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IRS News
First-Time Homebuyers Credit Extended/Expanded The Worker, Homeownership and Business Assistance Act of 2009 was signed on November 6, 2009. This act provided for the following: 1. Extends the deadline for purchasing and closing on a home 2. Authorizes a credit for long-time homeowners that buy a replacement home 3. Raises the income limitations for homeowners that claim the credit The deadline to purchase a new home and claim the $8,000 credit is September 30, 2010. (A valid contract in place by April 30, 2010 and close on the deal before September 30, 2010) Long-time homeowners can now claim a credit of $6,500 (married filing Joint) is purchasing a replacement home. Restrictions apply such as you must have lived in the lived in the same principal residence for a 5 year (consecutive) period during the eight year period ending on the day you close on the replacement home. Other restrictions apply so contact our office for more details. Additional benefits are available for members of the military and certain other federal employees. Military and certain other federal employees will have an additional year to buy a home and obtain the credit. Any one filing for the credit on their 2009 tax return will need to use the new from 5405. Claiming the credit on the 2009 tax return will result in the return being filed on paper not through Efile. A copy of the HUD-1 statement must be mailed with the return when claiming the First-time Homebuyers credit. If you are claiming the Long-time homeowners credit you will be required to provide a copy of the HUD-1 and it is recommended that you provide proof of the 5 years of residency. This proof can be in the form of 5 years of Form 1098, Mortgage Interest statement, property tax records or Homeowners insurance records. Providing these additional records will help expedite the processing of the return. Overview of 2008 Tax Changes Unemployment Benefits Tax Free in 2009 Each person will be able to exclude up to $2,400 of unemployment benefits paid during 2009. Not extended for 2010. IRS Softens Rules for 2008 IRS will waive late penalties and negotiate payment plans for struggling taxpayers. New steps were announced that include: 1. Collection suspensions. IRS employees have flexibility to suspend collections where taxpayer can not pay due to loss of job, etc 2. Flexibility for missed payments. Taxpayers may skip a payment or get reduced monthly payments when on an installment plan. 3. Home equity adjustments. IRS is setting up a special unit to handle cases where a home's value has hindered efforts to reach an offer in compromise. 4. Speeding up levy releases. For those where wages or bank accounts are being garnished for delinquent back taxes. the IRS is loosening its requirements for levy release of those amounts. 5. Expanding its free E-File programs. Now available for all taxpayers, regardless of income. This will speed up refunds and payments. Overall IRS employees are being given more freedom to work with a taxpayer that has been hit hard financially due to the economy downturn. To help you figure out how to file taxes during the economic downturn contact our office or the IRS website, "What if?" or call 1-800-829-1040. New twist to the Standard Deduction As a result of the passage of the Housing Assistance Tax Act of 2008, through 2009, taxpayers who take the standard deduction vs. itemizing the deductions, will be able to use the Real Property Tax paid as a deduction. Single taxpayers may take up $500 and $1,000 for joint tax filers. Attach Schedule L. Foreclosed Mortgage get Debt Relief As a result of the passage of the Mortgage Forgiveness Debt Relief act passed in late 2007 a temporary exclusion was created to cancel the debt income. New law discharges up to $2 million in debt when the debt was secured by the principal residence and incurred during the purchase, construction or improvement of the home. This exclusion was extended to 2012 as a result of the Emergency Economic Stabilization Act passed in October of 2008. The amount of debt forgiven must be reported on Form 982 and attached to your tax return. Alternative Minimum Tax gets fixed for 2008 As mentioned before the Alternative Minimum Tax (AMT) received a temporary fix under the Emergency Economic Stabilization Act that was passed in October. This provided for a one year fix and increased the AMT exemption amounts to $69,950 (from $45,000) for married taxpayers filing a joint return, $46,200 (from $33,750) for single and head of household taxpayers filing, and $34,975 (from $22,500) for married taxpayers filing separate returns. The fix also includes non-refundable personal credits, such as the Dependent Care credit and the education tax credit all to reduce the taxpayers AMT liability. Child Tax Credit Expanded Threshold by where the credit is figured has been reduced to income over $8,500 (from $12,500). This makes over 2.4 million now eligible for the Child Tax Credit Only good for 2008 unless enacted as a permanent change or extended year over year. Increase in age of children whose income is taxed at parent's rate For 2008 the rate will continue to apply to children that