In Revenue Procedure 2008-48, the IRS has announced some new rules that apply to parents who support children that they cannot (or do not) claim as dependents, but still provide medical care or insurance to them.

Traditionally, the IRS position has been that if you cannot claim the dependency exemption for a child (because they don’t live with you, often), you cannot claim deductions for medical expenses that you pay for the child. Many colleges and businesses used this rule when considering how their benefits apply.

The new rule changes this. A noncustodial parent can now claim payment for medical expenses. Furthermore, they can also include the dependent on company health plans and use funds from an MSA or HSA to pay for medical expenses for the noncustodial child. Furthermore, this ruling is retroactive.

What does that mean for you?
1. If you pay child support, consider making some of the payments specifically for medical services
2. If you have a company or college health plan that prevented you from covering a child in the past, talk to your HR department about this change.
3. Review your taxes for 2005, 2006 and 2007. If you paid any medical expenses for noncustodial children in those years, you can still amend them and get a refund.

Categories: Tax News and Tips
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Just to make sure we can never rest on our laurels too much, the IRS has released a new Form 990, the tax/information used to report non-profit activities to the IRS and (for many non-profits) to the public as well. From the IRS press release:

The Internal Revenue Service released the revised instructions that tax-exempt organizations will need to fill out the redesigned Form 990, which must be filed starting with tax year 2008 (filed in 2009).

Most charities and other tax-exempt organizations must file an annual informational return with the IRS to maintain their tax-exempt status. Information reported on Form 990 is made available to the public.

“These instructions are the final step in a tremendous effort to bring the Form 990 up to date and to reflect the diversity and complexity of the tax-exempt community,” said IRS Commissioner Doug Shulman. “The revised form will give the IRS and the public a much better view of how exempt organizations operate. The improved transparency provided by these changes will also benefit the tax-exempt community.”

Form 990 had previously not seen major revisions since 1979.

The revised instructions feature several new tools that make it easier to answer questions line-by-line and that facilitate uniform reporting. Input from the tax-exempt community played a major role in how the new instructions were designed.

“We were gratified by the amount of help the IRS received from the tax-exempt community through public comments to redesign the Form 990 and revise its instructions,” said Steven T. Miller, Commissioner of the Tax Exempt and Government Entities Division. “This input helped us achieve our goal of improving compliance while minimizing burden. We will now begin working with the tax-exempt sector to help organizations complete the form and prepare for the 2009 filing season.”

The IRS expects to release instructions to the 2008 Form 990-EZ, Short Form Return of Organization Exempt from Income Tax, in the next few weeks.

Categories: Tax News and Tips
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So many people associate the issue of taxes with April that they often miss out on the chance to make changes and update plans in the middle of the year. Even though it’s August, you should be thinking about taxes even if you didn’t file an extension. Here are some ideas to ponder:

Business Restructuring: Do you have the best business entity type for your needs? As an example, if your business will have a net income of $100,000 this year, an S Corporation might save you about $7,000 in taxes. You can’t form a corporation retroactively, so if you want those savings for next year, you’d better start the process no later than December.

Qualified Benefits Plans: Benefits plans include health, retirement, child care, life insurance and other employee benefits. Some of these can provide huge tax savings even to sole proprietors. While you can sometimes put money into the plans after January 1st, you must have established the plan before the end of the year. (Example: tax-deductible HSA contributions can be made for the 2008 tax year until April 15th, 2009, but only for plans with coverage that started before December 31st, 2008.) It can take time to analyze benefit options, set up accounts and choose providers.

Capital Gains: 2008 is an unusual year. There’s the possibility that capital gains might be taxed at 0%! While you should turn to your investment advisor regarding whether to sell anything now, you could save on taxes. Again, the sales must be made before the end of the year.

And More: Should you prepay property tax? What about prepaying rent? Should you have an elective surgery this year or next year? Do you have enough saved to pay your taxes in April? Could you benefit by converting a traditional IRA to a Roth IRA? Don’t ask in April. It’ll be too late.

Categories: Tax News and Tips
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Over the past several years a local community park has become a hub of drug activity.  Because it is falls outside the city limits and in an otherwise relatively quiet suburban neighborhood, law enforcement personnel are not able to patrol or respond to calls quickly enough to be effective.  The major contributing factor that makes this park such a popular place for drug buyers and sellers is that it has been allowed to become overgrown to the point where people can park along the curb and disappear along one of the foot paths and become hidden from view very quickly.

The owners of Full Potential are dedicated to making a positive difference in the area, and have organized a park clean-up project that is taking action.  Every Saturday in August and September, and later if the weather permits, we are gathering with others in the community to cut down the overgrown vegetation, take out some of the trees, and bring light and life into the park.  We have invited Scout troops, church groups, and everyone we can reach through local neighborhood watch programs, newspaper articles, flyers, newsletters, and email to come participate with us in this effort.  After the winter weather makes our work slow down, we will kick it back into full swing again in the Spring, and work with Scouts and others who have expressed a desire to be part of the on-going work.

The kick-off was Saturday, August 9, and had a terrific turn-out of support! Together, we as a community make the decisions about what we want to invite into our community, and what we will not tolerate.  Just as apathy and neglect are decisions, so are determination and action!  We are very proud of the response we have received from people all around the area who are eager and willing to stand together with us to make sure the drug dealers know we will no longer tolerate their presence.

Each of us makes a difference in the world around us, whether we know it or not!

Categories: Full Potential News, General News
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