Ten Facts about the Child Tax Credit, by Chicago CPAs.

The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. Here are 10 important facts from the IRS about this credit and how it may benefit your family.

  1. Amount – With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.
  2. Qualification – A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.
  3. Age Test – To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2012.
  4. Relationship Test – To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.
  5. Support Test – In order to claim a child for this credit, the child must not have provided more than half of their own support.
  6. Dependent Test – You must claim the child as a dependent on your federal tax return.
  7. Citizenship Test – To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.
  8. Residence Test – The child must have lived with you for more than half of 2012. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.
  9. Limitations – The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.
  10. Additional Child Tax Credit – If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

Please call Chicago Accountants at 773-728-1500 if you need help in getting your individual or corporation income tax prepared.

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Five Facts to Know about AMT, by Chicago Accountants:

The Alternative Minimum Tax may apply to you if your income is above a certain amount. Here are five facts the IRS wants you to know about the AMT:

1. You may have to pay the tax if your taxable income plus certain adjustments is more than the AMT exemption amount for your filing status.

2. The 2012 AMT exemption amounts for each filing status are:

  • Single and Head of Household = $50,600;
  • Married Filing Joint and Qualifying Widow(er) =      $78,750; and
  • Married Filing Separate = $39,375.

3. AMT attempts to ensure that some individuals and corporations who claim certain exclusions, tax deductions and tax credits pay a minimum amount of tax.

4. You should use IRS e-file to prepare and file your tax return. You figure AMT using different rules than those you use to figure your regular income tax. IRS e-file software will determine if you owe AMT, and if you do, it will figure the tax for you.

5. If you file a paper return, use the AMT Assistant tool on IRS.gov to find out if you may need to pay the tax.

We prepare tax returns for our clients who owe AM.  If you need help, please contact us, the Chicago Tax Accountants at 773-728-1500.  If you need help with filing extentions, please call us or email us at asif@taxcutters.com and we will help you out.

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LLC- How Many Properties Can OR Should I put in my LLC??

Difficult question because it depends a great deal on your individual risk tolerance.  However, let me make a couple of points from an accountant’s perspective that may be helpful in assessing your situation and the best course of action to take.  When it comes to business incorporation we should always get the expert’s advice.

For a question like “How many?”..the answer is ‘as many as you want’.  There is no limit.  You simply deed the properties into your LLC.  Make sure you look at local (state and county) rules that may apply in regards to transfer taxes (i.e. Florida and Washington State).

The downside to having too many properties in one LLC is that the risk and liability of each property affects the others. For example if you have 5 properties in one LLC and the LLC gets sued on property 2, then that judgment will affect and be applied against all other properties in the LLC.

The question then becomes how many properties should you put in your LLC.  In my opinion, this really comes down to the amount of equity you have in each one of your properties, where they are located and which properties have the most risk of a potential law suit.

Some general rules are:

  • you want to keep your high equity properties separate from your high risk properties;
  • consider grouping low equity properties together, while high equity properties may need their own LLC;
  •  when the equity in your LLC gets too high, consider transferring some of the properties out to a new LLC and separate your ‘eggs into different baskets’ and;
  •  if you have properties in a state that allows series LLC’s consider setting up or converting to a Series LLC.

It is critical that your LLCs are registered in the State where the property or properties exist and company maintenance should be a priority.

Please call us 773-728-1500 for any questions you may have regarding business incorporation, we the Chicago accountants are here to help you out!

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What to Expect for Federal Refunds for the 2013 Filing Season

It is important to set your  expectations for when the IRS will be sending refunds during the upcoming 2013 Filing Season and beyond.

Due to the increase in fraud and identity theft, the IRS is increasing their fraud filters during the processing of all individual returns. This means that a larger number of returns will be reviewed therefore, processing will take longer and the refund will be sent out later for these returns.

The IRS messaging for refunds for the upcoming filing season will be that refunds will be sent to the taxpayer within 21 days from the time the return has been accepted. This message will be the same on the IRS website, “Where’s My Refund?” page, and when a taxpayer calls the IRS help desk.

The refund cycle chart has been eliminated.

You will also notice the following changes to the “Where’s My Refund?” tool for the upcoming filing season:

  • The expected date of when the refund will be sent will no longer be given when the return begins to be processed.
  • The refund status will be presented by way of a status bar as follows:
    • Return Received – From the time the return is received until the refund has been approved the message will be that the return is being processed and that the refund will be sent in less than 21 days.
    • Refund Approved – A date the refund is scheduled to be sent to the bank will be given.
    • Refund Sent – The date the refund was sent.
  • The taxpayer will be able to see the status of their return within 24 hours after their return has been accepted.

The IRS has also begun sending out an additional message to taxpayers that they should not be making major purchases during the holiday season solely on the expectation of when they will receive their refund before the bills arrive.

To learn more see the following:

Please call us, the CPAs in Chicago, at 773-728-1500 if you need help with your individual or corporate tax return.

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