are under 18 at the end of the tax year but beginning in 2008 will also apply to a child who is age 18 at the end of the year, and whose earned income is not more than half the child's support, and a student who is age 24 at the end of the year and whose earned income is not more than half of the child's support. Required Minimum Withdrawal Suspended for 2009 For tax year 2009, you will no longer be required to withdrawal from your IRA at age 70 1/2. This requirement will be reinstated for 2010. If you turned 70 1/2 in 2008 you will still need to take your distribution prior to April 2009 to avoid penalties. Home Mortgage Insurance Enacted for Tax Year 2007 but now extended to 2010 this is now deductible. Restrictions do apply. For more information click here. Home must have been purchased between January 1, 2007 and December 31, 2010. This is the insurance you are usually required to pay if the down payment is less than 20%. Phases out for families with Adjusted Gross Income between $100,000 and $109,000. Long Term Care Premiums paid during 2009
AdoptionMaximum credit for 2008 is $11,650 per each eligible adopted child. Credit will start to phase out when the modified adjusted gross income between $174,730 and $214,730. The credit was $11,390 for 2007 with a phase out beginning at $170,820. Child and dependent Care CreditThe maximum child and dependent care credit is 35 percent. reduced credits begin at an AGI of $15,000. The amount of eligible expenses is $3,000 for one child and $6,000 for two or more children. Residential Energy CreditsNon Business Energy property credit expires for property placed in service after December 31, 2007. Six Month Extension Available to most TaxpayersFiling Form 4868 will now get you a 6 month extension as opposed to the previous 4 months. No signature or explanation is needed to obtain this extension. Changes in Car Donation DeductionsYou are no longer allowed to claim the deduction based on "fair market value". In most cases you must wait until the organization sells the vehicle at which time they will provide you with the amount it was sold. This is the amount that may be claimed. You may still use the "fair market value" if you donate the vehicle to an organization that uses the vehicle itself to further its specific purpose. In the case of 1-800-Charity Cars, they refurbish the vehicles and provides them directly to the disadvantaged. In this case the charity must estimate the fair market value at the time of the donation. Energy Incentives Act passedFair number of tax breaks available for taxpayers who own certain energy-efficient property installed in their personal residence. This property must have been installed after December 31, 2005 and before January 1, 2008. Tax credit can not exceed $500. Purchase of Hybrid vehicles are included under this act. Sales Tax DeductionSales tax is now deductible on Schedule A. Taxpayers may elect to deduct State and Local general Sales Tax instead of State and Local income taxes. You may not deduct both. The Sales Tax may be deducted based on actual receipts or using the tables available on the IRS web site or you may view a copy of Publication 600. (Requires a PDF Reader). Self Employed Health InsuranceIf you are self employed, you will be allowed to deduct 100% of the cost of your health insurance and qualified long term care insurance for you and your family and long as neither you or your spouse are eligible to participate in another employer's health plan. Disaster Area DesignationsTo find out if your area qualifies go to the FEMA website at http://www.fema.com/. Gift and Estate TaxesThe annual gift tax exclusion for 2008 is $12,000 per donee, per year and $13,000 for 2009. The lifetime exclusion for gifts remains $1,000,000. IRS Provides information on NoticesHope you never get one of those pesky IRS notices but if you do here is some information that could make it easier to understand. File your Extension Form ElectronicallyFiling for an extension (Form 4868) will never be easier. The IRS will allow Extensions to be filed through the mail or through Efile. Check with your tax preparer for details. The IRS has set up a special toll free number. Make your federal tax payments online from anywhere.You may now make your federal tax payments online using the free Electronic Federal Tax Payment System (EFTPS). You can use the EFTPS to make all your Federal tax payments, including income, employment, estimated and excise taxes. Businesses can schedule payments up to 120 days in advance of their due dates, and individuals can schedule up to 365 days in advance of their due dates. This means an individual can schedule all four estimated tax payments (Form 1040ES) for the year at once. EFTPSOnline is popular. You can use it to make or cancel a payment, review payment history, change bank account information and print confirmation of your payment instructions. To sign up, visit www.eftps.gov, or call toll-free 1-800-555-4477 or 1-800-945-8400. Did you know?....Family day care providers can choose a standard rate for meals provided to children in their care instead of keeping detailed records and receipts. Most up-to-dates rates may be found my clicking here and selecting the appropriate year. Weight Loss Program can be taken as a Medical ExpenseIf prescribed by your Doctor and part of a treatment for a specific disease or ailment, including obesity. Visa acceptedYou may use your Visa card to make your tax payments. This is in addition to MasterCard, American Express and Discover. Contractor or EmployeeOften asked and debated question. Three factors to consider: 1. Behavioral Controls. Who provides the training, etc for how a task is performed? 