President Donald Trump and Democratic congressional leaders have agreed to develop a $2 trillion infrastructure plan, according to Senate Minority Leader Chuck Schumer, D-N.Y.

President Donald Trump and Democratic congressional leaders have agreed to develop a $2 trillion infrastructure plan, according to Senate Minority Leader Chuck Schumer, D-N.Y.

$2 Trillion Infrastructure Plan

"There was goodwill in this meeting…which is a very good thing," Schumer told reporters at the White House on April 30 after meeting with Trump. "We agreed on a number – $2 trillion for infrastructure,"Schumer said. Further, House Speaker Nancy Pelosi, D-Calif., and Schumer both praised Trump after the meeting for his bipartisan cooperation.

The president and Democratic leaders were to meet again to discuss how to pay for the infrastructure plan, Schumer said. At that time, Trump is expected to convey his ideas on funding, Schumer added. "This was a very, very good start…and we hope it will go to a constructive conclusion."

“Pay-Fors”

Additionally, Schumer told reporters at the White House that the infrastructure plan’s "pay-fors"remained undetermined. Notably, Schumer suggested from the Senate floor on April 29 rolling back part of Republicans’ 2017 tax reform law to fund infrastructure costs.

Generally, infrastructure is considered a bipartisan priority among lawmakers. However, reaching an agreement on how to pay for the reportedly $2 trillion infrastructure plan that is still in development is expected on Capitol Hill to be an arduous task. Namely, Democrats are expected to propose scaling back certain tax cuts under the Tax Cuts and Jobs Act (TCJA) ( P.L. 115-97) to foot the infrastructure bill, which is not likely to receive GOP support.

"That’s a non-starter" Senate Majority Leader Mitch McConnell, R-Ky., told reporters at the U.S. Capitol on April 30. "This tax bill [TCJA] is what has generated this robust economy; the last thing we want to do is step on all of this growth…by repealing in effect what has generated all of this prosperity and low unemployment," McConnell said.

White House: Meeting Excellent, Productive

Meanwhile, the White House praised the April 30 infrastructure meeting between Trump and top congressional Democrats, calling it "excellent and productive," as noted in a statement released by White House Press Secretary Sarah Huckabee Sanders shortly after the meeting. Notably, however, the statement did not mention the $2 trillion figure allegedly agreed upon by Trump and Democratic congressional leadership.

"We will have another meeting in three weeks to discuss specific proposals and financing methods,"Sanders added. "The president looks forward to working together in a bipartisan way and getting things done for the American people."

Now that summer is officially here and the main filing season is out of the way, tax planning may be far from your mind. However, typical summer traditions can yield tax benefits. For example, when school lets out for the summer, some parents may decide to send their young children to summer camp. Whether parents do this to supplement their children's education, enhance their athletic skills, provide social opportunities, or simply to get them out of the house, some working parents may be able to deduct certain expenses associated with the cost of sending children to day camp. That's where the child care and dependent credit under Code Sec. 21, might especially come into play.

Now that summer is officially here and the main filing season is out of the way, tax planning may be far from your mind. However, typical summer traditions can yield tax benefits. For example, when school lets out for the summer, some parents may decide to send their young children to summer camp. Whether parents do this to supplement their children's education, enhance their athletic skills, provide social opportunities, or simply to get them out of the house, some working parents may be able to deduct certain expenses associated with the cost of sending children to day camp. That's where the child care and dependent credit under Code Sec. 21, might especially come into play.

Child Care and Dependent Credit Basics

A taxpayer, who incurs expenses to obtain day care for child under age 13 so that the taxpayer and his or her spouse can be gainfully employed (or look for gainful employment), may be able to claim the child care and dependent tax credit on Form 1040, (line 49), Form 1040A (line 31), or Form 1040NR (line 47). Taxpayers may also claim the credit for expenses paid for care for certain other qualifying individuals, such as physically or mentally incapacitated dependents.

Taxpayers who qualify for the child and dependent care tax credit must claim it by completing and filing Form 2441, Child and Dependent Care Expenses, along with their tax returns. Taxpayers may not claim the credit if they file a Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, or Form 1040NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents.

