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American Recovery Act of 2009

There are a number of issues in the act that may be of benefit to tax payers.  For more information on these issues you may want to contact your tax advisor.  Some of these issues are listed below.

The first-time home buyer's credit is increased to $8,000.
Sales tax on vehicle purchases is deductible towards AGI for 2009.
Alternative Minimum Tax relief is extended for 2009 and the exemptiions increased.
A number of changes regarding student expeneses.
The earned income tax credit will increase for 2009 and 2010.
The child tax credit refundability will increase in 2009 and 2010.
Cobra Premium assistance for the unemploed will change.
Executive pay restrictions will be in place for those in the TARP program.
NOL carryback period extended to five years.
The first $2,400 dollars of unemployment compensation will be excluded from income.
Changes have been made in first year depreciation.
Changes have been made in deductions for business meals away from home.

This is only a sample of what is in the act and does not cover other legislation, as a result tax planning will be very inportant in 2009.

Variable Annuitites

According to Morningstar variable annuities fell 10% in the third quarter of 2008. Fixed annuities, however, saw zooming sales in the same period. This was considered a flight to safety, and fixed annuities have  great interest rates compared to CD and Treasuries.

Home Buyers can claim 2009 tax credit on 2008 tax return

February 26, 2009 – The Internal Revenue Service  announced that taxpayers who qualify for the first-time home buyer credit and purchase a home during 2009 prior to December 1, 2009 have a special option available for claiming the tax credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year. Qualifying taxpayers who buy a home this year before December 1 can receive a tax credit of up to $8,000 or $4,000 if they are married filing separately.

The qualifying taxpayers who buy a home before December 1, 2009, can claim the credit on either their 2008 or 2009 tax returns. They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. They can claim 10 percent of the purchase price up to $8,000 or $4,000 for married individuals filing separately.

The new law does not apply to people who purchased a home after April 8, 2008, and on or before December 31, 2008. For these taxpayers who are claiming the credit on their 2008 tax returns different rules apply.

For more information see your tax professional.

Tax free gifts to family

For 2009 you can give up to $13,000 each to an unlimirted number of recipients. The gifts may reduce your taxable estate, but you wan't have to pay estate taxes on them.  If you give more thant $13,000 per recipient, you will reduce the size of your estate tax exclusion.  For 2009 you can have an estate of $3.5 million and not have a federal estate tax payment.  For more information contact your CPA or Attorney.

Ron White, the great American Philosopher

Ron White will be on stage at the Majetic Theatre Friday, April 10 at 7:30 P.M. and Saturday, April 11 at 7:00 P.M. in Dallas, TX 214-373-8000 for tickets  www.tatersalad.com.

H&R Block Advertising

 

H&R Block claims there tax preparers are better prepare then CPAs. H&R Block hires employees with no profession background then trains them for a few weeks and lets them complete your tax return.

Lets look at the training of a CPA, then you decide.

CPAs are honest, skilled, and competent tax professionals. CPAs have college degrees, they pass rigorous exams, they are committed to continuing professional education; and they are certified, licensed, and regulated by state boards of accountancy.

CPAs are required to pass a rigorous professional exam after they complete their college education in order to be licensed by the states in which they practice. After they are licensed, mandatory continuing professional education requirements ensure that CPAs are current with regulatory and legal changes.

As members of the AICPA and TSCPA, CPAs are required to adhere to strict professional ethics standards. Additional ethics rules apply to CPAs who are tax practitioners.

If the IRS raises a question about a tax return, only CPAs, attorneys and enrolled agents are authorized to represent taxpayers before the IRS.

CPA tax professionals often know a lot about your personal situation, so the continuity of service you receive from a CPA may be an important factor to consider. CPAs are business people in the community who will be there for taxpayers year after year.

The AICPA and TSCPA are committed to ensuring that CPAs work in the public interest by providing the resources to best hone skills of CPA tax professionals and by regulating unacceptable professional conduct while advocating on behalf of the public and members an effective and efficient system of taxation.

