2009 Individual Tax Return Changes

If you’re going to do your own tax return this year (not that I suggest this, mind you), here are 10 new things you’ll see on your 2009 individual income tax return. Because of all these changes, please don’t rely on your 2008 tax return as a model for this year.



1. Homebuyer credit. This one’s big, but also complex. First-time homebuyers and some existing, long-time homebuyers, are entitled to a refundable tax credit of 10% of the purchase price, with credit maximum of $8,000 ($6,500 for the existing homebuyers). The credit for existing homebuyers didn’t come into being until November 6th and there’s some complication about how long you had to own it (5 consecutive years out of the last 8 – go figure). Once again, middle-class taxpayers lose this benefit once they earn over $95,000 ($170,000 for married couples) for purchases before November 7th and $145,000 ($245,000 for married couples) after November 6th . Further complicating things is that if you took the credit in 2008, may want to amend your tax return (or have me do it for you) to get a larger credit or one without payback requirements.



2. College expenses tax credit. OK, another great credit with great complications. There’s 3 possible credits in addition to possible education deductions (you can’t double dip though). However, the income limitations are quite low, despite having been raised in 2009 (compared to 2008). There’s also differences in what types of expenses qualify for the different education credits. If you think you may qualify for some of these credits, please consider using a tax professional to assist you to make sure that you get the highest credit available to you.



3. Making work pay credit. There was a special complication for this credit – you already received it through wage withholding. However, if you don’t ‘claim it on your tax return, you’ll end-up paying it back to the Treasury. Make sure you don’t miss this one, if you’re eligible. Some people may have had their withholding reduced while not being eligible for the credit. This will cause a little bit of a negative surprise on their tax return.



4. Motor vehicle sales tax. Sales tax paid on the purchase of a new motor vehicle (on purchase price of up to $49,500) after February 16th may be deductible. One of the differences in how this is handled in 2009 is that it’s deductible if you itemize or even if you take the standard deduction. If you’re fortunate enough to have income above $125,000 (double for married couples) you may not be able to get this deduction.



5. Standard deduction. The standard deduction increased in 2009 to $11,400 for married couples filing jointly, $8,350 for heads of households, and $5,700 for single taxpayers and others. In addition, you may be able to claim the sales tax on a new car as described above and a limited amount of real estate property taxes.



6. Unemployment compensation. For the 10% of people who became unemployed during 2009, $2,400 of unemployment compensation benefits became tax-free. This may not be a huge benefit for many collecting unemployment compensation, but it shouldn’t be missed when you do your tax return. Note: Many CPAs (including me) offer discounted or pro bono services for unemployed clients.



7. Child tax credit. The refundable portion of the child tax credit increased by lowering the income threshold to $3,000. Lower-income families may receive larger refunds as a result.



8. Energy credit. If you made qualifying energy efficiency investments of up to $5,000 to your home in 2009 and/or 2010 (combined), you can get 30% back as a tax credit. There is some energy efficiency standards that have to be met and your dealer or contractor should have the necessary information for you.



9. AMT exemption. The maximum alternative minimum tax (AMT) exemption has increased a little over 2008. This doesn’t apply to most tax returns, but it’s important if you have certain trading gains or losses or a small business (sole proprietor, S-Corp or LLC – disregarded entity) with depreciation.



10. Kiddie tax threshold. The tax on investment income of those under age 19--or under age 24, if full-time students--at their parents' highest marginal tax rate for amounts over $1,900, up $100 over 2008.



Of course, there are numerous planning and other ideas that your CPA can offer you throughout the year that will help to lower your taxes, and more importantly, increase your wealth to meet your goals.




Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax

It’s Not About Tax Returns, It’s About Having More Wealth

It’s Not About Tax Returns, It’s About Having More Wealth

This time of year it seems natural to focus on getting your tax returns done.  Maybe you’ll prepare the forms yourself using Turbo Tax or a low-cost online software solution.  Maybe you’ll take a chance and spend a few hundred dollars (after all their hidden fees are revealed) going to a seasonal chain tax store and having their temporary workers prepare your returns.  Of course, there’s another alternative that you may have considered too expensive.

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 An experienced Certified Public Accountant (CPA) will use the tax return prep interview as a way to get to know you and your circumstances, kind of like a doctor asks about your medical history during an office visit.  And, much like a doctor, the CPA should ask you questions, not just to complete forms, but to help you to get financially healthier.  This way, you will very likely discover opportunities to create additional wealth for you and help attain your financial goals.  And the last doctor-CPA comparison I’ll use is that your CPA should have a friendly “desk-side manner.” 

You should feel confident that your CPA has at least a 4-year degree in Accounting and has passed the CPA exam, which fewer than 20% of test takers pass on their first attempt.  The AICPA also requires that the CPA continue their education with at least an average of 40 hours of specific training every year. 

And, of course, the CPA practices accounting and tax all year long, not just for a few weeks before the tax return season.  This means that your CPA is looking for ways to maximize your wealth throughout the year.  I know that personally, it’s quite common for me to present ideas to clients that save them literally thousands of dollars in taxes and other non-tax expenses.

So, having a CPA in your corner will, at the end of the day, put more money in your pocket – and not just from a tax refund.  I know this sounds a bit self-serving, but I know with 100% surety that my clients make and/or keep more money by using my services than they would any other way.  

CPA’s are there to be your financial doctors,
keeping you fiscally fit!

• > Is it better to lease or buy that car? 
• > Should you pay points to lower your mortgage interest rate? 
• > Is now the time to refinance? 
• > Should I pay-down my home equity loan or my credit card balance? 
• > If I take a 2nd job, will I pay so much more in taxes that it won’t be worth it? 
• > What’s the ‘true’ cost of both parents working? 
• > Our income is higher than ever, yet we don’t seem to be saving anything.  How do we get our spending under control? 
• > Our broker is recommending some things that we’re not too sure about.  Can we get an unbiased, second opinion? 
• > I just got a letter from the IRS.  What do I do with it?
• > My wife is an Army NCO, deployed to Afghanistan and is from California. I’m from New York and work at a job near her base in Florida and our 2 children go to daycare while I work. Where do file tax returns? 

These are just a few of the common, everyday questions I get asked and am happy to help with.  The best starting point for your CPA to get to know you and your financial and family situations is to prepare your tax returns.  You’ll find it’s your best value, by far!

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Contact me:
kfolberg@mynetcpa.com
(262) 421-1170 Office
(877) 277-7151 Fax