Tax Credits for Caretakers

Have you spent some of the past year as a family caregiver?  You likely knew it would take much of your time, but perhaps not so much of your money.  According to the AARP, the average family caregiver spends about $7,200 a year on household, medical, and other costs related to the care of a loved one. (2021) Good news! If you’ve been taking care of an elderly parent, grandparent, or dear friend – you may be eligible for these 4 tax breaks:

1. Medical Expenses

If you are providing over half of the support for an elderly relative, regardless of if they are your dependent or not, and you itemize deductions on your tax return, you can include any medical expenses you incur for the individual, along with your own, when determining your medical deduction. This can sometimes be called a “medical dependent.” As stated above, an individual qualifies as a medical dependent if you provide over 50% of his or her support, which includes medical costs. This test is less stringent than that used to determine whether an individual is your “dependent,” which is discussed below.

There are a wide range of deductible medical expenses from eyeglasses to physical therapy and much more. Some of the more common expenses include:

  1. Prescriptions
  2. Doctor Appointments
  3. Chiropractor Appointments
  4. Hospital Care

In addition to some of the common expenses listed above, the costs of qualified long-term care services required by a chronically ill individual and eligible long-term care insurance premiums are included in the definition of deductible medical expenses. There is an annual cap on the amount of premiums that can be deducted. The cap is based on age, going as high as $5,640 for 2022 for an individual over 70.

Do keep in mind that medical expenses are deductible only to the extent they exceed 7.5% of your adjusted gross income (AGI) and to the extent that you were not compensated by insurance or otherwise.

2. Filing Status:

If you have been filing as “single” and taking care of an elderly relative, you may qualify for “head of household” status by virtue of the individual you’re caring for. A head of household (HOH) filer allows for a higher standard deduction and lower tax rates. You can claim this status if:

  1. The person you’re caring for lives in your household (see exception below),
  2. You cover more than half the household costs,
  3. The person qualifies as your “dependent,” and
  4. The person is a relative.

3. Claim Your Loved One as a Dependent

Taxpayers have long been able to claim a tax credit for children up to age 16. Unlike a deduction, which lowers your taxable income, a tax credit directly reduces your tax bill. The 2017 federal tax law expanded the Child Tax Credit (CTC) to allow taxpayers to claim up to $500 as a nonrefundable “Credit for Other Dependents,” including elderly parents.

Under this provision, in effect through the 2025 tax year, the IRS allows family caregivers to claim some individuals related by adoption, blood or marriage — and even some friends — as “other dependents” on their federal tax return if both parties meet IRS requirements.

  • You must provide more than 50% of the individual’s support,
  • The individual must be related, or if not related, then lived with you for the full year,
  • The individual must not have gross income more than $4,400 for 2022 (gross income does not include certain social security benefits),
  • The individual cannot be claimed as a dependent on someone else’s 2022 return,
  • The individual cannot file a joint return for the year, and
  • The individual must be a U.S. citizen or a resident of the U.S., Canada, or Mexico.

4. Dependent Care Credit

If the cared-for individual qualifies as your dependent, lives with you, and physically or mentally can’t take care of him- or herself, you may qualify for the dependent care credit for costs you incur for the individual’s care to enable you and your spouse to go to work. The amount of the credit is based on a percentage of the dependent care expense, up to $3,000 per one dependent for 2022.

Talk to us about caretaker credits, or use the IRS interactive tool to determine whether you’re eligible for these deductions click here.

Letter from Uncle Sam? Don’t Panic.  

The IRS sends notices or letters for a variety of reasons; a change to your return, a balance due, or a request for additional information just to name a few.  Now that the tax filing deadline has come and gone, we have reached that time of year when the IRS computers start sending out notices/letters to taxpayers.

Rule 1: Do NOT panic.

Rule 2: Respond in a timely fashion.

An important note, the IRS will never initiate contact with a taxpayer via phone call, email, social media, or text message. They always start contact through the mail.  That is why it is important that if you receive correspondence from the IRS that you open and read the notice immediately.

