 |
  
|
 |
|
|
|||
|
|
CreditsBusiness Credits Alcohol Fuels Credit: IRC 40For: Sale of straight alcohol or mixture at retail or used as fuel in trade or business (Per Announcement 95-76: the credit for fully taxed gasoline that is used to produce gasohol will be no longer be allowed for gasohol sold or used after 9/30/95) Rate: Alcohol - 45 cents to 60 cents/gallon; Ethanol - 40 to 54 cents IRS Pub 378 Tax Form 6478 Carryback/Carryforward: Back 3 years; forward 15 years; > 12/31/97 back 1 year, forward 20 years
Disabled Access Credit: IRC 38 For: Expenses paid or incurred to make business accessible to or usable by individuals with disabilities Rate: 50% of eligible access expenses; maximum credit $5,000 IRS Pub 907 Tax Form 8826 Carryback/Carryforward: Back 3 years;
forward 15 years; > 12/31/97 back 1 year, forward 20 years Employer Paid FICA And Medicare
Taxes Paid On Certain Employee Tips: IRC 45B For: Amount paid on tips above minimum wage Rate: 100% of eligible amounts Carryback/Carryforward: Back 3 years; forward 15 years (may not be carried back to a tax year ending before August 10, 1993); > 12/31/97 back 1 year, forward 20 years IRS Pub 334 Tax Form 8846 Empowerment Zone Employment Credit: IRC 1396For: Wages paid to employees working in selected geographic areas Rate: 20% of wages up to $15,000. $3,000 maximum credit. Carryback/Carryforward: Back 3 years; forward 15 years (may not be carried back to a tax year ending before August 10, 1993); > 12/31/97 back 1 year, forward 20 years IRS Pub 334 Tax Form 8844 Enhanced Oil Recovery Credit: IRC 43For: Qualified enhanced oil recovery costsRate: 15% of qualified costs IRS Pub 334 Tax Form 8830 Carryback/Carryforward: Back 3 years; forward 15 years; > 12/31/97 back 1 year, forward 20 years Indian Employment Credit: IRC 45AFor: Wages and health insurance costs paid to members of an Indian tribe or spouse for services performed on a reservation Rate: 20% of increase over amount paid in 1993 Carryback/Carryforward: Back 3 years; forward 15 years (may not be carried back to a tax year ending before August 10, 1993); > 12/31/97 back 1 year, forward 20 years IRS Pub 334 Tax Form 8845 Investment Credits• Energy Credit: IRC 48 Rate: 10% IRS Pub 535 Tax Form 3468 Carryback/Carryforward: Back 3 years;
forward 15 years; > 12/31/97 back 1 year, forward 20 years • Reforestation Credit: IRC 48 Rate: 10% IRS Pub 535 Tax Form 3468 Carryback/Carryforward: Back 3 years;
forward 15 years; > 12/31/97 back 1 year, forward 20 years • Rehabilitation Credit: IRC 47 Rate: 10% for pre-1936 buildings; 20% for historic structures IRS Pub 535 Tax Form 3468 Carryback/Carryforward: Back 3 years; forward 15 years; > 12/31/97 back 1 year, forward 20 years Low-Income Housing Credit: IRC 42For: Owners of residential rental buildings providing low-income housing Rate: 30% to 70% of qualified building basis for buildings placed in service after 1986. Taken over 10 years. IRS Pub 334 Tax Form 8586, 8609 Carryback/Carryforward: Back 3 years; forward 15 years; > 12/31/97 back 1 year, forward 20 years Orphan Drug Credit: IRC 45CFor: A nonrefundable tax credit for qualified expenses incurred in the testing of certain drugs to cure rare diseases or conditions; for amounts paid after 7/1/96. IRS Pub 334 Form 8820 Carryback/Carryforward: > 12/31/97, back 1 year, forward 20 years Renewable Electricity Production Credit: IRC 45A For: Facility that produced electricity from qualified energy resources and the facility was placed in service after 1992 Rate: 1.7 cents per kwh IRS Pub 334 Tax Form 8835 Carryback/Carryforward: Back 3 years; forward 15 years; > 12/31/97 back 1 year, forward 20 years Research Credit: IRC 41For: Research and experimental expenditures paid or incurred in carrying on trade or business (expired 6/30/95; reinstated for 7/1/96-6/30/2004) Rate: 20% of qualifying expenses in excess of base amount IRS Pub 535 Tax Form 6765 Carryback/Carryforward: Back 3 years; forward 15 years; > 12/31/97 back 1 year, forward 20 years Welfare-to-Work Credit: IRC 51For: Tax credit equal to 35% of qualified first-year wages and 50% if qualifying second year wages (limited to $10,000 per year for each employee during the first two years of employment). Wages include tax-free health and accident benefits and employer-provided educational and dependent care benefits. Based on a percentage of