For parents who work or are looking for work, the expenses associated with arranging for care of children under 13 years of age during school vacation may be eligible for the Child and Dependnet Care Credit.

Here are some things to consider:

• 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

For more information, please give us a call.

The IRS issued regulations outlining the administration of a 10% excise tax on indoor tanning services that went into effect on July 1, 2010.

Under the new regulations, providers of indoor tanning services will collect the tax at the time the purchaser pays for the tanning services. The provider then pays these amounts to the government, quarterly, along with IRS Form 720, Quarterly Federal Excise Tax Return.

The tax does not apply to phototherapy services performed by a licensed medical professional on his or her premises. The regulations also provide an exception for certain physical fitness facilities that offer tanning as an incidental service to members without a separately identifiable fee.

For answers to frequently asked questions surrounding the excise tax on indoor tanning services, please visit the IRS website at http://www.irs.gov/businesses/small/article/0,,id=224600,00.html

Just a reminder on your 2^nd quarter payroll taxes that are filed this month.

You must provide form W-11 (Hire Act Employee Affidavit) to your payroll service company if you want to take advantage of the program. 

A separate form is required for each qualifying new hire.

Under the Hiring Incentives to Restore Employment (HIRE) Act, your business may be exempt from paying the 6.2% employer share of Social Security employment taxes on wages paid to previously unemployed individuals hired after February 3, 2010 and before January 1, 2011.  The new employee cannot be a replacement for a former employee unless the former employee was terminated for cause or left voluntarily.  The new employee must certify by signed affidavit that he or she hasn’t been employed for more than 40 hours during the 60-day period ending on the date employment begins.  (Be sure to provide your payroll service company with form W-11, the HIRE Act Employee Affidavit)  And the employee can’t be “related” to the employer.  This tax relief is available for wages paid to qualifying individuals after March 18 through the end of 2010.

And keeping a newly hired employee on for at least 52 consecutive weeks could provide you with a tax credit in the year the retention requirement is first satisfied.  To qualify, the wages you pay the new employee during the last 26 weeks for the period must equal at least 80% of the wages paid for the first 26 weeks.  The credit for each qualifying retained worker is equal to the lesser of (1) $1,000 or (2) 6.2% of wages paid to the retained worker during the 52-week period.

If you operate your business entity as a C-Corp; you may have accumulated earnings.  The year 2010 sees an end to the 15% tax on dividends.  You could declare a dividend to flush out the cash and only pay a 15% tax.  You could then take the dividend and lend it back to your corporation if needed.

The Patient Protection and Affordable Care Act provides an incentive for employers with no more than 25 full-time (or full-time equivalent) employees to provide health insurance.  (Annual wages must average no more than $50,000 per employee.)  The Act offers qualifying employers a sliding-scale income tax credit to help them pay for health insurance coverage for employees.  For 2010 through 2013, the credit may be as much as 35% of the employer’s contribution toward the coverage.  In general, the employer must contribute at least 50% of the total premium cost.

Looking ahead, the health care reform law enacted earlier this year (the Patient Protection and Affordable Care Act, as amended) imposes a Medicare tax on the investment income of higher income individuals, estates and trusts, starting in 2013.  For individuals, the tax will be equal to 3.8% of the lesser of (1) net investment income or (2) the excess of modified AGI over $200,000 (single; head of house-hold), $250,000 (married filing jointly), or $125,000 (married filing separately).

Capital gains rates are scheduled to go up on January 1, 2011.  The two most significant changes are; up until now, if you were in the 10 or 15% tax rate as ordinary income; there was no tax on long term gains; now that tax will be 10%.  The 15% rate that we have enjoyed for the last 8 years goes to 20%.  You should contact your investment professional to discuss the possibility of bringing on or cashing in your imputed long term gains in 2010.  If you have investment property that you are considering selling in the future, there may be no better time to do it than 2010.

Unless Congress passes new legislation, on January 1, 2011, the top four tax brackets will revert from their current 25%, 28%, 33% and 35% levels to their pre-2001 levels of 28%, 31%, 36% and 39.6% and the 10% bracket will go away.  The lowest bracket will be 15%.

The IRS has announced that eligible taxpayers who contracted to buy a home, qualifying for the first-time homebuyer credit, before the end of April now have until Sept. 30, 2010 to close the deal.

For more information, please visit the IRS’s First-Time Homebuyer Credit page http://www.irs.gov/newsroom/article/0,,id=204671,00.html