These notices explain the reason you are being contacted and what you as the taxpayer need to do to comply with the notice.  Often these notices required timely responses; ignoring or failing to comply timely with these notices can lead to penalties and interest being assessed to your account.  Timely responses are also important if you disagree with the IRS assessment and plan to appeal their changes.  It can also help avoid delays in processing your return.

The IRS handles notice appeals on a first-in basis so a timely response can get you to the front of the line.  An appeal can be made by writing a letter in response to the notice or calling the phone number listed on the notice.  If contacting the IRS by phone, you should always have available a copy of your return and the notice to refer to during the conversation.

It is important to compare the IRS assessment against what was filed on your original return.  If you agree with the changes usually no response is necessary.  If an amount is owed to the IRS, pay as much as you can on the balance due.  If you are unable to pay the total due by the deadline provided there are payment plan options available at

If it’s determined that you do owe some money to the IRS the IRS accepts tax payments in several ways.  Payment via credit card, over the phone, or through the IRS website, direct debits from your bank account, and payment via check/money order to the address listed on the notice are all acceptable methods of payment.

If you have questions about an IRS notice/letter, make sure to reach out to us – the Hieronymus team is happy to help review the notice, draft an appeal, or take other steps to respond effectively.   

Ward Hieronymus

What Needs Keeping After My Taxes are Filed?  

With 2021 taxes wrapped and returned, you likely have paperwork ready to discard, a refund underway, or still need to file an amended return. 

Some important tips in all three situations:

Yes, you can throw away some tax records now.

The document retention rule: hang onto tax records related to your return as long as the IRS can audit your return or assess additional taxes.  The statute of limitations for an audit is generally three years after you file your return. Anything connected to a return filed prior to 2018 can now go. That also means if you filed an extension for your 2018 return, hang on to your records at least three years from when you filed the extended return. 

Important note: the statute of limitations extends to six years for taxpayers who understate their gross income by more than 25%.

You should keep certain tax-related records longer. For example, keep the actual tax returns indefinitely so you can prove to the IRS that you filed a return. There’s no statute of limitations for an audit if you didn’t file a return or filed a fraudulent one.

Keep records associated with a retirement account until you’ve depleted the account and reported the last withdrawal on your tax return, plus three (or six) years. And retain records related to real estate or investments for as long as you own the asset, plus at least three years after you sell it and report the sale on your tax return. Keep these records for six years if you want to be extra safe.

You can check the status of your refund with just a click.

The IRS has an online tool that can tell you the status of your refund. Go to and click “Get Your Refund Status” to find out about yours. You’ll need your Social Security number, filing status, and the exact refund amount.

If you forgot to report something, file an amended return.

In general, you can file an amended tax return and claim a refund within three years after the date you filed your original return or within two years of the date you paid the tax, whichever is later. So, for a 2021 tax return you filed on April 15, 2022, you can generally file an amended return until April 15, 2025.

However, there are a few opportunities when you have longer to file an amended return. For example, the statute of limitations for bad debts is longer than the usual three-year time limit for most items on your tax return. In general, you can amend your tax return to claim a bad debt for seven years from the due date of the tax return for the year that the debt became worthless.

We’re here when you need us!

Questions on taxes are a year-round scenario. That’s why we’re here. If you have any questions about tax record retention, locating a refund, or filing an amended return, reach out to us anytime. 

Ward Hieronymus

The Importance of Construction Time Tracking

Do you run a construction company?  Tracking employee time can be consuming, complex, and critical to your bottom line.  Capturing labor hours and issuing paychecks is only half the task.

Time tracking means keeping track of how many hours are spent on a particular project and/or task. Those various cost codes (CSI codes) are used to create buckets of funds for each trade or task. Capturing that time for that task allows you to compare reality to what was estimated.  Not only is effective tracking essential to job costing a project and estimating future work, but also for labor law compliance and potential workers compensation audit.

