Larry, I here that I am supposed to get some money from the government because of the law that the president passed. How do I get my share?
Edeth
Edeth, don't get too excited. What you are talking about is what the government calls the "Making Work Pay Credit." I have detailed information on this in a previous posting.
If you are an employee you will see the credit in your paycheck. The IRS will issue revised tables for your employer very soon. The 12 months of the credit will be crammed into about nine months of paychecks. That’s about $10-$20 extra per week. WHOOPEE!
If your are self-employed to get any advance benefit from the credit you will have to reduce quarterly estimated payments.
Here is the rub. The exact amount of the payroll tax credit for the year will be calculated when you file your 2009 return. If your income (adjusted gross income to be exact) is over $75,000 for individuals or $150,000 for married you will have to pay the money back with your 2009 return.
Saturday, February 21, 2009
Wednesday, February 18, 2009
FOLLOWUP QUESTIONS ON THE STIMULUS BILL
Congress has approved new economic stimulus legislation, the American Recovery and Reinvestment Act of 2009.
Here are a few that we have been getting on the legislation. For those of you that want more information the following is a link to the Senate Finance Committee 11 page summary of the income tax provisions. summary of the key provisions
Could the new legislation affect 2008 tax returns? Generally, no. The new legislation does not have any major impact for the vast majority of individuals preparing their 2008 tax returns due April 15. Instead, these changes will largely impact 2009 tax returns filed next year, in 2010. Taxpayers should continue to prepare their 2008 tax returns as they normally would. There are a few limited areas in the legislation that could impact 2008 tax returns. For example, for some small businesses, changes in the net operating loss provisions could affect 2008 tax returns. More details on this and other changes — such as the first-time homebuyer’s credit — will be available soon.
When and how will people get the $400 to $800 “Making Work Pay” tax credit? Taxpayers will not get a separate special check mailed to them like last year’s economic stimulus payment. For many taxpayers, the additional credit will automatically start showing up in their paychecks this spring. For people who receive a paycheck, the credit will typically be handled by their employers through automated withholding changes. For some other people, the credit can be claimed when they file their 2009 tax return next year.
More details about the “Making Work Pay” credit will be available soon, including an updated version of the withholding tables contained in Publication 15, (Circular E), Employer’s Tax Guide.
Does this new stimulus legislation have any impact on the recovery rebate credit for 2008 tax returns being filed now? No.
More information on the new law as it becomes available.
Larry Kopsa CPA
Here are a few that we have been getting on the legislation. For those of you that want more information the following is a link to the Senate Finance Committee 11 page summary of the income tax provisions. summary of the key provisions
Could the new legislation affect 2008 tax returns? Generally, no. The new legislation does not have any major impact for the vast majority of individuals preparing their 2008 tax returns due April 15. Instead, these changes will largely impact 2009 tax returns filed next year, in 2010. Taxpayers should continue to prepare their 2008 tax returns as they normally would. There are a few limited areas in the legislation that could impact 2008 tax returns. For example, for some small businesses, changes in the net operating loss provisions could affect 2008 tax returns. More details on this and other changes — such as the first-time homebuyer’s credit — will be available soon.
When and how will people get the $400 to $800 “Making Work Pay” tax credit? Taxpayers will not get a separate special check mailed to them like last year’s economic stimulus payment. For many taxpayers, the additional credit will automatically start showing up in their paychecks this spring. For people who receive a paycheck, the credit will typically be handled by their employers through automated withholding changes. For some other people, the credit can be claimed when they file their 2009 tax return next year.
More details about the “Making Work Pay” credit will be available soon, including an updated version of the withholding tables contained in Publication 15, (Circular E), Employer’s Tax Guide.
Does this new stimulus legislation have any impact on the recovery rebate credit for 2008 tax returns being filed now? No.
More information on the new law as it becomes available.
