New IRS Requirement

Earned Income Credit (EIC) & Head of Household

Attention Parents. To be eligible to receive the EIC credit or HOH status you must be able to prove that your children lived with you during the tax year. In the past the IRS has asked you to be able to provide them with certain records to prove your qualifying child lived with you. Now we are required to document in our records these same things or we could be liable for a preparer penalty of $530 for failure to comply. The IRS is trying to stop people who are not eligible to claim children. From the list below please bring at least one or two of the necessary documents with you for your tax appointment or we may not be able to get this credit for you.

Residency of qualifying children:

  • School Records or statement
  • Landlord or property management statement
  • Medical records
  • Child care provider records
  • Social service records or statement
  • Place of worship statement
  • Indian tribal officer statement
  • Employer statement

Disability of qualifying children:

  • Doctor statement
  • Indian tribal officer statement
  • Employer statement

To claim Head of House status you must be able to prove you are unmarried, paid more than half the cost of the home and your home is was the main home of your child, stepchild, or foster child for more than half the year.

As a result of the Path Act any tax refunds that include Earned Income and or Child tax credits on the return will be held until February 15th, to help combat identity theft and refund fraud from being committed.

Health Care Deductions The amount that is deductible must be greater than 7.5% of your income for everyone in 2019. Unless you have substantial medical expenses it is unlikely that any deductions will be able to be taken. If you are self-employed we still need to know how much you paid for health insurance.

Foreign Accounts the IRS is looking closely for offshore accounts. If you have a bank account, retirement account, or business interest with a value over $10,000 in a foreign country it must be reported or there are substantial penalties.

Gift Amounts have changed as of 2018. The amount you may give to one person in one year without filing requirements was increased to $15,000. Currently estates of less than $11.4 million for decedents in 2019 will not pay tax. The MN estate exclusion amount is $2.7 million so this could cause the need to file a federal estate return and pay taxes to MN.

If you are nearing the age that you can draw social security benefits and will continue to work we need to discuss the tax ramifications prior to doing it. Up to 85% of your social security benefits can become taxable.

Mortgage interest paid on your home is shown on form 1098. If you refinanced we should obtain the closing statements and if you drew money out on a home mortgage we must have general information on the use of money per the IRS.

Rental Property we now need the physical address for each one, the type of property (single-family, duplex, etc.) and the number of days rented and number of days used for personal purposes.

The PATH act permanently allows a tax free contribution of up to $100,000 per year from an IRA to a charity by directly transferring to the charitable organization.

A 2008 court case reminds us that all charitable contributions must have a receipt. Each individual contribution over $250 must also have an acknowledgement letter from the charity.