Tax Prep Rally

2009 Mileage Rates

2009-01-30T12:32:00.004-06:00

he Internal Revenue Service has issued the _2009_ optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2009, the standard mileage rates for the use of a car (also 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
14 cents per mile driven in service of charitable organizations

The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to a spike in gasoline prices. The rate for charitable purposes is set by law and is unchanged from 2008.

Reminder: The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.
More info on the IRS web site.

Stimulus Rebate

2009-01-26T21:02:00.001-06:00

To find the amount you received last year for your Stimulus Rebate, go to the IRS web site at:
https://sa2.www4.irs.gov/irfof/IRServlet?app=IRACTC&selectLanguage=en

Savers Retirement Credit

2009-01-25T20:31:00.002-06:00

Low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2008 and the years ahead, according to the Internal Revenue Service.
The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to Individual Retirement Arrangements (IRAs) and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.
In tax-year 2006, the most recent year for which complete figures are available, saver’s credits totaling almost $900 million were claimed on nearly 5.2 million individual income tax returns. Saver’s credits claimed on these returns averaged $213 for joint filers, $149 for heads of household and $128 for single filers.
Our tax software will help ensure you take advantage of this and other benefits for which you qualify. You can find the income qualifying limits at the IRS site.

Military Tax Relief

2009-01-25T20:21:00.002-06:00

The Heroes Earnings Assistance and Relief Act included tax incentives that will benefit many military families in 2008. These tax breaks are targeted to servicemen and women on active duty, reservists who are called to active duty, military families, and employers. Here are is one of the highlights of the military tax relief act…
Combat pay. Tens of thousands of U.S., troops are serving in combat zones around the world. Combat pay is tax-free. However, this tax-free treatment can cause some military families to loose eligibility for the earned income credit. The military tax relief act treats combat pay as earned income for purposes of the earned income credit. This treatment is permanent, will help soldiers in 2008 and is also retroactive to December 31, 2007.
The IRS has a special section of its web site designed to help members of the military is can be found at:
http://www.irs.gov/newsroom/article/0,,id=97273,00.html

Roll-overs to Roth IRA

2009-01-21T17:07:00.003-06:00

You may want to consider converting your Regular IRA into a Roth IRA in 2009. The opportunity opens up to more people in 2010. This this your total income must be under $100,000. This limit goes away next year. The amount rolled over will be subject to regular income.

Why this may make sense for you? With the stock market down so much and likely to have a significant improvement in the next two years, you can pull out income at the bottom of the market. Then reinvest in a tax-free Roth IRA before it goes back up. Be careful about the rollover rules. Have the funds transferred directly to be sure it happens timely. Don't take the funds expecting to find a new home for them later. Also, with the ecomony is such bad shape, you may be reporting less overall income in 2008, to the tax rate on the withdrawal will be less than it may have been in 2007 or 2008.
A handy-dandy calculator can help you decide. Find one at CalcXML.

Recycled paper and less of it

2009-01-18T11:04:00.001-06:00

I am a creature of habit. When Kimberly Clark discontinued my favorite stationary, I found a Neenah paper that looked exactly the same, in the same beautiful gray. Twenty years… one paper. But an accountant can change, and last year I finally changed papers. 100% post consumer recycled paper was too hard to resist, in a classy shade of beige. And recycled paper takes 40% less energy to produce. Taking one more small step, I changed to recycled paper for our report covers, confirmations paper and copier/printer paper. In the last three years, we have substantially cut our use of paper. We send, received and store files electronically. We learned that working with two monitors is the biggest change needed to work paperless.

Donate, Recycle Electronics

2009-01-13T18:28:00.002-06:00

Recycle your computer and electronic equipment to save damage to the environment. The U.S. E.P.A. as a list of non-profits excepting donations. Save three ways: protect the environment, clean out the garage and gain a tax deduction. My web site has a links for more information on this and many other items.