qualified wages paid to employees who have been certified to be long-term family assistance recipients who begin work after 12/31/97 and before 1/1/2002. Tax Form 8850 or 8861. Work Opportunity Jobs Credit: IRC 51For: Based on a percentage of qualified wages paid to employees, from one or more of seven targeted groups, who begin work after 9/30/96 and before 1/1/2002. Rate: 35% of qualified first-year wages limited to $6,000 for each employee ($3,000 for qualified summer youth employee) during the first year of employment; must be employed for at least 180 days (20 days for summer youth) or must perform at least 400 hours of service (120 hours for summer youth). For workers hired after 9/30/97, the 400 hours are reduced to 120 hours. Credit percentage is 25% for employment of at least 120 hours, but less than 400 hours and 40% for employment of 400 or more hours. Tax Form: 5884 and 8850 Carryback/Carryover: Same as pre-1995 targeted jobs credit; > 12/31/97 back 1 year, forward 20 years Child and Dependent Care Credit: IRC 21Adjusted Gross Income Over But not over Applicable Percentage $ 0 $10,000 30 % 10,000 12,000 29 % 12,000 14,000 28 % 14,000 16,000 27 % 16,000 18,000 26 % 18,000 20,000 25 % 20,000 22,000 24 % 22,000 24,000 23 % 24,000 26,000 22 % 26,000 28,000 21 % 28,000 No Limit 20 % To be able to claim the credit for child and dependent care expenses, you must meet ALL the following tests: 1. The care must be for one or more qualifying persons. 2. You (and your spouse if you are married) must keep up a home that you live in with the qualifying person or persons. 3. You (and your spouse if you are married) must have earned income during the year. 4. You must pay child and dependent care expenses so you (and your spouse if you are married) can work or look for work. 5. Your filing status is single, head of household, qualifying widow(er) with dependent child, or married filing jointly. You must file a joint return if you are married, unless an exception applies to you. 6. You must identify the care provider on your tax return. 7. You must make payments for child and dependent care to someone you (or your spouse) cannot claim as a dependent. If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the end of the year. 8. You exclude less than $2,400 (less than $4,800 if two or more qualifying persons were cared for) of dependent care assistance benefits. To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by the applicable percentage. The table shows the applicable percentage based on adjusted gross income. Child Tax Credit: IRC 242000 $ 500 per qualifying child 1999 $ 500 per qualifying child 1998 $ 400 per qualifying child 1997 $ -0- Phaseouts ($50 reduction for each
$1,000 of income above modified AGI phaseout limits) Single $ 75,000 Modified AGI MFJ, QW $ 110,000 Modified AGI MFS $ 55,000 Modified AGI Qualifying Child: for an individual to qualify as a qualifying child, 1. the taxpayer must be entitled to a dependency exemption deduction for the qualifying child; 2. the dependent must be related to the taxpayer as described in Sec 32(c)(3)(B) and 24(c)(1)(C) (ie: son, daughter (or descendant of either), a stepchild, or eligible foster child; 3. the qualifying child must be under
the age of 17 as of 12/31. Earned Income Credit (EIC) Definition of Earned Income: IRC 32
(EIC) Earned Income Not Earned Income Wages, salaries, and tips Union strike benefits Long-term disability benefits received prior to minimum retirement age Net earnings from self-employment †Voluntary salary deferrals (for example: 401(k) plans or the Federal Thrift Savings Plan) †Pay earned in a combat zone †Basic quarter and subsistence allowances and in-kind quarters and subsistence from the U.S. military †The value of meals or lodging provided by an employer for the convenience of the employer †Housing allowance or rental value of a parsonage for the clergy (see "Ministers and members of religious orders") †Excludable dependent care benefits †Voluntary salary reductions such as under a cafeteria plan not included in W-2 box 1 †Excludable employer-provided adoption benefits from Form 8839 Anything else of value you get from someone for services you performed even if it is not taxable †Income received for services performed as a Native American that is exempt from federal income tax †Mandatory contributions to a state or local retirement plan †Indicates Nontaxable Earned Income Interest and dividends Social security and railroad retirement benefits Workfare benefits (Including AFDC payments) Pensions or annuities Veterans' benefits Workers' compensation benefits Alimony Child support Unemployment compensation (insurance) Taxable scholarship or fellowship grants that were not reported on Form W-2 Variable housing allowance for the military For 1995 and after, earnings for work
