Summer Activities That Could Impact Your Clients' Next Tax Return

Summer is often seen as a time for relaxation and vacations, but for tax professionals, it's also an opportunity to advise clients on activities that may affect their tax situation in the coming year. By staying informed about these potential impacts, you can provide proactive guidance and help clients avoid surprises during tax season.

1. Summer Camp Expenses and the Child and Dependent Care Credit

Clients sending their children to summer day camps may be eligible for the Child and Dependent Care Credit. It's important to note that only day camp expenses qualify; overnight camps do not. Ensure clients keep detailed records of these expenses to maximize their potential credit. Child and Dependent Care Expense

2. Marriage and Its Tax Implications

Summer weddings are common, and newlyweds should be reminded to update their personal information with the appropriate agencies. This includes notifying the Social Security Administration of any name changes and submitting Form 8822 to the IRS for address changes. Timely updates can prevent processing delays and ensure accurate tax filings. Form 8822

3. Business Travel Deductions

Clients who travel for business purposes during the summer should be aware of the tax rules related to business travel deductions. Advise them to maintain thorough records of their travel expenses, including transportation, lodging, and meals, to substantiate their deductions. Business Travel Expenses

4. Part-Time and Gig Economy Work

Summer often brings opportunities for part-time jobs or gig work. Clients engaging in these activities should understand their tax obligations, including the potential need to file a tax return even if their income is below the standard deduction. Additionally, those receiving income through payment apps may receive Form 1099-K, which must be reported on their tax

return. Form 1099k

5. Home Improvements

The IRS has information to help taxpayers take advantage of tax credits for home improvements. If taxpayers make qualified energy efficient improvements to their home after Jan. 1, 2023, they may qualify for a tax credit up to $3,200. These types of improvements include energy efficient home improvement credits for things like water heaters, exterior windows and doors and heating and air conditioning installations. Residential clean energy credits are available for taxpayers who install solar water heaters, fuel cells and battery storage or solar, wind and geothermal power generation. Taxpayers can visit the Home energy tax credits page on IRS.gov to learn more.

6. Adjusting Withholding and Estimated Payments

Significant life changes or additional income during the summer may necessitate adjustments to tax withholding or estimated payments. Encourage clients to use the IRS Tax Withholding Estimator to assess their current withholding and make necessary changes to avoid underpayment penalties or unexpected tax bills. 

Conclusion

By proactively addressing these summer activities with your clients, you can help them navigate potential tax implications and ensure a smoother filing process next year. Staying informed and offering timely advice reinforces your role as a trusted tax professional.

---

Disclaimer: This article is for informational and educational purposes only and does not constitute legal tax advice. Advanced Tax Solutions is not liable or responsible for any damages resulting from or related to your use of this information. It is your responsibility to refer to official IRS documentation for information regarding any tax laws or tax information shown here.