Hybrid car tax credit

2009-01-13T18:27:00.003-06:00

Save while you drive a big SUV: Ford Motor sells (and President Obama drives) a Ford Hybrid SUV. You can save up to $3,000 depending on model by claimed the federal tax credit for hybrid (varies by model). USA Today reported the extra cost of a hybrid can be recouped in under two years by an average driver.

Many states, including California and Colorado, have financial incentives, too. This is a chance to save money and save taxes while saving the environment. Colorado residents could get up to another $3,000 of tax credit.

If you’re in the market for a new car and have a BIG budget, we have a new credit for you. The new Plug-In Hybrid tax credit started January 1, 2009 can be as much as $7,500. So far, only the Tesla Roadster would qualify, retail prices starting at $109,000. I’d wait for the new plug-in Chevy Volt scheduled for 2010. Powered by “the plug” with a low carbon footprint, they save energy

Be sure to check the credits available for your model and in your state before buyer. Don't trust the salesperson to explain it to your. They are under great strain to make sales.

Face-to-Face and Chic-to-Chic

2009-01-10T00:48:00.007-06:00

Cutting our carbon footprint, ban the bottled water, Albertson's sells re-usable grocery bags for a buck, all to save the planet, all very chic. And I get it... I think. Once last month, I actually remembered to take my re-usable bag into the store. But I feel bad about the seven computers in the basement. At least four of which are on all the time.
Lately, I've been turning off the monitors at the end of the day. That helps to save energy. But I still feel guilty having all those darn computers.
Then I read a great article at the Economist.com
Using computers SAVES energy. Yeah, meeting online & avoiding face-to-face meetings saves way more energy than my computers use. Using email instead of real mail saves the environment. I'm not such a bad guy.
Read the article online at the Economist.
For online meetings, we mostly use
LogMeIn & we also have used GoToMyPC. Both are great programs. Between staff, when Jim or Tim are working from home or we are at a client's office, we will use Radmin Remote Control for staff meetings along with Skype.
To avoid mailing files, cartridges and flash drives, try YouSendIt
Last year, when I promoted meeting-less meetings, I had a client email me, "I look forward to not seeing you." Thanks, Craig... I get it.

Bail out or BAIL OUT

2009-01-07T23:02:00.006-06:00

I vividly remember many years ago hearing the words “bail out”. We were lazily fishing in Lake St. Clair. I guess I was dozing or daydreaming. Thoughts of accounting formulas dancing in my head while a fishing pole sat not too firmly nestled in my lap. Suddenly, my peace was broken by my Dad yelling, “bail out! bail out!” I jumped to my feet. Right away I noticed the water in the boat. So I did. I bailed.
And I alone got all wet by jumping in the water. Of course, my Dad wanted me to bail out the boat, not bail out of the boat. I learned right then… there is “bail out” and there is “BAIL OUT!”
Whether the financial crisis requires the little bail out or the big BAIL OUT, depends on if the financial boat is leaking or sinking. Did the boat come aground on a sand bar, or did we hit an ice berg. The sudden stop could be from either; the length of the recovery depends on what we hit. If it’s the little bail out, just push the boat back off the sandbar. Change course and we will be quickly on our way again.
I hope we are not on the Titanic. If we hit the iceberg, let’s not throw each other off the boat into the icy water or fight over paid full price for their ticket. Let’s share the lifeboat and get rowing to safe ground before we all get sucked under.

Energy Credits - Better Luck Next Year

2009-01-06T18:05:00.006-06:00

Welcome to 2009. I'm glad 2008 is gone.
2008 was a bad year for many things, including the home energy credit. Congress let the home energy credit lapse at the end of 2007. The Stabilization Act passed in September resurrect them for 2009 but NOT for 2008. Sorry. $700 billion bail-out was not enough to show they care.
Next year, the credit will again cover things like storm doors, windows, exterior doors, insulation, even air conditioning. Watch for the energy star rating and check out the government info at:
http://www.energystar.gov/index.cfm?c=products.pr_tax_credits#s2

