifying expenses paid to adopt an eligible child. If you claim the adoption credit, you must file a paper tax return with required adoption-related documents.  For details, see the instructions for IRS Form 8839, Qualified Adoption Expenses.
6. Children with earned income – If your child has income earned from working, they may be required to file a tax return. For more information, see IRS Publication 501.
7. Children with investment income – Under certain circumstances a child’s investment income may be taxed at their parent’s tax rate. For more information, see IRS Publication 929, Tax Rules for Children and Dependents.
8. Higher education credits – Education tax credits can help offset the costs of higher education. The American Opportunity and the Lifetime Learning Credits are education credits that can reduce your federal income tax dollar-for-dollar. See IRS Publication 970, Tax Benefits for Education, for details.
9. Student loan interest – You may be able to deduct interest paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970.
10. Self-employed health insurance deduction – If you were self-employed and paid for health insurance, you may be able to deduct any premiums you paid for coverage for any child of yours who was under age 27 at the end of the year, even if the child was not your dependent. For more information, see the IRS website.

Forms and publications on these topics are available at www.irs.govor by calling 800-TAX-FORM (800-829-3676).

Here are the top six things you’ll need to know about using your federal refund to purchase savings bonds.

• You may use a portion of your refund to purchase up to $5,000 in U.S. Series I Savings Bonds.
• The total amount of saving bonds purchased must be a multiple of $50. Additional money over the specified amount must be deposited into another financial account – such as a checking or savings account.
• The bonds will be issued in your name. For married taxpayers filing a joint return, the bonds will be issued in the names of both spouses.
• You will receive the U.S. savings bonds in the mail.
• You normally select this option by filing Form 8888, Direct Deposit of Refund to More Than One Account.
• Form 8888 has step-by-step instructions on how to select this option and how to specify the amount of your refund you want to use to purchase savings bonds.

1. There are two easy and convenient options for obtaining free copies of your federal tax return information — tax return transcripts and tax account transcripts.
2. The IRS does not charge a fee for transcripts, which are available for the current year as well as the past three years.
3. A tax return transcript shows most line items from your tax return as it was originally filed, including any accompanying forms and schedules. It does not reflect any changes you, your representative or the IRS made after the return was filed. In many cases, a return transcript will meet the requirements of lending institutions, such as those offering mortgages and student loans.
4. A tax account transcript shows any later adjustments either you or the IRS made after the tax return was filed. This transcript shows basic data – including marital status, type of return filed, adjusted gross income and taxable income.
5. To request either transcript by phone, call 800-829-1040 and follow the prompts in the recorded message.
6. To request a tax return transcript through the mail, individual taxpayers should complete IRS Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Form 4506T-EZ is only for individuals who filed a Form 1040 series return. Businesses, partnerships and individuals who need transcript information from other forms or need a tax account transcript must use the Form 4506T, Request for Transcript of Tax Return.
7. You should receive your tax return transcript within 10 working days from the time the IRS receives your request. Allow 30 calendar days for delivery of a tax account transcript.
8. If you still need an actual copy of a previously processed tax return, it will cost $57 per tax year and take much longer. Complete Form 4506, Request for Copy of Tax Form, and mail it to the IRS address listed on the form for your area. Please allow 60 days for actual copies of your return. Copies are generally available for the current year as well as the past six years.
9. Visit the IRS Web site, IRS.gov, to determine which form will meet your needs. Forms 4506, 4506T and 4506T-EZ can be found at IRS.gov or by calling the IRS forms and publications order line at 800-TAX-FORM (800-829-3676).

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
2. The limit is $1 million for a married person filing a separate return.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.
7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.
9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.