Timothy Geithner - Incoming Treasury Secretary

Timothy Geithner is to be the Treasury Secretary and have oversite of the IRS. Last November when then president-elect Barack Obama tapped Timothy Geithner to take the reins as Treasury Secretary, Geithner's confirmation seemed like a slam dunk. But that was before the Obama team started vetting the nominee to make sure there would be no surprises.

Geithner has been hailed as a financial wizard after working in several Treasury positions under three different presidential administrations, nearly four years at the International Monetary Fund (IMF), and most recently, as president of the New York Federal Reserve Board. So how did this financial wizard make what is being called an "honest mistake" amounting to a serious underpayment of income taxes?

In his years at the IMF, 2001-2004, Geithner was paid large sums of money from which Social Security and Medicare were not withheld, as is a customary practice at the IMF. Because of this practice, the IMF instructs recipients that they need to report the income and pay self-employment tax of 15.3 percent on the money, just like any self-employed taxpayer would be required to do. But there was one difference. In addition to the untaxed money, Geithner was permitted to request additional funds to pay the taxes. To get the additional funds, he had to sign a form each year certifying that he would use the funds to pay the taxes. He signed the form, received the funds to pay the taxes, but did not pay the taxes.

In 2006, when the IRS audited his 2003 and 2004 income tax returns, the omission for those two years was noticed, and Geithner then paid the overdue taxes and interest, amounting to $17,230. The IRS waived penalties. Since his tax returns for 2001 and 2002 were not targeted for audit, the fact that the exact same circumstances also applied to those years, resulting in significant unpaid taxes went unnoticed by the IRS, and undisclosed by Geithner.

With Democrats and some Republicans in the Senate insisting Geithner's tax issues were "honest mistakes," it is probable that Geithner will be confirmed.

Bernard Madoff

The Wall Street Journal's online edition recently posted a 19-page document, "The World's Largest Hedge Fund is a Fraud," that was sent to the Securities and Exchange Commission on Nov. 7, 2005, by Harry Markopolos. In his report, Markopolos, who did not work at Bernard Madoff's company, says he talked to the SEC about his concerns over Madoff's steady returns as early as 1999, and he outlines the possible repercussions of a Ponzi scheme.

Required Minimun Distributions for 2009

On December 23, 2008, the President signed the Worker, Retiree, and Employer Recovery Act of 2008 (the Act) into law. Section 201 of the Act waives any required minimum distributions (RMDs) for 2009 from retirement plans that hold each participant’s benefit in an individual account, such as § 401(k) plans and § 403(b) plans, and certain § 457(b) plans. The Act also waives any RMD for 2009 from an Individual Retirement Arrangement (IRA). This means that most participants and beneficiaries otherwise required to take minimum distributions from these types of accounts are not required to withdraw any amount in 2009. If they do make a withdrawal in 2009 (that is not an RMD for 2008), they might be able to roll over the withdrawn amount into other eligible retirement plans. Of course, they must still include any previously untaxed portion of the withdrawal that they do not roll over in their gross income. 

See Individual Retirement Arrangements (IRAs), Publication 590, and Pension and Annuity Income, Publication 575, for additional information on rollovers and on calculating the taxable portion of a distribution.

The Act does not waive any 2008 RMDs, even for individuals who were eligible and chose to delay taking their 2008 RMD until April 1, 2009 (e.g., retired employees and IRA owners who turned 70½ in 2008). These individuals must still take their full 2008 RMD by April 1, 2009. The 2009 RMD waiver under the Act does apply to individuals who may be eligible to postpone taking their 2009 RMD until April 1, 2010 (generally, retired employees and IRA owners who attain age 70½ in 2009). However, the Act does not waive any RMDs for 2010.

If a beneficiary is receiving distributions over a 5-year period, he or she can now waive the distribution for 2009, effectively taking distributions over a 6- year rather than a 5-year period.

529 College Savings Plans

The IRS will allow holders of 529 college savings plan accounts to switch investments twice this year. The rule change comes after the plans were hit by tumbling stock prices, and many account holders were unable to stop the bleeding because of rules that allowed just one investment switch per year.