|
|
| 1- |
Have you heard about the NEW Home Buyer Credit? |
|
This credit is part of the new Worker, Homeownership, and Business Assistance Act of 2009,
which extends the deadline for qualifying home purchases from November 30, 2009 to April 30, 2010. The buyer has until June 30, 2010 to settle
on the purchase. The maximum amount remains at $8000 for a first-time homebuyer (a buyer who has not owned a primary residence during 3 years
up to date of purchase). Settlement Sheets from the purchase of the home must be attached to the return.
|
| |
|
However, the new law also allows a "long-time resident" credit of up to $6,500 to others who are not "first-time homebuyers". In other words,
if a buyer has owned and used the same home as a principal residence for at least five consecutive years of the eight year period ending on the
date of purchase of the new home, he may qualify (if he meets the income limits). This new home must be his primary residence-not a rental, etc.
He must also be over 18 years old, not a dependent, and the purchase price must be under $800,000. So, if you are seriously considering moving
to another primary residence, now may be a good time. Your income limits are approximately $125,000 if you are single, and $225,000 if married
filing joint.
|
| |
|
I will also remind you that you must have the settlement sheets. It has been amazing how many people have contacted me to ask if I do the "new
homebuyer credit". I tell them that I do prepare the form, and I ask if they have the settlement sheets. Some folks did not seem to understand
that they actually had to BUY a home in order to get this credit! Please, do not let a tax preparer file this form for you if you did not buy a
home. This is fraud, and the IRS says they are investigating these claims. I only wish the government had been smart enough to mandate enclosing
settlement sheets when they started these credits.
|
| |
| 2- |
Be aware of the other credits now available for those who qualify- |
|
For example, under the American Recovery and
Reinvestment Act (ARRA) more parents and students will qualify over the next two
years for a tax credit called the American Opportunity Credit. This credit helps
pay college expenses, by modifying the Hope Credit for tax years 2009 and 2010.
This Hope Credit is now available to more taxpayers, including those with higher
income and those who owe no tax. It also adds required course materials to the
list of qualifying expenses and allows the credit to be claimed for four
post-secondary education years instead of two. Many of those eligible will
qualify for the maximum annual credit of $2,500 per student. This credit is
available for folks whose modified adjusted gross income is $80,000 or less (if single), or $160,000
or less (if married), with phase outs for income above these levels. These income levels are higher than under the existing Hope and Lifetime Learning
Credits.
|
| |
|
Also, AARA provides a temporary increase in the Earned Income Credit for taxpayers with three or more qualifying children. This credit begins to
phase out at $21,420 for married filing joint taxpayers, and completely phases out at $40,463 for one child, $45,295 for two children, and $48,279
for three children. For married filing joint taxpayers with no children, the credit begins to phase out at $12,470 and completely phases out at
$18,440. Therefore, this Act has increased the starting point of the phase out range for all married couples filing a joint return, regardless of
the number of children. These changes apply to 2009 and 2010 returns.
|
| |
| 3- |
Again, those of us who cannot itemize will be able to deduct real estate taxes paid, up to $1000 if married, and $500 if single.
You can also deduct sales taxes paid on vehicles purchased in 2009 along with
the standard deduction. |
|
Standard deductions this year are $11,400 for married folks, $5,450 for single, and $8,350 for Head of Household. It is getting more and more difficult
to itemize with the larger standard deduction amounts. Keep in mind you get the greater of the standard deduction (with real estate
and/or sales taxes added)
or the itemized deductions. Charity is playing a large role in deciding whether or not a taxpayer can itemize, and the IRS is really cracking down
on what can be deducted. In essence, if you didn’t write a check or have some documentation, you will lose the deduction. Donations to Salvation
Army, etc., are supposed to be itemized (yes, every article) with a "yard sale" value attached-not the purchase price or what you think the item
is worth. This is especially important if the donations are over $500 annually. Therefore, please be realistic when you fill out those "blank"
receipts they give you. If you didn’t itemize everything, the IRS can disallow or use a "minimal" value for your donation.
|
| |
| 4- |
File and Pay on Time--Actually, just pay on time as the IRS doesn't give a hoot
when you file, as long as you file an extension (Form 4868) which extends until October 15.
