December 26, 2009
Happy Holidays!
Hi, I am Tynisa Gaines, the owner of Tynisa Gaines, EA LLC. Tynisa Gaines EA, LLC is going green. This year, all tax returns will be emailed to the client free of charge in an adobe document. This will save paper and ink. Copies of federal and state returns will cost $10/$5 respectively. The information below applies to 2009 tax year unless otherwise stated.
Individual Tax Returns
If you normally file a 1040, 1040A, or 1040X the following tax changes may apply to you:
It’s not too late… You can still save on your taxes if you buy a house, car, or energy efficient appliance.
The Homebuyer credit has been extended with the following rules:
* You must enter into contract on a principal residence priced less than $800,000, by 4/30/10 and close by 6/30/10.
* You can claim it on 2009 or 2010 tax return.
*If you have lived in a home 5/8 years ending on Nov 6, 2009, you may qualify for $6500 toward the purchase of a new principal residence.
*Income limits have increased to $225,000, up from $125,000.
Install energy Star qualified insulation, windows, doors, roofing, heating and cooling systems, water heaters or fuel-efficient stoves in your primary residence and you may be able to receive a federal tax credit for up to 30% of the cost; up to $1,500 for products put in service in 2009 & 2010. Not all products qualify. Read the rules at energystar.gov/taxcredits.
Taxpayers who buy a qualifying new motor vehicle this
year after Feb. 16 can deduct the state or local sales or excise taxes they paid on the first $49,500 of the purchase price. Qualifying motor vehicles include new passenger automobiles, light trucks, motorcycles, and motor homes.
The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.
Not in the market to spend money? You can still donate to charity. The rules for charitable donations changed in 2007 and are still enforced.
*Clothing and household items must be in good or better condition.
Any item over $500 must have an appraisal, and the condition is irrelevant.
*Monetary items require a bank record or written record from the charity including the name of the charity, the date, and the amount of the contribution.
*Deductions count during the year they are made. Any donations made by 12/31 will count for 2009.
*Make sure you donate to a qualified charity, if in doubt, ask for proof, or search on irs.gov.
*Charitable donations are not tax deductions for everyone. If your standard deduction is more than the amount of charitable contributions, plus taxes, or mortgage interest, then more than likely you don’t itemize, and therefore are unable to take a deduction on your tax return.
Traditional IRA’s
The maximum contribution for 2009 is $5000 and $6000 if you are over 50. You must take money out, (minimum required distribution) once you turn 70 ½ and you will pay income taxes on that money at your current rate. If you take money out prior to age 59 ½, you will have to pay tax plus an additional 10 percent penalty if you don’t qualify for an exception.
IRA changes: For 2009 only, you don’t have to take minimum required distributions if you are 70.
ROTH IRA’s-
You don’t have to withdraw the money at 70 ½, and you can pass the account to heirs. You can withdraw contributions with no tax and no penalty if you are over 59 ½ or meet a requirement for a qualified distribution, such as purchasing a home.
Do you have a 401k or Traditional IRA that you wish was a ROTH IRA, but could not convert because your income was over $100,000? The income ceiling has been removed for 2010.
As of January 1, 2010, you can convert to a ROTH IRA however you will pay income taxes on the amount of money that you can convert. The good news is that you can split the income on your 2011 and 2012 returns if it’s a large amount.
Who would benefit from this?
Some who expects their assets to increase or tax rate to increase significantly into retirement.
Someone who can take an increase in income hit now, rather than later. Maybe you or your spouse was unemployed this year, or you expect income to decrease in the next two years and you can absorb the tax hit now.
I suggest that you keep one of each and if you don’t have one, you should open one of each. Who knows what the upcoming tax laws may benefit you in the future.
Beginning Jan,2010, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
- 50 cents per mile for business miles driven;
- 16.5 cents per mile driven for medical or moving purposes; and
- 14 cents per mile driven in service of charitable organizations.
Do you have a business related question or need help with your books?
Email me mstyea@yahoo.com.
That’s all for now. Thanks for reading! If there is a particular tax subject you’d like to see in the next issue, let me know!
