Law Could Allow IRS to Help Find Kids

In a continuing battle between taxpayer privacy and protecting children, we may finally strike a compromise. A new bill sponsored by Senator Amy Klobuchar would allow the IRS to give police addresses of people who claimed missing children as tax dependents. Currently the agency is barred from providing this information, a law that has hampered police investigations for year.

From StarTribune.com:

"This is a great tool for law enforcement," said Patty Wetterling, mother of Jacob Wetterling, who disappeared near St. Joseph, Minn., in 1989 and still has not been found. Wetterling, who is vice chairwoman of the National Center for Missing and Exploited Children and was a candidate for Congress in 2006, accompanied Klobuchar at a news conference Sunday in Hopkins.

Klobuchar said there are numerous examples of noncustodial parents or other child abductors who have sought tax deductions by claiming the children they've taken as deductions. The adults may have changed their own names but use the child's Social Security number on tax returns.

A 2007 study by the Treasury Department, which includes the IRS, examined the Social Security numbers of 1,700 missing children and the relatives suspected of abducting them, and found that more than one-third had been used in tax returns filed after the abductions took place. But the IRS cannot release any information on the returns unless a parental abduction is being investigated as a federal crime and a federal judge orders the information released. Most parental abduction cases are investigated by state and local prosecutors.

Hopkins Police Chief Mike Reynolds said that the setup amounts to "a one-way street" between the IRS and authorities searching for missing children. "This is a bill that just makes sense," said Reynolds, who also spoke at the news conference.

Continue reading at StarTribune.com...

IRS Sits on Data Pointing to Missing Children

Tax privacy is important. Your tax records have a lot of very personal information; information that, in the wrong hands, can be used to hurt you. We get it. But should tax privacy laws trump a criminal investigation? The answer depends on who you ask. Ask someone whose child has been abducted, and the answer is a resounding “NO.”

It turns out that the IRS frequently has information about missing children but does not aid investigators. How can we protect children while still maintaining the privacy of innocent taxpayers?

From NYTimes.com:

For parents of missing children, any scrap of information that could lead to an abductor is precious.

Three years into an excruciating search for her abducted son, Susan Lau got such a tip. Her estranged husband, who had absconded with their 9-year-old from Brooklyn, had apparently filed a tax return claiming the boy as an exemption.

Investigators moved quickly to seek the address where his tax refund had been mailed. But the Internal Revenue Service was not forthcoming.

“They just basically said forget about it,” said Julianne Sylva, a child abduction investigator who is now deputy district attorney in Santa Clara County, Calif.

The government, which by its own admission has data that could be helpful in tracking down the thousands of missing children in the United States, says that taxpayer privacy laws severely restrict the release of information from tax returns. “We will do whatever we can within the confines of the law to make it easier for law enforcement to find abducted children,” said Michelle Eldridge, an I.R.S. spokeswoman.

Comedian Tries to Teach Kids About Taxes at Halloween

Over the weekend The Tax Foundation blog posted a funny video about how to teach children about taxes after they get home from tick or treating. Check out the embedded video below.

Questions for the Tax Lady: October 25th, 2010

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an email, direct message or @ reply, and I will do my best to get an answer for you!

Question: Roni, if I donate Halloween candy and costumes to a local children’s home, is that deductible?

Answer: What a fun idea and a wonderful thing to do for those kids. Dressing up for Halloween is such a big part of childhood; I love the idea of helping underprivileged kids experience that!

To answer your question, yes you should be able to deduct the contribution so long as the children’s home is a recognized tax-exempt charitable organization. If you aren’t sure, you can ask the organization or you can check out www.IRS.gov to be sure. And remember, you will need some written acknowledgement of your donation from the children’s home, like a thank you letter.

Question: What are the differences between tax credits, deductions, and exemptions?

Answer: I’m so glad you asked this question, people use these terms interchangeably, and it drives me a little nuts.

A deduction refers to something you spent money on that can be deducted from your taxable income. The amount of the deduction varies based on what the expense was, how much you spent and IRS eligibility requirements. For example: if you donate $1,000 to a recognized charity, you could deduct your taxable income by $1,000.

An exemption allows you to reduce your taxable income, much like a deduction. However, exemptions are given in set dollar amounts ($3,650 in 2010) and are not tied to your actual expenses. Instead they are generally tied to the number of people you support. For example, you can claim an exemption for yourself, one for your spouse if you file jointly, and one additional exemption for each taxable dependent you support.

The tax bill impact of deductions and credits is tied to your tax bracket. If you are in the 25% tax bracket, a $1,000 deduction results in a $250 reduction in tax your tax bill. In the same vein - still assuming a 25% tax bracket - that $3,650 exemption will result in a $912.50 reduction in tax bill.

A tax credit is a dollar for dollar reduction in your tax bill. Credits are usually tied to how you spend money, or your income and family status. So, if you have a $100 tax credit, it will result in lowering your total tax bill by $100. Tax credits are almost always more beneficial than deductions.

There are refundable and non-refundable types of credits. A refundable credit means that if the amount of your credit exceeds the amount of taxes due, you can actually get a refund check for the rest. (For example, if your tax bill is $500, and you have a refundable credit for $1,000, you could actually get a refund check for $500.). Non-refundable credits can only result in a reduction of your tax bill, but not give you a refund. For example, if you have a $500 tax bill, and a $1,000 non-refundable tax credit, your tax bill will be reduced to zero, but you would not get a check for $500.