Larry Kopsa CPA
Tuesday, February 17, 2009
HERE IS HOW THE STIMULUS BILL WILL AFFECT YOUR TAXES
Unless you were completely out of the loop you know that President Obama has just signed the "American Recovery & Reinvestment Act." While much of the news focuses on the spending provisions, it also includes $287 billion in tax cuts:
The act includes a new "Making Work Pay" credit for 2009-10 to offset the first $400 of Social Security tax you pay ($800 for joint filers). It phases out as your adjusted gross income (AGI) tops $75,000 ($150,000 joint). This will come as a reduction of payroll taxes sometime late spring.
There's a new higher education tax credit of up to $2,500 for your first $4,000 in college expenses. The credit phases out as your AGI tops $80,000 ($160,000 joint). You can also use Section 529 plan funds for computer-related expenses, including software and online access (2009-10 only).
Buying a car? You can deduct state and local sales and excise tax you pay on a new (but not used) car, light truck, RV, or motorcycle you buy between January 1 and November 30, 2009. The deduction is limited to purchase amounts up to $49,500 and phases out as your AGI tops $125,000 ($250,000 joint).
Buying a home? The act increases the "first-time homebuyer" credit from $7,500 to $8,000, extends the purchase period through November 30, 2009, and eliminates the requirement to repay the credit for homes purchased in 2009. This credit phases out as your AGI tops $75,000 ($150,000 joint).
Buying business equipment? The act extends the current $250,000 first-year expensing limit and 50% bonus depreciation provisions for purchases through 2009.
Finally, the bill "patches" the Alternative Minimum Tax, to protect 24 million mostly middle-income filers from the AMT's bite.
Congress passed these new rules with less deliberation than usual, so there's bound to be confusion. To learn more, call us at 402.362.6636.
Sunday, February 15, 2009
TAX DEDUCTIONS FOR POST SECONDARY EDUCATION
I was wondering if you could get me some information. My son will be going to school this fall. Are here some credits that will give us a tax break for education?
Rene
Rene, President Bush was not called the "Education President" for nothing. Under his watch there were several tax incentives put in the books the help defray the cost of education. Unfortunately everybody in Congress jumped on the bandwagon so we have several laws that we can select from. This makes it a little confusing. In addition the the credits below there may be some deductions.
You are right in that education tax credits can help offset the costs of higher education for yourself or a dependent. The Hope Credit and the Lifetime Learning Credit are two education credits available which may benefit you. Because they are credits rather than deductions, you may be able to subtract them in full, dollar for dollar, from your federal income tax.
The Hope Credit
The credit applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs.
The Lifetime Learning Credit
The credit applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.
These credits are phased out for Modified Adjusted Gross Income over $48,000 ($96,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $58,000 or more ($116,000 for married filing jointly). If the taxpayer is married, the credit may be claimed only on a joint return.
For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov
Rene
Rene, President Bush was not called the "Education President" for nothing. Under his watch there were several tax incentives put in the books the help defray the cost of education. Unfortunately everybody in Congress jumped on the bandwagon so we have several laws that we can select from. This makes it a little confusing. In addition the the credits below there may be some deductions.
You are right in that education tax credits can help offset the costs of higher education for yourself or a dependent. The Hope Credit and the Lifetime Learning Credit are two education credits available which may benefit you. Because they are credits rather than deductions, you may be able to subtract them in full, dollar for dollar, from your federal income tax.
The Hope Credit
The credit applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs.
It can be worth up to $1,800 ($3,600 if a student in a Midwestern disaster area) per eligible student, per year.
You're allowed a credit of 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,200 ($2,400 if a student in a Midwestern disaster area).
Each student must be enrolled at least half-time for at least one academic period which began during the year.
The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.
The Lifetime Learning Credit
The credit applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.
If you qualify, your credit equals 20% (40% if a student in a Midwestern disaster area) of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 ($4,000 if a student in a Midwestern disaster area) per tax return.
You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim either credit if you claim a tuition and fees deduction for the same student in the same year.- To qualify for either credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent.
- The credit may be claimed by the parent or the student, but not by both.
- Students who are claimed as a dependent cannot claim the credit.
These credits are phased out for Modified Adjusted Gross Income over $48,000 ($96,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $58,000 or more ($116,000 for married filing jointly). If the taxpayer is married, the credit may be claimed only on a joint return.