performed while an inmate at a penal institution. Due Diligence Requirements (EIC) Notice 97-65, Section 6695(g) Penalty The Taxpayer Relief Act of 1997 imposes a $100 penalty on a preparer per return for failure to comply with the due diligence requirements in determining a taxpayer's eligibility for the Earned Income Credit (effective after 12/31/96). 1. The preparer must either complete a) an Earned Income Credit (EIC) Eligibility Checklist or b) record in the preparer's files the information necessary to complete the checklist. The information must be based on information provided by the taxpayer to the preparer or otherwise reasonably obtained by the preparer. 2. The preparer must include in his/her files the EIC calculation including the method and information used to make the computation. 3. The preparer must not know or have reason to know that any information used by the preparer is incorrect. 4. The preparer must retain the a) completed checklist; b) computation worksheet; and c) a record of how and when the information was obtained by the preparer (including the identity of any person furnishing such information). These items must be retained for three years after the June 30th following the date the return was presented to the taxpayer for signature. 5. The 6695(g) penalty will not be imposed if, after considering all the facts and circumstances, the preparer's normal office procedures are reasonably designed and routinely followed to ensure compliance and the failure to meet the due diligence requirements for the refund in question was isolated and inadvertent. Eligibility Checklist (EIC) Name:___________________________________ SSN:______________ Tax Year: 2000 Taxpayer may claim the earned income credit if all the following questions are answered yes (Notice 97-65, Section 6695(g) Penalty): 1. Do the taxpayer, spouse, and qualifying child each have a social security number? ___ YES ___ NO 2. Is the taxpayer's total taxable and nontaxable earned income at least $1 but less than: * $10,380 if the taxpayer does not have a qualifying child? * $27,413 if the taxpayer has one qualifying child? * $31,152 if the taxpayer has more than one qualifying child? ___ YES ___ NO 3. Is the taxpayer's modified AGI less than: * $10,380 if the taxpayer does not have a qualifying child? * $27,413 if the taxpayer has one qualifying child? * $31,152 if the taxpayer has more than one qualifying child? ___ YES ___ NO 4. Is the taxpayer's investment income $2,400 or less? ___ YES ___ NO 5. Is the taxpayer's filing status one of the following: married filing jointly, head of household, qualifying widow(er), or single? ___ YES ___ NO 6. If the taxpayer is a nonresident alien, is the filing status married filing jointly? (If taxpayer is not a nonresident alien, answer YES). ___ YES ___ NO 7. Answer YES if the taxpayer (and spouse if filing a joint return) is not a qualifying child of another person. ___ YES ___ NO 8. Answer YES if the taxpayer (and spouse if filing a joint return) is not filing Form 2555 or Form 2555-EZ to exclude from gross income any income earned in foreign countries or to deduct or exclude a foreign housing amount. ___ YES ___ NO STOP: If the taxpayer has a qualifying child, answer question 9 and skip 10. If the taxpayer does not have a qualifying child, skip 9 and answer 10. 