Do you have a tax question? Email me at mstyea@yahoo.com
February 28, 2009
The stimulus plan President Obama signed into law contains a few tax treats for individuals under The American Recovery and Reinvestment Act (ARRA) of 2009.
Most of the other changes signed into law will affect NEXT YEAR’s (2009) tax return.
WHAT’S IT GOING TO DO FOR YOU?
Taxpayers will not get a separate, special check mailed to them from the IRS like last year’s economic stimulus payment.
The exception included in the new law is a lump sum payment of $250 to Social Security recipients, disabled veterans, and certain retirees. The Social Security Administration announced that seniors and other recipients will receive their one-time $250 payment in late May or early June. The IRS will not be sending these one-time payments as it did with the 2008 stimulus payments. SSA, VA, and the Railroad Retirement Board will be directly handling the payments.
MORE MONEY?
You will begin to see one change to your paychecks this spring if your modified adjusted gross income is between $150,000 and $190,000 for married filing joint returns, and others with modified adjusted gross incomes (MAGI) between $75,000 and $95,000. Available for tax years 2009 and 2010, the Making Work Pay credit is 6.2 percent of a taxpayer’s earned income with a maximum credit of $800 for a married couple filing a joint return and $400 for other taxpayers, but it is phased out for higher income taxpayers. Most workers will qualify for the maximum credit. Because the credit is refundable (people can get it even if they owe no tax), most low-income workers will also qualify for the full credit.
HOMEBUYING
There are two breaks in the tax code for first-time homeowners. Which credit you can take depends on when you purchased your home.
If you’re a first-time home buyer and you purchased your home on or after April 8, 2008, and by Dec. 31, 2008, you may eligible for the $7,500 tax credit that you will have to pay back. It’s a 15-year, interest-free loan from the IRS. If you claim the credit on your 2008 tax return, you have to begin paying back the money in 2010.
The $8,000 tax credit is available for qualifying home purchases from Jan. 1, 2009, until Dec. 1, 2009. If you take advantage of the $8,000 tax credit and then sell your home or it’s no longer your principal residence within 36 months of the purchase date, you will have to pay back the full $8,000. However, as with the $7,500 credit, if you sell the home and your gain is less than the credit, you only have to repay up to the amount of the gain. If you die before the credit/loan is repaid, any outstanding amount is forgiven.
If your status is married filing separately, you can’t get the full $8,000 or $7,500 credit. Instead, you get $4,000 of the $8,000 credit or $3,750 of the $7,500 credit. Single filers are eligible for the full credit. You can take this credit in 2008 or 2009.
CAR BUYING
The ARRA provides an incentive for new motor vehicle purchases in 2009. The bill allows taxpayers to deduct the state and local sales and excise taxes for any new car, light truck, motorcycle or mobile home purchased between February 17, 2009 and January 1, 2010. The deduction is “above the line,” which means it can be taken even by those who do not itemize other deductions on their tax returns limited to the taxes on up to $49,500 of the purchase price on a qualified motor vehicle. It phases out for taxpayers with MAGI of $125,000-$135,000 for individuals and $260,000 for married filing joint.
UNEMPLOYMENT
The plan exempts the first $2,400 of unemployment insurance benefits from federal income taxes in 2009.
Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.
Employers must maintain supporting documentation for the credit claimed. This includes:
- Documentation of receipt of the employee’s 35 percent share of the premium.
- In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
- Declaration of the former employee’s involuntary termination.
COBRA provides certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers health plans maintained by private-sector employers with 20 or more full and part-time employees. It also covers employee organizations or federal, state or local governments. It does not apply to churches and certain religious organizations. The new COBRA subsidy provisions also apply to insurers required to offer continuation coverage under state law similar to the federal COBRA.
KIDS AND COLLEGE
Money withdrawn from a 529 college savings plan is not taxable if it’s used for qualifying expenses. Under the stimulus plan, computer costs will now be considered an allowable expense for 529 college savings plans.
The floor for the refundable child tax credit is reduced from $8,500 to $3,000 for 2009 and 2010.
