California State Taxes: Last Minute Income Tax Tips from the Tax Attorney

California State Taxes: Last Minute Income Tax Tips from the Tax Attorney

The deadline for California state taxes is on the horizon. If you are still putting together the your California tax filings, these last-minute tax tips could save you money and time!

The biggest thing to remember is the date Tuesday, April 18, 2017. That’s when your 2016 Personal Income Tax returns are due. Because April 15 falls on a Saturday, and Monday April 17th is the federal holiday Emancipation Day, tax day is occurring a little later than usual.

If you can’t file on time, April 18th is also the due date for a California state tax extension. Extensions in California are automatically granted as long as you file by the due date. If you do file for a California state tax extension, you must also remember the date October 16, 2017. That’s when your return will be due.

Now, let’s take a look at some credits for California’s state taxes

With a tax credit, your can claim a specific amount of reduction in the taxes you owe. Credits for California state taxes exist to provide relief for California households that qualify, and so they are relevant only to very specific situations.

Joint custody head of household credit (CA Code 170)

This credit is available if you were unmarried at the and of the taxable year, or if you were married but lived apart from your spouse, and your filing status is married filing separately. It also requires that you paid for more than half the household expenses for the main home for your child at least 146, but no more than 219 days of the tax year. The benefit if you qualify is 30% of your California tax, up to a maximum credit of $440.

Qualified senior head of household credit

If you were 65 or older as of December 31 of the tax year, you can take advantage of this tax credit in California. You must also have a maximum California adjusted gross income (AGI) of $71,370. The benefit for this credit is 2% of your taxable California income, at a maximum of $1,345.

Nonrefundable renter’s credit

If you were a California resident for the entire tax year, and your adjusted gross income is $39,062 or less, you may qualify for the $60 renter’s credit. For those who are married or in a domestic partnership filing jointly, head of household, or as a qualifying widow(er), your adjusted gross income must be $78,125 or less, and your credit would be $120 for your California state taxes.

California’s earned income tax credit

This credit is available to California residents and households based on you federal adjusted gross income (AGI). The credit opportunities are organized into three sections, and each has its own maximum credit:

  • If your AGI is less than $6,718 and there are no qualifying children, you qualify for a maximum credit of $217.
  • If your AGI is less than $10,088, and if there is one qualifying child, you qualify for a maximum credit of $1,452.
  • If your AGI is less than $14,162, and if there are two or more qualifying children, you qualify for a maximum credit of $2,706.

 

Additionally, the California Franchise Tax Board tells us that in order to qualify for the earned income tax credit, “Your investment income, such as interest, dividends, royalties, and capital gains cannot exceed $3,471 for the entire tax year.”

Are you looking for a dependable advocate for your tax needs? Contact the tax specialists at Mendes Weed, LLP.

Christina Weed has worked with clients in San Francisco, the East Bay, and throughout the United States. As a licensed attorney with an LL.M. in Taxation from the University of San Diego, and a Bachelor’s Degree in Accountancy, Christina offers a unique combined focus on Trusts & EstatesTax LawTax Litigation, and Business Law. Christina is Chair of the Tax Section of the Contra Costa County Bar Association and is also a member of the Estate Planning Council Diablo Valley and the Tri-Valley Estate Planning Council.

Disclaimer: The tips and materials provided on this page are for informational purposes only, offered as public service. No information on this website should be considered legal advice or used as a substitute for legal advice. For legal advice, you should contact an attorney directly.

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Tax Tips from the Tax Lawyer: Turning that Bundle of Joy into Dollars

Tax Tips from the Tax Lawyer: Turning that Bundle of Joy into Dollars

This article was originally written for Contra Costa Lawyer, a publication of the Contra Costa Bar Association. Click here for the full text.

Many taxpayers are likely scrambling to prepare and complete their individual tax returns. Most taxpayers have remembered to include all of their wages, business income, mortgage interest payments, etc. For parents, and especially new parents, are you sure you have claimed all of your applicable family/child tax benefits?