9. (a) Does the child meet the age, relationship, and residence tests for a qualifying child? See Form 1040 instructions for Line 56a. ___ YES ___ NO (b) Answer YES if the qualifying child is also a qualifying child for one or more other persons and the taxpayer's modified AGI is higher than each other person's. Answer YES if the child is a qualifying child only for the taxpayer. ___ YES ___ NO (c) If the qualifying child is married, is the taxpayer claiming the child as a dependent? (If the qualifying child is not married, answer YES.) ___ YES ___ NO 10. (a) Was the taxpayer's main home (and the spouse's if filing a joint return) in the United States for more than half the year? Military personnel on extended active duty outside the United States are considered to be living in the United States. ___ YES ___ NO (b) Was the taxpayer (or spouse, if filing a joint return) at least age 25 but under 65 at the end of 1999? ___ YES ___ NO (c) No one can claim the taxpayer (or spouse if filing a joint return) as a dependent on their return. If the taxpayer (and spouse if filing a joint return) is not eligible to be a dependent on anyone else's return, answer YES. If taxpayer (or spouse if filing a joint return) is eligible to be claimed as a dependent on someone else's return, answer NO. ___ YES ___ NO * PERSONS WITH A QUALIFYING CHILD: If the taxpayer answered YES to questions 1 through 9(a), (b), and (c), the taxpayer can claim the credit. Remember to fill out Schedule EIC and attach it to the taxpayer's Form 1040 or 1040A. * PERSONS WITHOUT A QUALIFYING CHILD: If the taxpayer answered YES to questions 1 through 8 and 10(a), (b), and (c), taxpayer can claim the credit. IF THE TAXPAYER ANSWERED NO TO ANY QUESTION, TAXPAYER IS NOT ELIGIBLE FOR THE CREDIT. _______________________ _______________________ Taxpayer's Signature Spouse's Signature _______________________ _______________________ Date Date Requirements to Qualify (EIC) 2001 Requirements (EIC) 1) The credit amount will increase for persons who work and have one or more qualifying children. 2) The amount a person can earn and still be eligible for the credit will increase. 3) The credit includes persons who work but do not have any qualifying children. 4) The amount a person with one qualifying child can earn and still be eligible for the credit is $28,260 ($32,121 for persons with more than one qualifying child). 5) Certain nonresident aliens cannot claim EIC unless he/she is married to a U.S. citizen or resident and elects to be treated as a resident alien for the entire year. 6) Military personal on extended active duty outside the U.S. may be able to claim EIC. 7) Social Security numbers must be correct and valid for all qualifying children. 8) Investment income from taxable or tax-exempt interest, dividends, net income from rents and royalties, net capital gains, and net passive income cannot exceed $2,450. 9) Individuals not authorized to work in the U.S. are not eligible for EIC. 10) EIC phaseout is based on modified AGI rather than AGI. Modified AGI does not include losses from the sale or exchange of capital assets in excess of gains; 75% of the net loss from carrying on trades or business; net loss from estates and trusts; and net loss from nonbusiness rents and royalties. 11) Nontaxable amounts received as a pension or annuity or from an individual retirement plan are added to the definition of AGI. PERSONS WHO WORK AND DO NOT HAVE A QUALIFYING CHILD If you do not have a qualifying child, you must meet the following rules: 1) You must have earned income. 2) Your earned income and adjusted gross income must each be less than $10,710. 3) Your main home must be in the United States for more than half the year. 4) You (or your spouse) must be at least 25 years old but less than 65 before the close of your tax year. 5) You cannot be eligible to be claimed as a dependent on anyone else's return. 6) Your return must cover a 12-month period. 7) Your filing status can be any filing status EXCEPT married filing a separate return. 8) You cannot be a qualifying child of another person. A "qualifying child" is defined in Publication 596. 9) You must not file Form 2555, Foreign Earned Income,(or Form 2555-EZ, Foreign Earned Income Exclusion). EIC may be denied for 10 years for acts of fraud or 2 years for reckless or intentional disregard of rules and regulations. 2000 Requirements (EIC) 1) The credit amount will increase for persons who work and have one or more qualifying children. 2) The amount a person can earn and still be eligible for the credit will increase. 3) The credit includes persons who work but do not have any qualifying children. 4) The amount a person with one qualifying child can earn and still be eligible for the credit is $27,413 ($31,152 for persons with more than one qualifying child). 