|
|
If you still owe money after April 15, the IRS will charge around 7 percent interest, as well as a late-filing
penalty which is usually five percent of the tax owed for each month, or part of a month that your return is late, up to five months. If your
return is over 60 days late, the minimum penalty for late filing is the smaller of $135 or 100 percent of the tax owed. If you believe you will
owe money, the very best thing for you to do is make quarterly payments--especially if you received a large gain from selling stock, or your
withholding is wrong at work. I have prepared many returns in which someone only worked part-time, or didn't make very much money. In this
case, the withholding amount is very low. That is not the employer's fault-they are merely using the table. However, the table does not take
into consideration the other spouse's income which may be quite a bit higher. If one or both spouses are claiming Married and 1 or even worse
2, they may be in for a nasty surprise. This is where a tax professional (such as Memphis Tax Lady, of course) can help you. Call or email
the information from your "middle of the year" pay stubs. Then, you can get an estimate of your refund, or (yikes) what you owe. You can then
either adjust your withholding at work, or make an estimated payment. |
| |
| 5- |
Finally, folks-here is my advice to you: |
| |
 |
Using Tax Software vs. Memphis Tax Lady |
|
|
I realize many of you wish to save money by using tax products purchased from retail outlets. Be aware that these products are not always
suitable for everyone. If you are a student, single, or even married with children and only have W-2’s, then perhaps these products are okay
for you. However, if you have ANY type of unusual documents, unusual situations, or any other type of income, PLEASE see me. In most cases,
I am actually cheaper to use than purchasing the software!!!! Also, if you file your return and get audited, you will need to get a CPA to
help you. If I prepare your return, and you are audited in Memphis, I go with you free of charge. I cannot help you if you have filed your
own return.
|
| |
|
Rapid Refund Rip-offs |
|
|
I realize I said this before, but PLEASE think carefully before you go to someone who is going to "rapid refund" your return. This is YOUR
money, why do you want to pay someone huge amounts of interest, etc, to get YOUR money? Electronic filing with direct deposit normally gets
your money into your bank account within 10-14 days. Is having your refund back tomorrow really worth the extra? My fee for someone with
just W-2’s and even Earned Income Credit is $50.00 (40.00 basic fee plus 10.00 for Earned Income Credit). I charge an additional $10.00 for
electronic filing, making a total of $60.00. You will usually pay $150 or more for this same return going the rapid way. Some of my clients
have told me they paid $400 for this type of return! Plus, these tax preparers are probably not going to be around if you need audit help,
as they are generally closed during off-season. Memphis Tax Lady is open year round, with 24/7 availability.
|
| |
|
Protect Yourself and Your Privacy |
|
|
Find someone that is truly a professional. Check with the BBB (Memphis Tax Lady has an A+ rating, by the way), and avoid anyone who guarantees
results or bases fees on a percentage of the amount of refund. Choose a preparer that asks a lot of questions, as these questions are important
in determining qualifications for expenses, credits, etc. If someone doesn’t ask you anything, don’t walk-RUN!! These people don’t give a hoot
about you, and won’t be around if you ever need them. They have also probably prepared your return incorrectly, which can cause you needless
time, worry, and money. Avoid firms that export your returns to foreign countries- a lot of CPA’s and strip-mall firms are doing this-they can
export to India, have the return prepared cheaply and fast (their day is our night) and you will never know the difference as your preparer has
signed the return even though he did not actually prepare it. Foreign countries do not have the same security and privacy procedures. Your
sensitive information can be easily compromised, and think about it-everything about you is on that return!! I am the Memphis Tax Lady, I prepare
the returns, and no one else outside my in-home office sees the return until you get it.
|
| |
|
Organizing Your Records Can Reduce Your Tax Prep Fee and Increase Your Refund |
|
|
Last, but not least, please organize your records. If you have to amend your return after it has been filed, it will cost you more money.
File early, but be sure you have everything before you file. Make sure you have all of your W-2’s, interest and stock statements, and all
other related information. Keep some sort of filing system with folders for tax info, and you will be ready. Please keep in mind that tax
preparers will charge you more if they have to go through "garbage sacks". Have your materials neat and organized. Not only will your return
cost less, but you will easily be able to tell if something was missed. After all, it’s your return!
|
|
|