The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
THE TAXMAN COMETH
2014 Taxes
Potential Tax Benefits
for Maryland
Resource Parents
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
1
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
DISCLAIMER
DHR/DSS can NOT give tax advice. We can only
share information with you.
You and your tax advisor have to make decisions
based on your specific situation.
This presentation is for informational purposes only.
This is not legal or tax advice.
Five Sections
• Maryland State Taxes (HB 699)
• Federal Taxes: Introduction and Potential
Dependency Exemption of Foster Children
• Hows and Whys of Documentation
• Specific Deductions and Credits
• Conclusion and Resources
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
2
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Potential Maryland
State Tax Benefits
Potential Maryland
State Tax Benefits
•
•
•
•
House Bill 699: History
What the Law Says
DHR Policy
Some Examples of Potential Unreimbursed
Expenses
• Form 502 SU
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
3
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
House Bill 699 History
• Advocated for by the Maryland Resource
Parent Association (MRPA)
• Sponsored by Delegate Peter Murphy from
Southern Maryland, and others
• Passed both Houses, unanimously
• Signed by Governor Martin O’Malley on
May 5, 2014
What the Law Says
• Public Foster Parents and Approved Kinship
Providers
• Subtraction Modification from Federal
Adjusted Gross Income (AGI)
• Subtraction is for unreimbursed expenses
incurred on behalf of a child in care
• Subtraction allowed includes only expenses
approved by local department as “necessary.”
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
4
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
What the Law Says (continued)
• Subtraction may not include expenses for
which an allowance or reimbursement was
received (i.e. subsidy)
• Around October of each year, DHR submits to
State Comptroller’s Office a list of eligible
providers
• Subtraction amount can not exceed $1,500.
PER CHILD as interpreted by Comptroller’s
legal counsel
What the Law Says (continued)
• This Law took effect July 1, 2014 and shall be
applicable to all tax years beginning after
December 31, 2013
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
5
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
DHR Policy
• Draft policy is being reviewed by Attorney
General’s Office
• Draft policy stipulates reimbursed expenses
not eligible for the subtraction modification
are those delineated in SSA Policy 11-19, and
include such things as food, clothing, shelter
and utilities, transportation, bedding and
toiletries, as well as allowance
DHR Policy (continued)
• The draft policy interprets the words “as
necessary” to mean as appropriate or
acceptable
• The draft policy includes a form to be
completed by the resource family and
submitted for approval to the local
department which includes date of expense,
description of expense, and amount of
expense
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
6
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Some Examples of Appropriate
Unreimbursed Expenses
•
•
•
•
•
Vacations/Trips
After School Activities
Sports/Music Lessons
Special tutoring
Day care expenses not covered by local
department
• Summer camps not covered by local
department
Maryland Tax Form 502 SU
• When claiming subtraction modification, you
must complete Maryland Tax Form 502 SU and
include it when filing your Maryland return
• You do NOT need to include form from local
department or any receipts when filing;
however, these should be kept if needed for
verification or audit
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
7
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Section One:
Review and Questions
Federal Taxes: Introduction and
Potential Dependency Exemption
for Foster Children
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
8
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
TAXABLE INCOME
Definition of 'Taxable Income‘
• The amount of income that is used to calculate an individual’s or a
company’s income tax due. Taxable income is generally described as
gross income or adjusted gross income minus any deductions,
exemptions or other adjustments that are allowable in that tax year.
Taxable income is also generated from appreciated assets that have
been sold or capitalized during the year and from dividends and
interest income. Income from these sources is generally taxed at a
different rate and calculated separately by the tax entity.
Read more:
http://www.investopedia.com/terms/t/taxableincome.asp#ixzz2Hgie3hjq
TAXABLE INCOME
Non-Taxable
• The reimbursement you
receive for foster children in
your home, or for an
adoptions subsidy is NOT
taxable income.
• SSI or Social Security benefits
are generally non-taxable
Note: the tax benefits described
today are basically for families
that have taxable income
(wages or self-employment).
•
•
•
•
Some Taxable Payments
Parent cares for more than
10 children or operates a
group home.
Parent is paid to keep a bed
open, even if it is not used.
Parent is paid for their time.
Parent cares for more than
five over the age of 19.
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
9
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
FORMS
• W-2: For employees. This shows income earned
and deductions such as taxes; social security, and
Medicare.
• 1099-Misc: Payments for services performed by
people not considered employees. This is used
when $600.00 or more is paid within a tax year.
Note:
Both forms are reported to the IRS.
Public Resource Parents and Kinship Providers
should not receive either form.
Deductions and Credits
• A deduction is subtracted from taxable
income. The value of a deductions is based on
the tax bracket of the taxpayer.
• A tax credit is a dollar for dollar reduction in
tax liability.
Note
A tax credit can be refundable or nonrefundable. They just reduce or eliminate the
income tax that you owe.