For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov
Wednesday, February 11, 2009
COMMENTARY: Ruin Your Health With the Stimulus Plan
On www.bloomberg.com, former New York Lt. Gov. Betsy McCaughey, now a senior fellow at the Hudson Institute, writes that no one from either political party is objecting to the health provisions slipped in the federal economic stimulus bill (H.R. 1) without discussion. Senators and congressmen "should read these provisions and vote against them because they are dangerous to your health," McCaughey writes.
The bill’s health rules will affect “every individual in the United States” by creating a new bureaucracy, the National Coordinator of Health Information Technology, which will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective, according to McCaughey. The goal is to reduce costs and “guide” your doctor’s decisions. Hospitals and doctors that are not “meaningful users” of the new system will face penalties. “Meaningful user” isn’t defined in the bill. That will be left to the HHS secretary, who will be empowered to impose “more stringent measures of meaningful use over time.”
McCaughey writes that many of the health reform provisions in the stimulus bill come from former Sen. Tom Daschle’s book, which says that aging Americans should be more accepting of the conditions that come with age instead of treating them. "That means the elderly will bear the brunt," McCaughey writes. "Medicare now pays for treatments deemed safe and effective. The stimulus bill would change that and apply a cost-effectiveness standard set by the Federal Council."
She adds: "The health-care industry is the largest employer in the U.S. It produces almost 17% of the nation’s GDP. Yet the bill treats health care the way European governments do: as a cost problem instead of a growth industry. Imagine limiting growth and innovation in the electronics or auto industry during this downturn. This stimulus is dangerous to your health and the economy."
The bill’s health rules will affect “every individual in the United States” by creating a new bureaucracy, the National Coordinator of Health Information Technology, which will monitor treatments to make sure your doctor is doing what the federal government deems appropriate and cost effective, according to McCaughey. The goal is to reduce costs and “guide” your doctor’s decisions. Hospitals and doctors that are not “meaningful users” of the new system will face penalties. “Meaningful user” isn’t defined in the bill. That will be left to the HHS secretary, who will be empowered to impose “more stringent measures of meaningful use over time.”
McCaughey writes that many of the health reform provisions in the stimulus bill come from former Sen. Tom Daschle’s book, which says that aging Americans should be more accepting of the conditions that come with age instead of treating them. "That means the elderly will bear the brunt," McCaughey writes. "Medicare now pays for treatments deemed safe and effective. The stimulus bill would change that and apply a cost-effectiveness standard set by the Federal Council."
She adds: "The health-care industry is the largest employer in the U.S. It produces almost 17% of the nation’s GDP. Yet the bill treats health care the way European governments do: as a cost problem instead of a growth industry. Imagine limiting growth and innovation in the electronics or auto industry during this downturn. This stimulus is dangerous to your health and the economy."
Thursday, February 5, 2009
DON'T BUY THAT HOUSE JUST YET
If you are about ready to purchase a personal residence, you might want to wait until the stimulus bill passes before you sign the deal.
The current credit of $7,500 for first-time home buyers may be expanded to 10% of the purchase price, but no more than $15,000, and will not be limited to first-time buyers.
The current credit of $7,500 for first-time home buyers may be expanded to 10% of the purchase price, but no more than $15,000, and will not be limited to first-time buyers.
In addition, unlike the current credit, the new one would not have to be repaid over 15 years, although the House may insist on a phase out for higher-incomers. The new credit would be fully refundable and would apply to residences bought within 12 months after Obama signs the bill. The current credit, along with the repayment obligation and phaseout for upper-incomers, would continue to apply until the bill is signed.
Monday, February 2, 2009
MORE ON BIG NUMBERS - YOU AND EACH MEMBER OF YOUR FAMILY NOW OWE $4,000.00
Recently I posted a ditty that I titled The Law of Big Numbers. See the January 28th posting. Here is more on that topic, which I find scary.
The Congressional Budget Office is forecasting a U.S. budget deficit for the 2009 fiscal year of nearly $1.2 trillion dollars. That's close to $4,000 for every man, woman, and child in the US.
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