2. Financial Controls, How is the worked paid? Are the workers expenses reimbursed? Can the worker make a profit or report a loss? 3. Relationship of the parties. Is the worker eligible for benefits? Relationship permanent or temporary in nature? Stock Option reporting SimplerA stock broker will no longer need to issue a 1099-B for same day exercise and sale. Certain conditions will need to be met. Deduction for EducatorsIn the past educators could deduct any expenses, such as buying school supplies, attending seminars, etc. These deductions were taken on Schedule A and were subject to an AGI (Adjusted Gross Income) limitation of 2%. No more. Beginning with 2002 taxes, this deduction may be taken without a limitation. Taxpayers may subtract up to $250 of qualified expenses. You will need to itemize deductions to receive this benefit. This deduction has been extended to 2010. Publication is now available for Terrorist Victims..The IRS has released a new publication explaining how to file claims under the Victims of Terrorism Tax Relief Act of 2001. This new law applies to victims of Sept 11, 2001, Anthrax Attacks and the April 1995 Oklahoma City bombing. IRS Publication 3920 is now available and contains worksheets to figure the amount of tax forgiven and for claiming the minimum tax relief of $10,000. As of October 7, the taxpayer assistance phone number (800) 829-1040 will be available from 7 am to 10 pm, Monday through Friday. IRS To collect overdue tax obligations through SS benefit reductions..If you are collecting Social Security benefits and have outstanding federal tax bills you will need to call the IRS at (800) 829-7650 to make arrangements to pay that debt. Starting in February of next year, benefit payments could be reduced by 15%. If you are affected by this federal Payment Levy Program you should have begun to be notified in October. No deductions will be taken from children's, lump sum death or Proudly benefits. And no deductions will be taken from Supplemental Security Income payments or benefits undergoing partial withholding to repay a debt owed Social Security. Dependents Allowed Benefit of 10% Tax Bracket..The advance refund was not available to certain taxpayers, including taxpayers who were claimed as dependents on someone else's 2000 income tax return. This was NOT what Congress had in mind when they drafted the Economic Growth Act of 2001. As a result, the IRS has written the instructions to Form 1040, line 40 permitting dependents to claim the credit. New Information for Obtaining EINSome Service Centers will only accept a fax, while others only require a phone call. There is now a new hotline that will standardize this process. The official word from the IRS is that the toll-free number for obtaining EINs will be fully functional January 2, 2002. The new toll-free number is (866) 816-2065 and will operate Monday through Friday from 7:30am to 5:30pm local time. Requests will continue to be received by fax or mail at these three locations: Brookhaven, NY (631) 447-4991 Cincinnati, OH (859) 669-5760, and Philadelphia, PA (215) 516-3990 Employers are required to withhold FICA on ISO ExerciseThe amount subject to FICA is the fair market value of the shares, less any amount paid for the shares. Saver's CreditQualified individuals are allowed a nonrefundable of up to $1,000 ($2,00 for MFJ) for eligible contributions to an IRA or 401K. This credit is available to you if you:
For more information on this tax credit ask your Tax Preparer or visit the IRS Web Site. Refer to IRS announcement 2001-106. or IRS Publication 590. Electronic Payment OptionsThere are two ways to pay taxes electronically. Taxpayers can use an electronic funds withdrawal from a checking or savings account, or use a credit card. MasterCard, American Express, Discover and now Visa are acceptable forms of Credit Card payments. E-Payments can be used to pay a balance due on an income tax return, pay a projected tax due, when requesting an automatic extension of time to file, and to pay an estimated tax payment when e-filing a return. Electronic funds withdrawal is free and you decide when the tax payment is withdrawn from your account. Electronic funds withdrawal is only available to those who e-file, either by computer or phone. This allows you to file your return early and schedule the withdrawal as late as April 15. An estimated tax payment can be made through electronic funds withdrawal only when filing a tax return via a computer. The estimated payment may be the one due in April, June or September. Only one estimated tax payment can be made through electronic funds withdrawal. Estimated tax payments cannot be made by phone. |
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