5) Certain nonresident aliens cannot claim EIC unless he/she is married to a U.S. citizen or resident and elects to be treated as a resident alien for the entire year. 6) Military personal on extended active duty outside the U.S. may be able to claim EIC. 7) Social Security numbers must be correct and valid for all qualifying children. 8) Investment income from taxable or tax-exempt interest, dividends, net income from rents and royalties, net capital gains, and net passive income cannot exceed $2,400. 9) Individuals not authorized to work in the U.S. are not eligible for EIC. 10) EIC phaseout is based on modified AGI rather than AGI. Modified AGI does not include losses from the sale or exchange of capital assets in excess of gains; 75% of the net loss from carrying on trades or business; net loss from estates and trusts; and net loss from nonbusiness rents and royalties. 11) Nontaxable amounts received as a pension or annuity or from an individual retirement plan are added to the definition of AGI. PERSONS WHO WORK AND DO NOT HAVE A QUALIFYING CHILD If you do not have a qualifying child, you must meet the following rules: 1) You must have earned income. 2) Your earned income and adjusted gross income must each be less than $10,380. 3) Your main home must be in the United States for more than half the year. 4) You (or your spouse) must be at least 25 years old but less than 65 before the close of your tax year. 5) You cannot be eligible to be claimed as a dependent on anyone else's return. 6) Your return must cover a 12-month period. 7) Your filing status can be any filing status EXCEPT married filing a separate return. 8) You cannot be a qualifying child of another person. A "qualifying child" is defined in Publication 596. 9) You must not file Form 2555, Foreign Earned Income,(or Form 2555-EZ, Foreign Earned Income Exclusion). EIC may be denied for 10 years for acts of fraud or 2 years for reckless or intentional disregard of rules and regulations. 1999 Requirements (EIC) 1) The credit amount will increase for persons who work and have one or more qualifying children. 2) The amount a person can earn and still be eligible for the credit will increase. 3) The credit includes persons who work but do not have any qualifying children. 4) The amount a person with one qualifying child can earn and still be eligible for the credit is $26,928 ($30,580 for persons with more than one qualifying child). 5) Certain nonresident aliens cannot claim EIC unless he/she is married to a U.S. citizen or resident and elects to be treated as a resident alien for the entire year. 6) Military personal on extended active duty outside the U.S. may be able to claim EIC. 7) Social Security numbers must be correct and valid for all qualifying children. 8) Investment income from taxable or tax-exempt interest, dividends, net income from rents and royalties, net capital gains, and net passive income cannot exceed $2,350. 9) Individuals not authorized to work in the U.S. are not eligible for EIC. 10) EIC phaseout is based on modified AGI rather than AGI. Modified AGI does not include losses from the sale or exchange of capital assets in excess of gains; 75% of the net loss from carrying on trades or business; net loss from estates and trusts; and net loss from nonbusiness rents and royalties. 11) Nontaxable amounts received as a pension or annuity or from an individual retirement plan are added to the definition of AGI. PERSONS WHO WORK AND DO NOT HAVE A QUALIFYING CHILD If you do not have a qualifying child, you must meet the following rules: 1) You must have earned income. 2) Your earned income and adjusted gross income must each be less than $10,200. 3) Your main home must be in the United States for more than half the year. 4) You (or your spouse) must be at least 25 years old but less than 65 before the close of your tax year. 5) You cannot be eligible to be claimed as a dependent on anyone else's return. 6) Your return must cover a 12-month period. 7) Your filing status can be any filing status EXCEPT married filing a separate return. 8) You cannot be a qualifying child of another person. A "qualifying child" is defined in Publication 596. 9) You must not file Form 2555, Foreign Earned Income,(or Form 2555-EZ, Foreign Earned Income Exclusion). EIC may be denied for 10 years for acts of fraud or 2 years for reckless or intentional disregard of rules and regulations. |
||||||||||||||||||||
| |||||||||||||||||||||
