You Make the CallEach week the Tax Knowledge Center will pose a question to you. Please note that the question and answer provided does not take into account all options or circumstances possible. The feature is intended to create some interest and insights into the topic provided. The answer will appear here. This week's question is brought to you by Sara Turner, JD, CPA, EA, from NATP's Tax Knowledge Center. July 24, 2008Question:
Your client, Jean Smith calls you to tell you that she has finished some remodeling of her residence. The remodeling included installation of new energy efficient doors, windows, insulation, and solar water heating property. Jean was told by her neighbor that she will get a sizeable tax credit for making these improvements and Jean wonders whether this is correct. She has never claimed any energy credits in the past. What do you tell her? Answer:
The solar water heating property will qualify for the residential energy efficient property tax credit under §25D. However, the other property will not qualify since they were purchased after December 31, 2007, which was when the credit for nonbusiness energy property tax credit under §25C expired.
July 17, 2008Question:
Tom Spender would like to have his 15-year-old daughter, Sara, work in the family business this summer. Tom and his wife Ann are the only owners of an ice cream shop that is operated as a partnership. It is a popular gathering spot and they do a booming business. Tom needs to know if Sara's work is subject to employment taxes. What do you tell him? Answer:
Since Sara is under age 18 and working in her parent's business, which is run as a husband and wife partnership, the payments to their daughter are not subject to social security and Medicare taxes (FICA). In addition, since Sara is under 21, her wages are also exempt from federal unemployment tax (FUTA). However, Sara's wages will be subject to income tax withholding.
July 10, 2008Question:
Your client calls you and says that he is contemplating sending his daughter to a day camp. She attends the camp from 8 a.m. until 5 p.m.; she does not spend the night at the camp. He's wondering if he can get any tax benefit for this expense. What should you tell him? Answer:
There is a dependent care credit available for parents who pay day care costs for their dependent children who are under age 13 so that the parents can work. This credit is claimed on Form 2441. Usually, the cost of sending your child to summer camp does not qualify for the credit, even if one of the reasons for sending the child is for care. However, if the organization conducting the day camp must adhere to the same rules as a dependent care center, the cost of sending the child will qualify. Note: The cost of an overnight camp never qualifies for this credit.
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