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
10
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Dependency Exemption
• U.S. citizen, resident, national, or resident of
Canada or Mexico, for some part of the tax
year
• Social Security number
• Phase out ranges; based on you adjusted gross
income
• Four part test to be a qualifying child
• $3,950. for each dependent
Dependency Exemptions cont’d
Relationship
• The child must be your son,
daughter, eligible foster
child, brother, sister, half
brother or sister, stepbrother or sister, or a
descendant of any of them
• Eligible foster child: the
child was placed with you
by and authorized
placement agency or by the
court
Age
• Under age 19 at the end of
the tax year
• Under age 24 at the end of
the tax year if they are a
FULL time student
• Any age if permanently and
totally disabled
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
11
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
RESIDENCE
• The child must have lived with you for more
than half the year (183 plus days)
• Temporary absences such as summer camp,
school, hospital stays do not disrupt the child’s
residence
• New-born babies placed right from the
hospital to your home for the balance of the
year meet the residence requirement
SUPPORT
• The child must not have provided more than
half of his or her own support for the year
• Payments (reimbursements) you receive for
the support of a foster child are considered
support provided by the Agency or the State
(not the child’s own support)
• Parent must be able to show that they spent
funds to support the child above and beyond
what you receive in reimbursements **
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
12
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Section Two:
Review and Questions
The Hows and Whys of
Documentation
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
13
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
News
Flash!
This is important!
DOCUMENTATION IS EVERYTHING
Record keeping:
• Documentation needs to
be available
• Most documentation
does not need to be sent
with tax filing
• Documentation should be
kept for at least 3 years
Social Security Numbers:
• Get from the worker as
soon as possible
• Can not claim/file without
a social security number
• Confidentiality issues
– Dates when the child is
placed in your home
– Expenses: the envelope
system
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
14
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Uh Oh!
Multiple Filers
It is possible that someone
else has filed for the same
child
Remember….”The early
bird gets the worm”
Section Three:
Review and Questions
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
15
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Specific Deductions and Credits
CHILD AND DEPENDENT CHILD CARE
• Generally for the care of a
child under age 13
(exception: child is
disabled and not capable
of self-care)
• Child care, after school
programs, summer camp;
but not overnight
• Maximums: $3,000.00
one child; $6,000.00 for
two children, and based
on parents adjusted gross
income
• You can not claim what is
paid by the Local
Department
• Providers tax ID number
will be needed
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
16
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Well……It’s about time
CREDITS
Child Tax Credit
If you are eligible to
declare a foster child as
a dependent, you may
be eligible to claim the
child tax credit
• The child must be under
the age of 17 at the end
of the tax year.
• $1,000.00 credit per
child, generally not
refundable.
• Income threshold:
$110,000.00, married
filing jointly.
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
17
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
EDUCATION CREDITS
• Post Secondary Education
• Educational expenses paid by a tax payer for a
child who is claimed as a dependent qualify for
this credit
• Educational expenses do not include personal
expenses like room and board
• This can include the cost of continuing education
classes and/or conferences for foster parents
(20 % reimbursement)
• For income limits and other information, see IRS
publication 970 or ask your Tax Advisor
EITC
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
18
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
EARNED INCOME TAX CREDIT
This is a refundable credit based
on a parents earned income and
the number of children a parent is
eligible to claim as dependents.
(Handout has specific amounts)
Adoption Tax Credit
• Permanent but not refundable. The credit can
carry over up to 5 years past year of finalization
• Maximum of $13,190 (modified with adjusted
gross income $197,880 to $237,880)
• Flat for special needs adoptions, that includes any
child adopted from foster care that has an
adoption subsidy (even just MA)
• Use Form 8839. Supporting documentation does
not have to be sent
Check NACAC for complete details
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
19
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
CHARITABLE CONTRIBUTIONS
• Foster parents are volunteers; therefore some
expenses for your service could be deductable
as a charitable contribution
• If you have no motive of making a profit, and
are not making a profit
• Remember…it is not a charitable contribution
if you are reimbursed for it
• Transportation/ Mileage: 14 cents a mile
Section Four:
Review and Questions
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
20
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Conclusion and Resources
Claims for Prior Years
• Any taxpayer may file an amended return
• Refunds can be received for no more than 3
years prior
• Remember- discuss your specific situation
with a tax professional/advisor
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
21
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Remember
• This content is for informational purposes only
• It is not tax or legal advice
• Use this information, with your tax advisor, tax
program, etc. to make the appropriate choices
for your situation
Maryland State Tax Information
• www.marylandtaxes.com
• 1-800-MDTAXES (1-800-638-2937)
• 410-260-7980 (Central Maryland)
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
22
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
INTERNAL REVENUE SERVICE (IRS)
RESOURCES
WWW.IRS.GOV
1-800-829-1040
Publication 17
(General Information)
Publication 501
(Exemptions)
Form 8839
(Adoption Tax Credit)
Resources: OTHER
• National Foster Parent Association (NFPA)
www.nfpaonline.org
• Maryland Resource Parent Association (MRPA)
www.MRPA.org
• North American Council on Adoptable Children
(NACAC)
www.NACAC.org
• John Bertulis (Foster Parent Ombudsman)
[email protected]
410-767-7561
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
23
The Tax Man Cometh, 2014 Taxes
Potential Benefits for Maryland Resource Parents
Happy Filing!
University of Maryland School of Social Work, Child Welfare Academy
Resource Parent Training Program
525 W Redwood Street, Baltimore, MD 21201
[email protected] l www.family.umaryland.edu/rpt
24