Roth IRA Contributions

2009-01-06T17:31:00.014-06:00

Congress established the Roth IRA in 1997, sponsored by Senator William Roth of Delaware. A Roth IRA must be kept separate from regular IRA funds. You do not benefit from a tax deduction for Roth IRA contributions. However, the income will never be taxed. With great tax loopholes come great potholes. The penalties for Roth early withdrawal can be higher than the penalties on a regular IRA. Plan carefully.
The Roth IRA has its own phase-outs, set far below President-elect Obama's definition of "rich". Single filers start lose their right to a Roth IRA when income hits $101,000, for married taxpayers the phase out starts at $159,000. The maximum contribution is $5,000 or all IRAs, $6,000 for those of us who are older and wiser (50 years of age or older). Vanguard has an excellent description of how the phase outs work at their site.

McCain Fought for Fair Corporate Tax Rate

2009-01-01T23:48:00.003-06:00

Dear John,
I appreciate your taking up the cause of lower corporate tax rates. I made much the same argument back in the seventies, even while still in college. Of course, I was 21 years old and an idiot. What's your excuse?
Having been a public accountant for thirty years, I not know there is a nominal tax rate & an effective tax rate. With all the "incentives" available to businesses few corporation pay the nominal rate. Most corporations will never at the effective tax rate.
Proving this point, a recently released report from the Government Accountibility Office found that two-thirds of the foreign and U.S. corporations paid no federal income... none, zip, zero.
John, you must have known this. Why did you take an unpopular & wrong position on corporate taxes? Politics often lives me baffled. Read the report at www.gao.gov

HSA contributions limits

2008-12-29T13:51:00.002-06:00

Health Savings Account Owners can contribute up to $2,900 (single) or $5,800 (family) to their account for 2008. You will have until April 15th to make the contribution. These limits are prorated by month for the number of months you were eligible in 2008.

For my own HSA account, I used HSA Bank to handle the funds, and I can highly recommend them. More information on HSA limits can be found at HSA Contibution Limits.

The contributions are reported on form 8889 Heath Savings Accounts (HSAs) for 2008. And the deduction is carried over to form 1040, Line 25. More info on form 1040 can be found on my web site at www.FastTaxReturnsOnline.com and at the IRS at irs.gov

The Online Tax Return Experience

2008-12-25T01:48:00.005-06:00

Years ago I shared a plane ride with another CPA. He was moving from Texas to Ft. Collins, Colorado to open several store-front tax preparation offices. He had sold his CPA firm to explore a “better” business model. As he explained, the new income tax preparation software uses a quick, easy Q&A to prepare tax returns. The CPA business depended on finding bright, motivated, highly educated people, making growth very difficult. We both agreed this is a poor business model for growth.

With the store-front tax preparation offices, he could hire high-school graduates and quickly teach them to ask the questions on the screen & avoid saying too many stupid things. If they stick with the program, take the client step-by-step through the questions and rely on the easy Q&A the accuracy is assured and the quality of work is good. Ninety percent of the taxpayers can be served this way and the other 10% would never try a store-front tax service, anyways.

That chance meeting was many years ago... back when personal computers were new & expensive, the internet was an obscure defense project, and tax preparation software was new. The technology has evolved greatly in recent years. What hasn’t changed is the business model requiring cheap, minimally trained people.

Two years ago, the daughter of a good friend ours went to a Chicago office of the largest tax preparation, store-front company. She had moved from Florida to Chicago when her husband joined the Navy. She was told by the preparer that they couldn’t do her Florida tax return. Apparently, they didn’t bother to find out that Florida does not have an income tax. They didn’t know what to do with her new husband’s military W2, so they prepared form 1040A as “married filing separately”. And the bill was $160.

In less time that it took to drive to the tax preparation office, she could have used our online tax return service. The tax returns would have been done right, and cost her less than $50.

She learned her lesson. Last year she was much smarter. She sent her W2s to me, and I did the tax returns for free. I certainly have a lot more friends during tax season than during hunting season.

Merry Christmas!