A taxpayer who qualifies may claim a credit in an amount between 20 to 35 percent of employment-related child care expenses. Such expenses can include the cost of sending a child to day camp, something that can run up a hefty bill of more than $100 or $500 per week!

In general, to claim the child and dependent care credit, the taxpayer must meet the following requirements:

• The taxpayer must live with the child(ren) or qualifying person(s) for more than half of the tax year;
• The child and dependent care expenses must be incurred to allow the taxpayer to work or look for work. (If the taxpayer or the spouse is a stay-at-home parent, unfortunately, the child care costs are nondeductible);
• The taxpayer must have income from work during the year. (The amount of the employment-related expenses taken into account in calculating the child and dependent care credit may not exceed the lesser of the taxpayer's earned income or the earned income of his spouse if the taxpayer is married at the end of the tax year);
• The taxpayer must have made payments for child and dependent care to someone the taxpayer or his spouse could not claim as a dependent. If the person to whom payments were made was the taxpayer's child, the child must have been 19 or over by the end of the year;
• If married, the taxpayer must file a joint return (unless an exception applies);
• The taxpayer must include the taxpayer identification number of the qualifying individual on the return;
• The taxpayer must provide specified information regarding service providers, including the name, address and taxpayer identification number (TIN) of the provider (no TIN is required if the provider is a tax-exempt organization);
• A taxpayer must substantiate any child and dependent care credit claimed by providing adequate records or other sufficient evidence of work-related expenses, etc.

Summer Camp Costs

Because day camp is comparable to day care, the IRS allows taxpayers to factor in the costs of sending a child to day camp when determining the amount of the child and dependent care credit they may claim. The cost of sending a child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers, music, football, or soccer. Furthermore, taxpayers are not required to seek out the least expensive day camp option in order to claim the credit. The IRS regulations provide that "the manner of providing care need not be the least expensive alternative available to the taxpayer."

Reg. §1.21-(1)(d)(6) provides that the cost of sending your child to an overnight camp, however, is not considered a work-related expense. Similarly, summer school and tutoring programs are not considered to be for the care of a qualifying individual and the costs are not employment-related expenses.

The regulations under Code Sec. 21 provide two examples intended to outline the distinction between a summer day camp, for which expenses are deductible, and a tutoring program, for which expenses are nondeductible. They state: To be gainfully employed, N sends her 9-year old child to a summer day camp that offers computer activities and recreational activities such as swimming and arts and crafts. The full cost of the summer day camp may be for deductible care. In contrast, to be gainfully employed, O sends her 9-year old child to a math tutoring program for two hours per day during the summer. The cost of the tutoring program is not for deductible care.

According to the IRS, the question of whether or not an expense qualifies for the dependent care credit depends on the nature and primary purpose of the services provided and is primarily a question of fact. In order for an expense to qualify in full for the dependent care credit, any portion of the expense for purposes other than care must be minimal or insignificant and inseparable from the portion of the expense for care. If a significant portion of the expense is for purposes other than care, an allocation must be made as to which portion of the costs are for deductible care and which portion of the costs are for other purposes. An expense that is primarily for a purpose that is not care, such as education, does not qualify for the dependent care credit.

Amounts paid for clothing, schooling and entertainment are not considered qualified expenses for purposes of calculating the child care and dependent credit. However, if these amounts are incidental to and cannot be separated from the cost of caring for the qualifying person, the regulations provide that these expenses can be counted toward the credit for qualified dependent care. This means that costs to purchase clothing, horseback riding chaps, soccer cleats, football padding, violin strings, or other gear that may be used by the child while at the day camp are nondeductible because they are technically personal in nature and not for the well-being of the child. However, if the day camp provides a lunch and snacks to the children attending the day camp, the regulations provide that the cost of this lunch and the snacks may be included in the cost of care for the child if they are incidental to and inseparably a part of the care.