MILITARY MEMBERS
The government will cover 95% of a loss if a service member is forced to sell a home as a result of a base closure, reassignment or combat wound requiring them to be near a health facility. The program also covers surviving spouses of those killed in combat.
ENERGY EFFICIENCY
For 2009 the stimulus plan increases from 10 percent to 30 percent (up to a maximum of $1,500) the tax credit for the purchase of qualified energy efficiency improvements to existing homes such a central air conditioner, heat pump or furnace.
AMT
There was yet another patch to the alternative minimum tax for 2009. The AMT exemption is set at $46,700 for single filers, $70,950 for joint filers. Without this temporary fix on a tax that was supposed to be targeted at the ultra wealthy, the AMT amounts were set to go back to $33,750 for individuals and $45,000 for married couples filing jointly.
January 22, 2009
Hi, I am Tynisa Gaines, the owner of Tynisa Gaines, EA LLC. 2008 has been an interesting year for everyone, especially tax professionals. I have listed the latest and greatest tax law changes below.
Individual Tax Returns
If you normally file a 1040, 1040A, or 1040X the following tax changes may apply to you:
Do you need another reason to contribute to your 201K? (Smile, it will get better.)
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. The following tax brackets may be eligible for an additional credit up to $2000 on their tax return.
Married couples filing jointly with incomes up to $53,000, Head of Household with income $39,750, and Single or Married Filing Separate incomes up to $26,500. You have until April 15, 2009 to add to or set-up and IRA if your income falls within these brackets.
Did you purchase a home this year? Do you plan to purchase one in 2009? Have you already paid your mortgage off? Did you foreclose on your house?
If you purchased a home after 2006 and pay mortgage insurance premiums or PMI, they remain deductible through 2010.
If you plan to purchase a home for the first time (or have not owned in 3 years), there is a credit of $7,500 available that must be paid back over 15 years via your tax return; if you purchase between April 9, 2008 and June 30, 2009. More information on this credit was published in the October issue.
If you own your home free and clear and just pay property taxes, there is a new law for you! Effective this year, there is an additional standard deduction for those who do not itemize. The deduction is for real estate taxes paid, and singles can deduct up to $500 and joint filers up to $1000.
If you sold your home for less than you owed, restructured your mortgage, or foreclosed through 2009. Your canceled mortgage debt generally won’t be treated as taxable income through 2012.
Did you donate to charity?
Did you get a receipt? Taxpayers must show documentation for all monetary contributions. A cancelled check, bank record, or receipt from the organization. You must be able to prove the name of the organization, the date and the amount. For non-monetary donations, they must be in good condition.
Did you not receive all or part your stimulus check this year?
You may be entitled to a recovery rebate credit when you file your 2008 tax return.
Lastly, the following items have been extended for 2008:
IRS has changed Regulations regarding claiming children of Divorced or Separated parents on a tax return. New Regulation 1.152-4 states the child is “the qualifying child of the parent with whom the child resides for a longer period of time during the taxable year.” It further states that it is referring to nights not days, and if they are equal then the parent with the higher adjusted gross income is considered the custodial parent. The custodial parent can still release the child to the non-custodial parent by filing for 8332 which must be attached to the return for the year(s) that the non-custodial parent claims the child.
Beginning Jan. 1, 2009, the standard mileage rates for the use of a car (including vans, pickups or panel trucks) will be:
-
55 cents per mile for business miles driven;
-
24 cents per mile driven for medical or moving purposes; and
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14 cents per mile driven in service of charitable organizations.
There have been changes to the AMT, Kiddie Tax, HSA’s, and IRA’s. If you have a specific question about any of these, let me know.
SELF EMPLOYMENT CORNER
Most business owners utilize the Section 179 deduction for depreciating assets. The amount has increased to $250,000 for 2008 which is double the 2007 amount of $125,000.
50% bonus depreciation is back and it’s the default. Taxpayers will need to elect out if they don’t want to utilize it.
Penalties for late filed Partnership returns are $85/month/partner.