For those who have questions, I will now take a pregnant pause … from my work schedule to make sure you have considered many of the tax savings associated with having children. [1]

Personal Exemptions

Most taxpayers are entitled to claim a personal exemption for themselves, a spousal exemption for a spouse and a dependency exemption for each dependent.[2] In 2015, the exemption amount is $4,000. This means, for example, that a taxpayer in the 25 percent tax bracket can reduce their total tax by approximately $1,000 in connection with each properly claimed exemption. Taxpayers must remember to include each individual’s taxpayer identification number (TIN) for each exemption they claim on their income tax return.[3]

In order to claim a dependency exemption for a child, said child must be a qualifying child under the Internal Revenue Code (IRC).[4]  In order to be a qualifying child, the child must be a U.S. citizen, national or resident of the U.S., Canada or Mexico for some part of the relevant tax year; may not be claimed as a dependent for anyone else; must be the taxpayer’s child; must be younger than the person claiming the exemption and under 19 years of age, or 24 years of age if a student; must have the same principal abode as the taxpayer for more than half of the year (with some exceptions); and must not provide more than one-half of his or her own support during the tax year.[5]

An additional benefit for unmarried taxpayers with children is that they may be able to file as head of household and increase their standard deduction amount from $6,300 to $9,250.[6]

Child Tax Credit

Some parents may receive a $1,000 credit for each qualifying child.[7] A credit is more valuable than deductions and exemptions because credits provide a dollar for dollar reduction in your tax liability instead of simply lowering your taxable income amount.

Credit for Adoption Expenses

A credit for adoption expenses of up to $13,400 in 2015 may be available for some taxpayers. Costs associated with adoption fees, court costs, attorneys’ fees related to the adoption and traveling expenses related to getting your child may all be includable expenses for purposes of determining this credit.[8]

Child and Dependent Care Credit

Single taxpayers and joint filers may be entitled to a child and dependent care credit of up to 35 percent for the first $3,000 of child care for one child or the first $6,000 for two or more children. In order for joint filers to claim the credit, both parents must have earned income from employment or business.

If a taxpayer chooses to hire a caregiver for child care services, the taxpayer must pay a “nanny tax” for amounts paid to the nanny in excess of $1,900 in 2015.

This means that the taxpayer must generally withhold and pay FICA[9] taxes for wages paid to the caregiver in excess of $1,900.[10] The taxpayer must also pay FUTA[11] taxes for wages paid to the caregiver of $1,000 or more during a calendar year quarter.[12] The taxpayer must report these wages on Schedule H of their U.S. Individual Tax Return (Form 1040). An employer identification number (EIN) should also be obtained by the taxpayer and included on the caregiver’s Form W-2.

Some taxpayers may receive a benefit from their employers in the form of a child care reimbursement account (flex plans), which allow a taxpayer to divert up to $5,000 a year of their salary into a special tax-advantaged account. The account can be used for child care bills and avoids federal and state income tax and social security and Medicare taxes. This benefit cannot be combined with the child tax credit.

Healthcare Costs

Medical expenses that exceed 10 percent of AGI may be deducted as itemized deductions. The medical expenses that may be deducted with respect to prenatal and post-natal care are: prescription medications, prenatal care, ultrasounds, blood work, other lab work and medical tests, hospital fees, delivery room fees, baby’s incubator fees, well-baby checkups and mom’s post baby checkup.

Also, in early 2011, the IRS announced that breast pumps and supplies that assist lactation are medical care under IRC §213(d) and therefore may be deductible expenses.[13] Taxpayers may also want to inquire as to whether their current health plan would cover these costs.

But Wait! Don’t Quit Your Day Job!

Although I have given you some great tips for turning your little bundle of joy into dollars, please remember that many of these tax benefits are subject to phase-out, which can occur surprisingly quickly, especially for taxpayers who live in the high cost of living areas like the San Francisco Bay Area because they may have correspondingly higher earnings. Consequently, you may not be able to claim any or all of the discussed tax benefits, or they may be subject to at least partial phase-out.

In addition, as of 2013, the United States Department of Agriculture (USDA) estimated that it takes approximately  $245,000 to raise one child to age 18 for middle income couples.[14] As I have been consistently reminded by others, parenting obligations rarely cease to exist just because a child turns 18 years old. The USDA’s estimate does not include college tuition or inflation or costs incurred after a child reaches 18 years of age.[15]

So, what is this expectant tax lawyer’s conclusion—does the benefit of an adorable, drooling, fluid secreting little munchkin and all of its potential tax benefits outweigh all of the costs?

Stay tuned. I plan to write a follow up article in approximately 18 years and let you know.


Christina Weed, JD, LL.M. (Tax), is a senior principal attorney at Mendes Weed, LLP in Walnut Creek. Christina focuses on tax controversy and estate planning. You can reach her at (925) 390-3222 or here



[1] Please note that all income tax rates/brackets, standard deduction, personal exemption, credit and or other tax related figures are for the 2015 tax year.