New Business Model

2008-12-24T09:43:00.003-06:00

During the Senate hearings into the auto industry bailout,

U.S. Senator Lindsey Graham, R-SC, issued statements opposing the plan passed by the U.S. House that would extend billions of dollars in loans to the failing auto industry. "Simply put, the model Detroit has created will not sustain itself in the global economy."

I suppose as proof that the Senate understands "business models" and "global economy" we could look at the energy incentives. Surely, Sen. Graham know the importance of energy efficiency.

Maybe not. The home energy credit for the cost of qualified energy efficiency improvements and expenditures for your home will NOT apply for 2008. It applies to 2006, 2007 [not 2008], and 2009. Now is this the group that can give advice to one of the few surviving manufacturing industries in America? One of the few to pay middle-class wage and benefits to high-school graduates? I don't know so.

But I am amazed that most Americans are quickly willing to accept that the American worker should make less, education should improve with less funding, one more industry moving off-shore is a good thing, unions are bad, and we don't need foreigners coming in here filling up our universities. The average wage is dropping, the middle class is shrinking, just since Reagan, we've gone from a creditor nation to a debtor nation, from a net exporter to a net importer. The business model is broken, alright.

IRS willing to stay in back seat

2008-12-24T09:09:00.002-06:00

Many taxpayers have found the road to re-fi blocked by a federal tax lien. Since the lien says they come first, taxpayers may not be able to work out better mortgages or re-fi maturing mortgages without taking out their tax debt, too. Now the IRS has announced a program that may let the IRS stay in a second position to a new mortgage without blowing the entire re-fi deal. More information can be found in IRS publication 784.

Recovery Rebates That Couldn't

2008-12-23T22:05:00.003-06:00

Affectionately known as the Recovery Rebate, the check many of us received last summer from the IRS has not led to a "Recovery," not for us or Chinese manufacturers. Regardless, the rebates will be back for some taxpayers who missed out last year. For 2008, you generally can claim a recovery rebate credit of up to $600 ($1,200 if married filing jointly) BUT this year's rebate is reduced by the amount you received in 2008.

Generally, the credit cannot be more than your 2008 net income tax liability. However, your credit will be at least $300 ($600 if married filing jointly) if you meet either of the following two conditions:

The total of your earned income, social security benefits (including social security disability payments), tier 1 railroad retirement benefits, certain veterans benefits, and nontaxable combat pay you elect to include in earned income is at least $3,000, or
Your total income (Form 1040, line 22; Form 1040A, line 15; or Form 1040EZ, line 4) is more than $8,950 if your filing status is single or married filing separately ($11,500 if head of household; $14,400 if qualifying widow(er); $17,900 if married filing jointly), and your net income tax liability is more than zero.

If you meet either of these conditions, you can also get an additional $300 for each of your children who is a qualifying child for the child tax credit.

To be eligible, you and your spouse each must have a valid social security number. To get the additional $300 credit for a child, the child must have a valid social security number. However, a valid social security number is not required for you, your spouse, or any qualifying child(ren) if you file a joint return and either you or your spouse was a member of the U.S. Armed Forces at any time during 2008.

You are not eligible for the credit if you can be claimed as a dependent of another taxpayer, or if you file Form 1040NR, 1040NR-EZ, 1040-PR, or 1040-SS.

If your 2008 AGI is more than $75,000 ($150,000 if married filing jointly), your credit will be reduced by 5% of your AGI in excess of that amount.

Credit reduced or eliminated by economic stimulus payment.Your credit is reduced by any economic stimulus payment you received in 2008. However, if your credit is less than the stimulus payment you received, you do not have to repay the difference.

The credit can be claimed on forms 1040EZ, 1040A or the full Form 1040.