A penalty for late filed S-Corp returns is $85/month/shareholder.
If you started a business this year, you can deduct and or amortize startup costs over 15 years without attaching a statement. Under IRC Sec. 195, you can deduct up to $5000 in the year the business starts. If costs exceed $50,000 this limit is reduced dollar for dollar.
Do you have a business related question or need help with your books?
Email me mstyea@yahoo.com.
ASK TY!
Ty, do you have any new tax laws that affect the military?
T. McKoy, Temecula, CA
They have made permanent the option to include excluded combat pay as earned income for the purposes of Earned Income Tax Credit or EITC.
That’s all for now. Thanks for reading! If there is a particular tax subject you’d like to see in the next issue, let me know!
Do you have a tax question? Email me at mstyea@yahoo.com
October 22, 2008
Hi, I am Tynisa Gaines, the owner of Tynisa Gaines, EA LLC. I have also just formed a non-profit corporation; Tax Information Agents Inc. Once it’s up and running, it will provide free tax preparation and audit representation to low-income individuals. Oct 15 is the deadline to file for those who filed an extension in April. If you would qualify for stimulus check, this is the deadline to file to make sure that you receive one. There are so many things going on in the world right now that the tax professionals are going to have to keep up! The mortgage crisis, the credit crunch, the upcoming election….. How does all of this affect your tax situation? I’ll try to highlight some of the most prominent things below.
THE “F” WORD
Is there a foreclosure near you? In the past, a discharge of debt income as a result of a foreclosure was taxable income unless you filed Title 11 bankruptcy, were insolvent or had a qualified farm or real property discharge. Due to the housing crisis, Congress enacted a principal residence exception as well. The 2007 Mortgage Forgiveness Debt Relief Act; effective January 1, 2007-December 31, 2009; excludes any discharge of debt income of a qualified principal residence from taxable income. In short, foreclosures should not increase your taxable income. This does not apply to second homes, vacation homes, business property or investment property. However, it may apply to second mortgages or home equity loans, if the proceeds were used to buy, build or substantially improve the primary residence. This law does not preempt the current bankruptcy laws, but provides an alternative. You will receive a 1099A and or 1099 C; therefore you will need to provide this information to the tax preparer so that they can adequately report the information on your tax return to exclude the tax. Although, this explanation is simplified, there are still exceptions to the rule. Please contact me if you have a specific question regarding this.
TO BUY OR NOT TO BUY?
The recently enacted Housing & Economic Recovery Act of 2008 provides a refundable tax credit for main home purchases made after April 8, 2008 and before July 1, 2009. Vacation and Rental homes do not qualify.
-You must not have owned a home at any time in the 3 years prior to the purchase.
-The credit is 10% of the purchase price of the home up to a max of $7,500.
The full credit will be available for home costing at least $75,000.
-The full credit is available for Married Couples with incomes less than $150,000 and singles with less than $75,000 in income.
And of course the fun part is for the tax professionals………
-The Credit is really a 15-year interest-free loan. The credit should be repaid in 15 annual installments beginning with the second year after the credit is claimed. Repayment is included as an additional tax on the income tax return for the year. There are some exceptions if you divorce, a spouse dies, you sell the home, it no longer becomes your primary residence; part or all of the income may become due on the return the year any of these occur.
SELF EMPLOYMENT CORNER
Receipts, Receipts, Receipts! I know you don’t want to, but start gathering them now. Start organizing bank and credit card statements by month. Highlight business expenses by categories. Oct 1 is the deadline to start SIMPLE IRA’s, but you can still start a SEP. Make an estimated tax payment if your income has increased more than last year. You can also still purchase depreciable items such as computers and cars to help reduce tax liability.
ASK TY!
What can I do now to get ready for tax season?
Clean out your closets & make charitable donations (get receipts, they are required). Increase IRA contributions if you haven’t maxed out. Pay property tax bills on time. Keep receipts for any large purchases such as cars or appliances, you may be able to take the sales tax deduction in lieu of a state income tax deduction.
Do you have a tax question? Email me at mstyea@yahoo.com
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