I hope this helps clarify these tax terms for you. Understanding the differences can help you make better tax choices.

Study: Shaken-Baby Cases Rose During the Recession

Time magazine reported that since the start of the current recession there has been a significant increase in cases of shaken baby syndrome, in which young children are shaken violently by an adult. This topic hits close to home for me, so I’d like to take a moment to bring awareness to this real and devastating form of child abuse. Researchers, led by child abuse expert Dr. Rachel Berger at Children’s Hospital of Pittsburg, analyzed 512 cases of head trauma in the children’s centers of four hospitals (in Pittsburgh, Pa.; Cincinnati, Ohio; Columbus, Ohio; and Seattle). They found that the number of cases had increased from 6 per month to 9.3 per month as of Dec. 1, 2007, a rate that had held steady since 2004.

"This is a perfect storm in a bad way, where we have economic stressors that are causing the removal of social-service resources for preventing and addressing child abuse," says Berger. Dr. Berger cautions that her study highlights an association, not a cause-and-effect relationship, between the recession and the incidence of shaken babies. But findings such as these are a stark reminder that many stressful circumstances—family tragedy, natural disaster or financial problems may push parents or caretakers to the limits of their coping abilities.

Berger says the findings also serve to highlight the risks of cutting back on social services provided by cities when economic times get tough; these services can educate parents and provide resources to help them cope with the stress, preventing child abuse from occurring.

Please read more about Shaken Baby Syndrome at The Hannah Rose Foundation website, www.dontshakeyourbaby.com.

Read more of the Time article here.

Kids Caught In Medicaid Pay Crossfire

From CNNMoney.com:

A kid with a fractured leg highlights the problems Dr. Jaquelin Gotlieb's pediatric practice is having with Georgia's Medicaid system.

"I needed to send the child to a pediatric orthopedic surgeon," said Gotlieb. "I couldn't find a specialist who took Medicaid. It took so long that the leg healed on its own."

Gotlieb said getting paid "fairly" by Medicaid is such a problem for Georgia's doctors that many are no longer taking new patients, or dropping patients altogether. Others, she said, are going out of business because the payments from the program don't cover their costs.

The impact on her Atlanta-area practice has been profound. Because two pediatric clinics have closed in her area, she's seeing a lot more patients.

"This is the first time in my life that I'm seeing as many as 30 patients a day," said Gotlieb. "It's an extremely high number for me."

Consequently, as the number of Medicaid patients grows at her practice, Gotlieb said she's also losing money instead of making more money.

"It's become a desperate situation for us," said Gotlieb, who says 62% of her patients are now on Medicaid. Her practice, the Pediatric Center of Stone Mountain, has already laid off one of its four doctors since January, and four other employees were let go in the past three weeks.

Tax Friendly Ways to Save for your Children’s Education

Yesterday, the Roni Deutch Tax Center Tax Help Blog posted a new entry discussing the best tax friendly ways to save for your children education. In this economy, it may seem almost impossible to try saving money for the future, but as you will see there are dozens of ways to plan for your child’s future regardless of your income.

Are you already worried about trying to save for your children’s future education related expenses? In today’s economy, millions of taxpayers are struggling to pay their bills let alone save up for future bills. It may seem overwhelming to be thinking about a day when you will have to help your child earn their diploma, but by preparing early you can avoid expensive loans twenty years down the road.

It is a common misconception that only very wealthy families can save for their children’s future. In fact, there are multiple educational savings plans that were made especially for middle-class and low-income households. To help those of you looking to get a head start on the process, please enjoy the following article on tax friendly ways to save for your children's education.

1. Coverdell Education Savings Account

If you are looking for a way to avoid taxes and fees when you withdrawal your child's education money in the future, then a Coverdell Education Savings Account (ESA) is the way to go. It allows you to contribute $2,000 per year until the beneficiary is 18 years of age. Although the contributions are not tax-deductible, the distribution cash will become tax-free when withdrawn in the future. However, the funds must be used only for school expenses. For more information on opening a Coverdell ESA check out this page on IRS.gov.

Continue reading this blog entry, here.

Bush Says No to Children's Health Insurance

A few days ago President Bush vetoed a bill that would have expanded a children’s heath insurance program by over $35 million over the next five years. Speaking in Pennsylvania, Bush claimed he vetoed the bill because he felt it was a step towards federalizing medicine and inappropriately expanding the program to help more children. Senate and House Democrats alike were quick to condemn the veto, which had received bipartisan support. House Majority Leader Nanci Pelosi has already announced plans to gain enough votes to overturn the veto. For more coverage on this issue, check out CNN.com.

Tax Relief For Special Needs Children

According to recent Census data, one in twelve children and teenagers have a physical or mental disability. With special education enrollment costs on the rise, parents are left with the financial burden of paying for special education. Although the Internal Revenue Service does not have any clear cut relief measures for these parents, there are many deductions that the IRS recommends that parents of special needs children take advantage of when preparing their tax return. Intuit has a helpful article on tax relief for special needs children that you can read by clicking here.