The cost of transporting a qualifying individual to a place where care is provided is not generally a qualifying expense unless it is provided by a dependent care provider. If a day camp takes a child or qualifying person to or from the day camp location, that transportation is for the care of the child. This includes transportation by bus, subway, taxi, or private car.

Forfeited amounts

A taxpayer may include the cost of fees paid to an agency to get the services of a day camp provider, including deposits and application fees. However, if the taxpayer changes his or her mind and either does not send the child to day camp or selects another program, any forfeited deposit will not be considered "for the care of a qualifying person" and will therefore become nondeductible.

Credit Amount

The amount of the child care and dependent credit is subject to a cap calculated as a percentage of the taxpayer's employment-related expenses, as well as a dollar limit. A maximum credit of 35 percent of employment-related expenses is available to taxpayers with adjusted gross income (AGI) of $15,000 or less. The credit percentage is reduced by one percentage point for each $2,000 of adjusted gross income, or fraction thereof, above $15,000. The minimum credit percentage is 20 percent, and it applies to a taxpayer with AGI in excess of $43,000.

In addition, the maximum amount of eligible expenses that may be used to calculate the final credit amount is $3,000 for taxpayers with one qualifying individual and $6,000 for taxpayers with two or more qualifying individuals. Therefore, the maximum credit amount is $1,050 for taxpayers claiming expenses for one child and $2,100 for taxpayers claiming expenses related to two or more children.

Any child care benefits provided by an employer will reduce dollar-for-dollar the amount of expenses a taxpayer may use to calculate the credit.

The child care and dependent credit is nonrefundable, meaning that if the taxpayer already has no tax liability for the year in which he or she incurred qualified expenses for purposes of the credit, he or she will receive no tax benefit from claiming the credit.

How can an EA help me?

Enrolled agents advise, represent, and prepare tax returns for individuals, partnerships, corporations, estates, trusts, and any entities with tax-reporting requirements. The expertise of EAs in the continuously changing field of taxation enables them to effectively represent taxpayers audited by the IRS.

Privilege and the Enrolled Agent

The IRS Restructuring and Reform Act of 1998 allow federally authorized practitioners (those bound by U.S. Department of the Treasury Circular 230 regulations) a limited client privilege. This privilege allows confidentiality between the taxpayer and the enrolled agent under certain conditions. The privilege applies to situations in which the taxpayer is being represented in cases involving audits and collection matters. It is not applicable to the preparation and filing of a tax return. This privilege does not apply to state tax matters, although a number of states have an accountant-client privilege.

Are enrolled agents required to take continuing professional education?

In addition to the stringent testing and application process, the IRS requires enrolled agents to complete 72 hours of continuing professional education, reported every three years, to maintain their EA status. NAEA members are obligated to complete 90 hours per three-year reporting period. Because of the knowledge necessary to become an EA and the requirements to maintain the license, there are only about 40,000 practicing EAs.

What are the differences between enrolled agents and other tax professionals?

Only EAs are required to demonstrate to the IRS their competence in matters of taxation before they may represent a taxpayer before the IRS. Unlike attorneys and CPAs, who may or may not choose to specialize in taxes, all EAs specialize in taxation. EAs are the only taxpayer representatives who receive their right to practice from the U.S. government (CPAs and attorneys are licensed by the states).

Are enrolled agents bound by standards?

Enrolled agents are required to abide by the provisions of U.S. Department of the Treasury Circular 230, which provides the regulations governing the practice of EAs before the IRS. National Association of Enrolled Agents (NAEA) members also are bound by the NAEA Code of Ethics and Rules of Professional Conduct.

Why should I choose an enrolled agent who is a member of the National Association of Enrolled Agents?

The principal mission of the National Association of Enrolled Agents and its members is qualified, accurate, and ethical representation of the financial positions of taxpayers before governmental agencies. Members of NAEA must fulfill continuing professional education requirements that exceed the IRS required minimum. NAEA members comprise a strong network of experienced, well-trained tax professionals who effectively represent their clients and work to make the tax code fair and reasonably enforced.

How can I hire an enrolled agent?

