The IRS is planning to provide help to taxpayers this year by being open for business this Saturday, March 27 from 9 a.m. to 2 p.m.—your local time. The location of participating offices is listed here.
IRS Commissioner Doug Shulman says the purpose of the Saturday office hours is to give economically struggling taxpayers the opportunity to work directly with IRS employees to resolve their tax issues via economic hardship status and payment arrangements. Taxpayers will also be able to get help claiming any of the special tax breaks in last year’s American Recovery and Reinvestment Act, many that I have gone over previously in my blog, such as, the:
- Homebuyer tax credit - the refundable credit equal to 10 percent of the purchase price up to a maximum of $8,000 ($4,000 if married filing separately). A first-time homebuyer is an individual who, with his or her spouse if married, has not owned any other principal residence for three years prior to the date of purchase of the new principal residence for which the credit is being claimed.
- American Opportunity Credit - a federal education credit to offset part of the cost of college. This credit modifies the existing Hope credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Income guidelines are expanded and required course materials are added to the list of qualified expenses. Many of those eligible will qualify for the maximum annual credit of $2,500 per student.
- Making Work Pay credit - In 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act will provide a refundable tax credit of up to $400 for working individuals and up to $800 for married taxpayers filing joint returns.
- Expanded Earned Income Tax Credit - There is now a new tax classification for EITC recipients who have three or more children and a higher credit amount – up to $5,657.
The IRS may hold three additional Saturday office hours this spring and early summer.
Showing posts with label new tax breaks. Show all posts
Showing posts with label new tax breaks. Show all posts
Wednesday, March 24, 2010
Wednesday, April 01, 2009
New Tax Breaks to Be Aware Of
The millions of procrastinators now scrambling to finish their tax returns may want to watch out for a few new twists -- and several old ones.
Unless they're careful, they could wind up paying Uncle Sam more than they really owe. Even when Congress tries to offer Americans tax relief, the result is often so complex that it requires the assistance of high-priced experts trained in the translation of tax-law gibberish.
Among the major changes: The Internal Revenue Service recently issued guidance that is likely to provide relief for many Ponzi-scheme victims, including those hurt by Bernard Madoff, who pled guilty last month to criminal charges in connection with a decades-long scheme. The IRS's conclusions are "very taxpayer-friendly," for those who qualify, says David F. Earley, senior tax manager at Deloitte Tax LLP in Boston. But victims may have to consult tax experts to reap the benefits.
Separately, investors who sold the stock of insurance companies that once were owned by policyholders may be able to save on taxes, thanks to a court decision last year.
Taxpayers this year should also be aware of older laws that may have new relevance. For example, many people looking for work can deduct job-search expenses, whether or not they find a job.
Here are a few recent changes and other last-minute advice from accountants and other tax advisers:
Ponzi schemes. IRS Commissioner Doug Shulman said the Madoff scandal has affected "a very large and diverse pool" of investors. "Beyond the toll in human suffering -- as entire life savings and retirements appear to have been wiped out -- the Madoff case raises numerous tax and pension implications for the victims," he told senators recently.
The IRS defines a Ponzi scheme as one in which a fraudster gets cash or property from investors, purports to earn income for them and then reports income amounts that are "wholly or partly fictitious." Payments, if any, of the purported income or principal to investors come from cash or property from other investors. And the perpetrator of the fraud "criminally appropriates some or all of the investors' cash or property."
Much to the relief of many victims, the IRS concluded that investors typically are entitled to a "theft" loss -- and that "investment" theft losses aren't subject to the stiff limits that apply to personal casualty or theft losses. (With personal theft losses, your deduction for 2008 typically would be limited to the extent the losses exceeded 10% of adjusted gross income, after reducing each loss by $100.)
Wednesday, February 25, 2009
IRS Outlines Tax Savings
The IRS Spokeswoman, Sue Hales, recently explained the some new tax credits in an article on the Daily Journal. You can find a clip of the article below, but the full post can be found here.
Housing Credits
The America Recovery and Reinvestment Act, which Obama recently signed into law, will affect 2009 tax returns more than 2008, Hales said, but it does include a new deduction for first-time homebuyers that can be applied this tax season. Additional real estate tax deductions of up to $500 for singles and $1,000 for married couples are available for those who file standard deductions.
Disaster Relief Credits
Net losses suffered in federally declared disasters can be deducted on tax filings.
Additional relief is being offered for victims of federally declared disasters in the Midwest that occurred between May 20 and July 31, 2008.
Qualified disaster victims can deduct casualty and theft losses without subtracting $100 plus 10 percent of adjusted gross income from that amount.
Income Tax Credit
Earned income tax credit, a refundable credit for eligible low- to moderate-income individuals, has increased to $4,824 for families with two or more children; $2,917 for families with one child; and $438 for individuals between 25 and 64 years old who have no children. If the income tax credit amount exceeds taxes owed, the difference will be refunded to the taxpayer.
Free tax filing through the IRS is available for those with a 2008 adjusted gross income of $56,000 or less. The program, available through the IRS Web site, has 20 participating tax companies, and three offer service in Spanish.
"We encourage people to e-file. There are many benefits for people to e-file," Hales said. "You can request to have it deposited in a bank account, and receive it in 10 days or less, which is much faster than mail. E-filing is far more accurate than paper filing. The error rate on e-file returns is usually less than 1 percent. The error rate on paper returns is around 20 percent."
A recovery rebate credit -- an extension of last year's stimulus payment -- is available to eligible taxpayers. Hales noted that the stimulus payment is not taxable or deductible, and only used to determine if an individual will receive a recovery rebate credit, and what amount it will be.
Tax Breaks Could Spur Business Investment
The American Recovery and Reinvestment Act gives companies two reasons to invest in new equipment this year, and it provides many small businesses a way to find the money to make these purchases.
The economic stimulus package extended two tax incentives for business investment through the end of this year. Companies can write off 50 percent of the cost of new equipment immediately instead of following the usual depreciation schedules. Small businesses can expense up to $250,000 of new equipment purchases this year.
These breaks can be a powerful incentive for business investment, especially when combined, said Bill Smith, director of the national tax office for CBIZ MHM.
Smith cites an example of a small business investing $500,000 in equipment that normally is depreciated over five years. The business could take the $250,000 Section 179 expensing limit and then apply 50 percent bonus depreciation. The business could then depreciate $25,000 of the remaining $125,000 of the investment this year. The end result: The business could write off $400,000 of the $500,000 investment this year, instead of having to wait to recover this money.
That's good for cash flow, but many companies may not have the cash or credit to make this kind of investment, especially in such a weak economy.
Business tax breaks
Under the economic stimulus package:
Businesses can immediately write off 50 percent of the cost of new equipment purchased in 2009
Small businesses can immediately write off $250,000 for capital expenditures made this year
Small businesses with gross receipts of $15 million or less can carry back net operating losses for five years instead of two years
Some companies can defer taxes on certain types of business debt repurchased before 2011
Source: Senate Finance Committee
"A lot of small businesses aren't going to have the capacity to do it right now," said Clint Stretch, managing principal for tax policy at Deloitte Tax.
The economic stimulus package provides a solution, however, to businesses with less than $15 million in annual revenue. The new law allows these businesses to carry back net operating losses for five years, instead of the previous two-year limit. A business that currently is losing money could apply these losses to a previous profitable year and then claim a refund for taxes paid that year.
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