Mistakes in time tracking in an industry like construction can lead to enormous payroll errors. In the case of public projects, mistakes result in compliance failures with prevailing wage and tax laws. Legal actions and penalties are possible.  The good news:  a variety of new automated tech tools let contractors track more effectively than ever, even in large projects at multiple locations.  The days of a timecard have been replaced with geofenced apps that can drill down to who’s working where and when all with satellite precision.  A few tips to avoid time-tracking snafus:

Stay abreast of classifications

Publicly funded projects are required to pay prevailing wage rates and follow appropriate wage laws. Work and worker qualifications are key.

For example, if you classify a worker as a laborer when the person is doing electrical work, that’s a misclassification that violates the law. You may be paying the wrong hourly rate, which includes benefits and tax withholdings.   

What if a worker moves from task to task on the job?  Every various action must be assigned and reported based on that wage determination.  On a busy job site, managing and tracking these details in real time is a headache… but required. Make sure your workers understand the importance of tracking both their hours and their changing roles in the field.

Stay aware of wage rates

Every classification of laborer and mechanic has a designated hourly wage and fringe benefit rate.  These rates apply to federally funded projects and come from wage surveys conducted by the U.S. Department of Labor. Some states, counties, and cities have similar laws in place and publish their own prevailing wage determinations for state-funded or municipal projects.

Alabama does not have a prevailing wage law to govern wage rates on government projects or service contracts.  Instead, employers should follow the federal Davis-Bacon act which sets prevailing wages for four categories: building, residential, highway and heavy construction.     Make sure your administrative team knows where to track the most up to date prevailing wages for your jurisdiction.   A good resource is:  Rates may change year to year, so make sure you’re on top of the latest designation.     

Standardize your processes

Create a checklist to streamline payroll workflow by including every step required to complete the payroll cycle.  That list should include a timeline for submitting hours, along with steps to verify time and double (triple!) checking work classifications and wage determinations. Without a smart system in place, mistakes are harder to correct and much easier to make.

Even if you use a certified payroll software for reporting, maintain a separate checklist detailing the tasks required for compliance.  Make sure your accounting staff checks off these tasks along the way as they’re completed. 

Be zealous with record keeping

If you routinely work on government-funded projects, following stringent reporting requirements is critical to compliance. Keep records systematically and avoid panicked deadlines that often lead to mistakes. 

Sometimes, despite their best efforts, construction businesses are investigated for prevailing wage issues. If that happens, you’ll want to produce a clear digital/paper trail indicating that you have sound time-tracking and payroll procedures in place. In other words, those checklists will come in handy.

Make training a priority

Train, train, repeat.  Ensuring your employees are trained in the details will minimize mistakes and compliance headaches. 

Make sure field workers understand the importance of tracking on-site as their roles and tasks change. Do they realize misclassifications can impact their pay? Does your administrative staff know how to find and verify wage determinations?  Make sure resources are quickly available and up to date. Make sure new team members are trained and offer refresher training to stay on top of changing laws and policies.    

Continuing education is a smart tactic. Share articles and updates on prevailing wages and labor laws, schedule time for your employees to watch webinars, and send regular reminders to everyone about best practices.

Automate time tracking

Your profitability relies on accuracy.  “Guesstimating” doesn’t protect your bottom line, and shouldn’t be an approach to tracking labor time.  Competitive future bids rely on a clear snapshot of what it takes to complete the job. 

Traditional manual methods aren’t the most reliable, as it’s easy to forget to clock in and out on a timesheet.  The old-school approach let an employee track their own spread sheet for the week. Ink gets smudged, memory fades, and accuracy is sacrificed for poor handwriting.   The good news? Digital time tracking and cloud-based mobile applications keep workers and office personnel data-connected.  Jobsite data is transmitted in real time, letting accounting staff see time punches, activities performed, and project locations.  Most of these apps offer advanced features such as geofencing, labor cost data collection, and employee accountability by using GPS to determine where clock in and out occurred.  

Reap the benefits

Payroll mistakes can affect morale, undermine profits, and create legal and tax problems. With a proactive strategy, you’ll tighten processes and reap the benefit of a more engaged workforce and fewer dollars wasted to mistakes or compliance penalties.   We work with clients across a wide variety of industries in payroll processes and management – call us if we can help.

Forrest Hieronymus