The fastest way to locate an enrolled agent in your area is to visit www.naea.org. The ‘Find an EA’ function located on the home page will allow you to search instantly by locality or specialty. You also can reference your local phone book under the ‘Tax Preparation’ category and look for the phrase ‘Enrolled Agent,’ ‘Enrolled to Represent Taxpayers before the IRS,’ or the ‘EA’ credential following the name of the tax professional.

Rita Lewis will highlight issues that have been of concern to her clients.  Rita's Blog:  2019 Update on tax laws...  

BREAKING NEWS:

Well, they did it!! Read the separate articles to learn what the New Tax Act will mean to you over the next decade. A huge new tax law, revised tax forms, and most IRS employees furloughed for weeks, means we are all waiting on final tax guidance and for the IRS to catch up on their backlog this year.

And, they did NOT do it. Now that the government/IRS is back to work, expect more new "clarifications" this year (probably later rather than earlier) as well as over the next few years, so check back here monthly to see the latest news for 2019 and for planning for the next few years. One topic alone is 247 pages long! And, more arrived at the end of February 2019 pertaining to 2018 tax returns.

The revised withholding tables mean more in your take-home pay. But, that means your balance due or refund for 2018 with your federal return filed in 2019 may be an unpleasant surprise.

Refunds are much, much slower as the IRS battles tax return fraud. And, even slower if you take Education, Child Tax, Earned Income Credits, or use Head of Household filing status. And, slower still if you file an amended return.

Also, expect your tax preparer to ask a LOT more due diligence questions if you want to take the American Opportunity, Child Tax, &/or Earned Income Credits, or use Head of Household filing status. EXPANDED questionaires are part of your tax return if claiming any of those credits or HoH filing status.

You NEED your Form 1098-T as well as a transcript from the bursar's office AND what YOU PAID to qualify for any Educational Credits or Deductions.

NEW: If you receive a Form K-1 for 2018 or future years, it will have additional information due to the new tax laws. And, it will take your tax return preparer more time to complete your returns.

Remember that the IRS and the Social Security Administration/Medicare and CT and most states contact you via US Mail and NOT electronically. There are a lot of very aggressive telephone scams out there, including some targeting Medicare recipients. Do NOT pay anyone who claims to be from the IRS or Medicare or any governmental unit without calling me first. Newer scams target employees in human resource departments and request W-2 information. And, a new official-looking MAILING targets LLCs in CT and other states. Read carefully!

CONNECTICUT

Repeat: A new official-looking MAILING targets LLCs in CT and other states. CT did NOT change how you file and pay your annual report to the Secretary of the State for your business.

CT continues to reduce the value of the property tax credit, and has made many new 2018 tax law changes.

If you are part of a partnership or S-corporation, new CT laws are retroactive to 1 January 2018. Partnerships and S-corporations must pay estimated taxes to CT. Partners and shareholder/employees can make correspondingly lower payments to CT; they will get credit for a percentage of payments made by their pass-through companies to CT.

The CT Forms K-1 will have additional information due to CT's new tax law. And, it will take your tax return preparer more time to complete your returns.

CT also jumped on the problem of fraudulent tax returns, so don't be surprised if CT contacts you to prove your identity. This also means slower refunds.

And, the CT Department of Revenue Services frequently demands proof of eligibility for it's fairly new Earned Income Credit.

CT's Department of Labor is taking a hard look at Independent Contractor vs. Employee issues.

NEW TAX LAW

Expect Many, Many Interpretations of our New Tax Laws! Effective dates are 2018 and later. Sunset date is 2025.

The new tax laws and the revised tax forms and the lack of clarification from Congress and the government shutdown and the furloughed IRS employees mean your tax preparer will spend more time on your tax returns this year. And, ask you a lot of new questions.

As usual, Congress gives and it takes away. Before you rely on any new law to change your tax position, call Rita Lewis at 203-557-0909 to learn if the law was in the signed version, or was extended or modified or expired or clarified, or if income phase-outs reduce the law's application to your specific situation.

CAUTION: Any and all laws still could change during 2019 for 2018, yes 2018, and future tax returns.