Year-End 2009

If any one of the following  topics pertain to you and you are not fully aware of the 2009 rule changes … then you really should seek out a tax professional for to prepare your 2009 tax return.

The following topics had major 2009 rule changes.

2010 Withholding Issues
>> A 2009 program gives special tax credits to most workers.  Instead of sending checks, IRS was told to take less withholding.  They revised the tables in April.    Problem: for many folks, the withholding reduction is greater than their tax credits.  They must pay back the difference at tax time.  Folks with multiple jobs (or families where both spouses work) got too much take-home pay.  Folks with civilian pensions get no credits, but had less withholding.

College Expenses
>> Special credits have been available since 1997. But, rules for 2009 and 2010 are more liberal than ever. The only problem is we must segretate the costs into several categories.
1. General Costs. First: tuition and fees for college classes.  Schools send out Form 1099-T in January reporting tuitions paid.  It is sent to the student’s address, but credits belong on the return claiming the student’s “personal exemption”.  Usually it’s the parents’ return.  In 2009 and 2010 there’s a new benefit. You can also claim costs for books, course materials, and class supplies.  That’s our second category.  The credit can be up to $2,500 — full rebate of the first $2,000 spent, plus 25% of the next $2,000.  It phases out for higher incomes, but income limits are higher than in the past.
2. College Savings Plans. If you set up a “section 529″ plan to pay for your child’s education, yo must show that withdrawals were spent on education, or you can face a tax.  The costs above count, but you may also add room and board — a third category.  For 2009 and 2010 there’s a fourth category.  You can claim costs for the student’s computer, software, and on-line fees.
First Time Homebuyer Credit
If you bought a home in 2009 before December 1, there might be a BIG credit for you.  If you didn’t own a “principal residence” inside the US for a full three years prior to buying the home, you get 10% of the cost (capped at $8,000) as a direct tax rebate.  There’s talk of extending the program, but as I write this, it ends after November 30.

Foreclosures
>> If you lost a property this year, I need lots of details.  Your problems are not behind you until we deal with the income tax issues.  You might have income from the cancellation of the mortgage.  Official forms may have arrived — 1099-A and/or 1099-C.  I must see these.  I’ll need as much information as possible about what really happened.  I need to know the complete history of loans for the property. It will help if I can see the last few mortgage statements.  These cases involve more than simply tax law, so please be as thorough as possible.

Government Retirees
>> Government Retirees may get a special $250 tax credit this year. If you collect any government pension for work that was exempt from social security you may qualify. This can include school districts, libraries, law enforcement — any government work at all. YHou can lose the credit if you collect social security or if you are still working.

Home Energy Credits
Two different kinds of credits here.  Conservation. Energy-saving improvements to you main home can cut your taxes in 2009 and 2010.  Main home only — not for rental or vacation properties.  You get 30% of the first $5,000 you spend in `09-10′ for installing new insulation, doors, windows, skylights, certain furnaces, heat pumps, and air conditioners.  IRS says you can rely on the manufacturer’s statement that a given device qualifies.  I recommend you keep the brochure or print out the information from their website.

Hybrid Car Credits
>> These credits are drying up.  No more credits for Honda and Toyota/Lexus vehicles.  Ford and Mercury hybrids get full credits for purchases before April 2009.  From April 1 to September 30, the credit is 50%.  As of October 1, it’s 25%.  Full credits still apply for hybrids from GM, Mazda, and Nissan.

Mortgage Insurance
>> NOTE:  2009 is the last year for this one.  Form 1098 will show the interest you paid on your mortgage.  It should also show any mortgage insurance.  We can deduct this along with the interest.

Non-Filers
There’s a catch – you must file a tax return to get this credit. Perhaps an older member of your family earned a government pension, but no longer needs to file tax returns.  I can help this person collect the $250 — but a 2009 tax return MUST be filed.

Non-Itemizers
>> If you don’t have many tax deductions, we use the “standard deduction”.  For 2009, there are two deductions you can claim even if you can’t itemize.  The first is sales tax on new cars bought after February 16, 2009, and the other is up to $500 of real estate taxes on any property you own ($1,000 for a couple).

Over 70-1/2 IRA Rules
>> Two special rules if you have “mandatory distributions” from your IRA.  Both are set to expire this year, but could be extended.
1. No 2009 Distribution. You are free to NOT take any distribution this year. Take as much or as little as you wish.  this was intended to help compensate for dramatic losses in financial markets.
2. Directly to a Charity. If you have yur IRA Custodian send a check to a charity, the amount can be excluded from your income. You don’t need to itemize deductions, so you get full value for the gift.

Sales Tax on New Car
>> If you bought a new car (not a used car) after February 16 this year, there’s a valuable deduction for any sales or excise tax you paid.  You get it even if you don’t normally itemize your deductions.  I’ll want to see a copy of the purchase contract.