[2] Internal Revenue Code (IRC) §151.

[3] Please note that personal exemptions begin to phase-out when adjusted gross income (AGI) reaches $309,900 for married taxpayers filing joint returns and surviving spouses, $154,950 for married taxpayers filing separate returns, $284,050 for heads of households, and $258,250 for other unmarried taxpayers. If you are risk of phase-out, you may want to meet with a tax lawyer or other financial professional to discuss making deductible contributions to tax­ favored accounts.

[4] IRC §152(c).

[5] Id.[6] See IRC §63, adjusted for inflation in subsequent years.[7] Generally, a qualifying child must be under age 17 at the end of the tax year in which a credit is claimed; be a taxpayer’s son, daughter, adopted child, stepchild or eligible foster child, brother, sister, stepbrother, stepsister or a descendent of any of these individuals; be a U.S. citizen, U.S. national, or resident of the U.S.; did not provide over half of his or her own support; and must have lived with the taxpayer for more than half of the year (with some exceptions). Please note that this credit begins to phase out for married taxpayers filing jointly with AGI that exceeds $110,000, for single taxpayers whose AGI exceeds $75,000, and for married taxpayers filing separately whose AGI exceeds $55,000.

[8] Phase-out occurs when modified AGI reaches $201,010, and is completely phased out when modified AGI reaches $241,010. Rev. Proc. 2014-61, §3.03, 2014-47 I.R.B. 860.

[9] Federal Insurance Contributions Act.

[10] IRC §312l(a)(7XB).

[11] Federal Unemployment Tax Act.

[12] IRC §3306(c)(2).[13] IRS Announcement 2011-14, February 10, 2011.[14] Roberts, Kenneth. “Average Cost of Raising a Child Over $245,000.” MarketWatch, May 28, 2015.[15] Id.

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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

Is Your Client an Innocent Spouse?

Is Your Client an Innocent Spouse?

You suspect your client’s spouse is not paying her or his taxes, filing erroneous returns, or worse—intentionally evading taxes. Is your client innocent? Maybe not, but perhaps she or he is an “innocent spouse.”

Liability for Income Taxes

Generally, spouses are jointly and severally liable for income taxes due on a jointly filed income tax return. A common situation that occurs is one in which a married spouse,[1] your client, is a stay-at-home parent. Your client may have been able to access money for household expenses; but she or he was earning little or no income.

Your client’s spouse had one or more separate bank accounts, and your client had no knowledge that income was underreported or that taxes were not being paid. Perhaps your client was in an abusive relationship. These are all factors to keep in mind when there are outstanding tax liabilities in connection with a joint income tax return…

Click here for the full text. This article was written for Contra Costa Lawyer, a publication of the Contra Costa Bar Association.

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Christina Weed - Taxation Law Specialist
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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

Tax Tips from the Tax Lawyer: Free Filing Services

This article was written for Contra Costa Lawyer, a publication of the Contra Costa Bar Association.

  1. For taxpayers who have adjusted gross income (AGI) below $60,000, there are many free filing options for completing and filing a federal income tax return. (Fees for filing a state income tax return may apply.) Taxpayers may browse and compare free filing options here:http://apps.irs.gov/app/freeFile.
  1. For taxpayers who feel more comfortable obtaining tax preparation assistance in person…

Click here for the full list.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667

The New Health Care Rules: Tax Returns, Taxes, Penalties, and Exemptions.

A radio show.

Guests: Jason Galek, a Specialist in Taxation Law, Certified by the California Board of Legal  Specialization of the State Bar, and Christina Weed, tax attorney. Listeners with questions for Chuck and his guests, please call 415-841-4134.

This radio show aired on January 15, 2015 on KALW. Click here for the full content.

SuperLawyers-RisingStars
Best of the East Bay Attorneys
Lisa Janine MendesReviewsout of 5 reviews
Walnut Creek Chanber of Commerce logo
Christina Weed - Taxation Law Specialist
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Walnut Creek Main Office

1990 N. California BLVd.
Suite 1020
Walnut Creek, CA 94596

(925) 390-3222

San Francisco Office

95 Third Street
2nd Floor
San Francisco, CA 94103

(628) 216-5558

Oakland Office

66 Franklin Street
Suite 300
Oakland, CA 94607

(510) 822-2770

San Jose Office

3031 Tisch Way
110 Plaza West
San Jose, CA 94607

(408) 707-1667