Tax Time Help for Parents
 

As parents struggle with the costs of child care, it's important not to miss a single credit or benefit available through their employers, the state, and/or the federal government. Child Care Connection staff are not tax experts; we're just reminding you to get every break coming to you.

For the final word on any income tax issue, check with your accountant or one of the volunteer tax assistance programs in your area. You must be able to document your income and all claimed child care expenses.

CAFETERIA or FLEXIBLE BENEFIT PLAN Ask your human resources person if a tax-free child care benefit is available to you. It may mean that you can pay for child care completely tax free using salary reductions.

EARNED INCOME CREDIT (IRS and Wisconsin) The EIC is a special tax benefit for working people who earn low or moderate incomes. Workers who qualify and file tax returns can get back some or all of the federal (state) income taxes that were taken out of their pay. Even workers whose earning are too small to have paid taxes can get the EIC.

CHILD AND DEPENDENT CARE CREDIT (IRS only) This credit helps families pay for child care so that they may work or look for work. For families that do not owe taxes at the end of the year, this credit can give them back some or all of the federal taxes that were taken out of their paychecks. Some families are eligible for both the EIC and the Child and Dependent Care Credit. For families that end up owing taxes, the credit can lower the amount they must pay to the IRS. Families that earn too little to pay federal income tax must use the EIC (above).

CHILD TAX CREDIT A new credit for 1998 means families are eligible for a credit of up to $400 per child under age 17. The child must be a dependent and your son, daughter, direct descendant, step- or foster child. The amount of the credit is reduced beginning at income levels of $110,000 for joint returns, $75,000 for individuals and $55,000 for married couples filing separately.

CREDIT FOR ADOPTION A maximum nonrefundable credit for qualified adoption expenses of $5,000 per child and up to $6,000 for special needs adoptions. This credit phases out for taxpayers with income between $75,000 and $115,000.

IRS toll-free 1-800-TAX-1040 or www.irs.ustreas.gov

Wisconsin Department of Revenue www.dor.state.wi.us

Center on Budget and Policy Priorities www.cbpp.org