Tax

Are you taking care of an elderly parent or relative? According to the U.S. Census Bureau, there were 43.1 million people age 65 and older in the United States in 2012, nearly 15 percent of the total population.

Whether it’s driving to doctor appointments, paying for nursing home care or medical expenses, or handling their personal finances, dealing with an elderly parent or relative can be emotionally and financially draining, especially when you are taking care of your own family as well.

Fortunately, there is some good news: You may be able to claim your elderly relative as a dependent come tax time, as long as you meet certain criteria.

Here’s what you should know about claiming an elderly parent or relative as a dependent.

Who qualifies as a dependent?
The IRS defines a dependent as a qualifying child or relative. A qualifying relative can be your mother, father, grandparent, stepmother, stepfather, mother-in-law, or father-in-law, for example, and can be any age.

There are four tests that must be met in order for a person to be your qualifying relative: not a qualifying child test, member of household or relationship test, gross income test, and support test.

Not a Qualifying Child
Your parent (or relative) cannot be claimed as a qualifying child on anyone else’s tax return.

Residency

He or she must be U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico; however, a parent or relative doesn’t have to live with you in order to qualify as a dependent.

If your qualifying parent or relative does live with you however, you may be able to deduct a percentage of your mortgage, utilities and other expenses when you figure out the amount of money you contribute to his or her support.

Income
To qualify as a dependent, income cannot exceed the personal exemption amount, which in 2014 is $3,950. In addition, your parent or relative, if married, cannot file a joint tax return with his or her spouse unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid.

Support

You must provide more than half of a parent’s total support for the year such as costs for food, housing, medical care, transportation and other necessities.

Claiming the Dependent Care Credit
You may be able to claim the child and dependent care credit if you paid work-related expenses for the care of a qualifying individual. The credit is generally a percentage of the amount of work-related expenses you paid to a care provider for the care of a qualifying individual. The percentage depends on your adjusted gross income. Work-related expenses qualifying for the credit are those paid for the care of a qualifying individual to enable you to work or actively look for work.

In addition, expenses you paid for the care of a disabled dependent may also qualify for a medical deduction (see next section). If this is the case, you must choose to take either the itemized deduction or the dependent care credit. You cannot take both.

Claiming the Medical Deduction
If you claim the deduction for medical expenses, you still must provide more than half your parent’s support; however, your parent doesn’t have to meet the income test.

The deduction is limited to medical expenses that exceed 10 percent of your adjusted gross income (7.5 percent if either you or your spouse was born before January 2, 1949), and you can include your own unreimbursed medical expenses when calculating the total amount. If, for example, your parent is in a nursing home or assisted-living facility. Any medical expenses you paid on behalf of your parent are counted toward the 10 percent figure. Food or other amenities however, are not considered medical expenses.

What if you share caregiving responsibilities?
If you share caregiving responsibilities with a sibling or other relative, only one of you–the one proving more than 50 percent of the support–can claim the dependent. Be sure to discuss who is going to claim the dependent in advance to avoid running into trouble with the IRS if both of you claim the dependent on your respective tax returns.

Sometimes, however, neither caregiver pays more than 50 percent. In that case you’ll need to fill out IRS Form 2120, Multiple Support Declaration, as long as you and your sibling both provide at least 10 percent of the support towards taking care of your parent.

The tax rules for claiming an elderly parent or relative are complex. If you have any questions, please give us a call. We’re here to help you.

• By Leon Clinton
• June 11, 2014

June 10

Employees who work for tips – If you received $20 or more in tips during February, report them to your employer. You can use Form 4070.

June 16

Individuals

If you are a U.S. citizen or resident alien living and working (or on military duty) outside the United States and Puerto Rico, file Form 1040 and pay any tax, interest, and penalties due. (U.S. citizens living in the U.S. should have paid their taxes on April 15.) If you want additional time to file your return, file Form 4868 to obtain 4 additional months to file. Then file Form 1040 by October 15. However, if you are a participant in a combat zone, you may be able to further extend the filing deadline.

Individuals

Make a payment of your 2014 estimated tax if you are not paying your income tax for the year through withholding (or will not pay enough tax that way). Use Form 1040-ES. This is the second installment date for estimated tax in 2014.

Corporations

Deposit the second installment of estimated income tax for 2014. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.

Employers

Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in May.

Employers

Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in May.

• By Leon Clinton
• June 2, 2014

As the May 15 Filing Deadline for tax-exempt organizations filing Form 990-series information returns and notices quickly approaches, here are two important reminders for protecting personal information:

• First, make sure you file Form 990 if you are required to file. Filing the form is very important for many groups who are at risk of losing their tax exemption.
• Second, do not include Social Security numbers on Form 990 when you file the form. Including unnecessary personally identifiable information such as SSNs or other unrequested personal information could lead to identity theft.

In addition, here are seven tips to protect your exempt status and the information of your donors, clients, benefactors and administrators:

1. Certain organizations must file Form 990, Return of Organization Exempt From Income Tax. The annual form reports information about the mission, programs and finances of the filer. The due date for many groups to file their form is May 15.

2. Most groups must file a Form 990-series return or notice with the IRS. If they fail to file their annual report for three consecutive years, the law automatically revokes their federal tax exemption.

3. The law also requires that the IRS and most organizations make most parts of their filed forms available to the public. This includes schedules and attachments filed with the form.

4. Forms made available to the public include Forms 990, 990-EZ and 990-PF. All are marked “Open to Public Inspection” in the top right hand corner of the first page.

5. Generally, the IRS does not ask for SSNs on these forms. The forms’ instructions have a caution to filers not to include them on the form.

6. Don’t include personal information that’s not needed on Form 990. For example, including a person’s mailing address may put them at risk.

7. Organizations should e-file their tax forms. E-file lowers the risk of including SSNs or other unneeded personal information.

For more information on filing Form 990-series information returns and notices, please give us a call. We’re happy to answer any questions you have regarding charities and non-profit organizations.

• By Leon Clinton
• May 27, 2014