CAUTION: Some of these tips may be outdated.

SOCIAL SECURITY BENEFITS

The deadline is approaching for the 2000 security benefits. This applies to those helped by the repeal of the earnings test for folks who are ages 65-69. This repeal was retroactive to Jan. 1, 2000. This limitation had caused many working people in the 65-69 age group who would have more than $17,000 in income to delay applying for Social Security. Now with the test gone, benefits will not be reduced, folks must apply by July 1, 2000 to get benefits retroactive to Jan. 1, 2000. Earnings limit remains for those ages 62-64 ... $10,080 a year.

 

TAX CREDITS

The child tax credit of $500.00 per child continues for the tax year 2000. There is a supplemental credit for three or more children when one qualifies. Children must be under the age of 17. The education credits, the Hope Scholarship and the Lifetime Learning credit, continue. The Hope credit provides a maximum allowable credit of $1500 per student for each of the first two years of postsecondary education. The Lifetime credit allow a credit of 20 percent of qualified tuition expenses paid by the taxpayer for any year the Hope credit is not claimed. Under some conditions, the IRS can prescribe a recapture. Also income limitations may apply.

 

CHILDCARE PROVIDERS AUDIT GUIDELINES

IRS has released a guide to help its employees examine returns of childcare providers. These guidelines can help providers and tax preparers when preparing the 1040, Schedule C, and Form 8829 portions of the return. One example cited by the IRS is start-up costs. IRS believes providers improperly deduct these expenses. These costs include advertising, inspection fees, supply expenses, pre-opening payroll expenses, and miscellaneous expenses incurred prior to opening day. These start-up costs must be capitalized and amortized over a 60 month period. Start-up costs are not current expenses. Depreciation expenses on assets purchased prior to opening day begins on opening day or a day actually placed in service after opening day.. IRS cites the need for retaining paper records to prove advertising costs, car expenses, and wages. Telephone expenses are usually limited to long distance business calls. Toys are a significant expense. Some may need to be depreciated. IRS is on the lookout for larger, unusual, questionable, and personal items. The business office in home deduction may be taken using the daycare rules. Consult Form 8829 for the actual calculations. Note that the business percent of the home may be depreciated as part of the off - in-home deduction.

 

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STUDENT TAXES:

Many students can avoid income tax withholding for the summer job. They must not have owed tax last year and expect to owe none in '00. Students with investment income and claimed as a dependent must be careful. With investment income of $250 or less, withholding can be avoided if total income doesn't exceed $4,400. Investment income over $250, total income cannot exceed $700. Write "exempt" on Form W-4. This eliminates need to file for a refund in '01.

 

HIRING A CHILD:

Hiring your child can help on taxes. No social security tax is due when sole proprietors or husband-wife partnerships hire their children as long as the children are under age 18. FICA isn't owed until the children are 21.

 

SOCIAL SECURITY EARNING TEST:

The Social Security earning test for beneficiaries age 65 to 69 has been repealed. The repeal is retroactive to 1/1/2000. Earnings test remains for those who take early retirement benefits at ages 62 - 64. The cap for 2000 is $10,080. Note that anyone born after 1937 can not retire at 65. This age has been raised incrementally to 1967.

Brick House Business Services
PO Box 17
Plainfield, VT 05667
Phone (802) 454-1674
FAX (802) 454-1927
bhbs1@brick-house.com