Believe, support, document

2008-12-22T23:37:00.002-06:00

Tip: If you do not get your checks back from the bank (like me), be sure to download or print a copy from your bank's web site now. Keep this with your tax records. Who knows if when you need it... (a) the bank will be there, (b) you'll still have the account there, and (c) you'll be within the time-frame your bank keeps them available.
Congress has been increasingly un-charitable about charitable contributions. It seems each year the record keeping get more and more strict. Gone are the days when you could tack on hundred dollars for the numerous small gifts we all make during the year, but don't get receipts for.
Regardless of the amount, even gifts of cash/checks require either (1) a bank record; or
(2) a receipt, letter, or other written communication from the donee showing the name of the charity, the date the donation and the amount of the contribution. Only with these records will the deduction be allowed. This more closely aligns the substantiation rules for cash contributions with the substantiation rules for contributing non-cash property to charitable organizations.

IRS' Video Tax Help

2008-12-17T23:09:00.006-06:00

I have spent hours and hours & weeks and weeks studying tax law. Let's face it, most of it is as boring a staring at a rotating fan all morning. There are some instructors that can bring taxes to life and make it exciting. (Honestly, there are). These are not the instructors that the IRS hires for their online tax videos "Tax Talk Today". But, they are mostly very knowledgeable and provide much useful information. The speakers attitude alone is sometimes worth the watch. Compared to private sector classes, the focus is much more on paying the "right tax" with no commentary about how crazy tax code designed committee can be or "right tax" vs. "left tax". Find the classes at:
IRS Tax Talk Today

Say No to Rapid Refund Rip-Offs

2008-12-16T01:17:00.005-06:00

Tax Refund Anticipation Loans (RALs) are short-term cash advances against a customer's anticipated income tax refund. But the loans are offered at high interest rates, ranging from about 40% to over 700% APR. Also, they speed up the refund process by as little as one week, compared to what consumers can expect by filing online and having their refunds deposited directly into their banking accounts. There were over 12 million RAL borrowers in 2003.

Tax preparers and lenders strip about $1.57 billion in fees each year from the earned-income tax credits paid to working parents, according to a 2005 study by the National Consumer Law Center.

Never have, never will... We do not offer RAL.

2009 eFiling Season starts Jan 16, 2009

2008-12-16T00:32:00.004-06:00

The IRS announced the two phase start of the 2009 eFiling Season will begin on January 16, 2009. Seven form will not be immediately available.

IRS Announcement

Electronic Return Originators (EROs) can submit most returns when the e-file system opens on January 16, 2009, but there are seven forms the IRS will initially be unable to process. The seven affected forms cover less than 25,000 tax e-filed returns. The vast majority of individual e-filed returns are not affected by this situation, and almost all individual taxpayers will be able to file electronically as normal.

Form 3468, Investment Credit
Form 5884-A, Credits for Affected Midwestern Disaster Area Employers
Form 6478, Alcohol and Cellulosic Biofuel Fuels Credit
Form 8820, Orphan Drug Credit
Form 8900, Qualified Railroad Track Maintenance Credit
Form 8909, Energy Efficient Appliance Credit
Form 8912, Credit to Holders of Tax Credit Bonds

IRA & Pension RMDs

2008-12-15T09:31:00.008-06:00

Retirement plan & IRA beneficiaries over over the age of 70-1/2 face minimum distributions rules. While there has been a lot of talk about suspending the rule for 2008, Congress decided it would be too complication to implement given that many taxpayers have already withdrawn funds in 2008. So Congress passed a waiver of the minimum distribution rule for 2009 but not for 2008. President Bush is expected to quickly sign it.
The change does not apply to any required minimum distribution for 2008 permitted to be made in 2009 by reason of an individual's required beginning date being April 1, 2009.
The Internal Revenue Service is still looking at possible changes to the penalty computation rules for 2008. Kind of late, don't you think? [[[ update... the IRS decided NOT to make any changes ]]]
Form 5329 is used for computing penalties on IRAs and pensions.
Penalty rules explained

Blog Announce

2008-12-14T23:11:00.002-06:00

Blog Directory
http://BlogAnnounce.info

Google Analytics is Coming to Town

2008-12-14T23:09:00.003-06:00