Friday, May 22, 2009
Tennessee New Workers' Compensation Law
Public Chapter 1041 (SB1748/HB1645) clarifies that unless you are a sole proprietor or partner (with no employees) getting paid directly by the property owner, an employer in the contracting group designated by the National Council of Compensation Insurance (NCCI) must have workers’ compensation insurance on themselves. This Act becomes effective December 31, 2009.
Thursday, May 21, 2009
Making Work Pay - Update for Pension Recipients
You can watch this video provided by the I.R.S. http://www.youtube.com/irsvideos
The Internal Revenue Service has released new withholding adjustment procedures for pension plans on May 14. This is supposed to alleviate the problem of not enough being held out of pension checks. However, there is still a problem since pension payors are not required to use this new procedure and may continue to use only the February 2009 withholding tables. It is our suggestion that you contact your pension plan and see if they will work with you and get your withholding back to about what it was in January. That should be the answer.
Call us if you need help.
The Internal Revenue Service has released new withholding adjustment procedures for pension plans on May 14. This is supposed to alleviate the problem of not enough being held out of pension checks. However, there is still a problem since pension payors are not required to use this new procedure and may continue to use only the February 2009 withholding tables. It is our suggestion that you contact your pension plan and see if they will work with you and get your withholding back to about what it was in January. That should be the answer.
Call us if you need help.
Monday, May 4, 2009
Making Work Pay Credit
This is probably the hardest one to explain, the one that affects the most people, and the one that will accidentally cause many, many taxpayers to be without a refund next year.
Here is a video provided by the I.R.S. http://www.youtube.com/irsvideos
Eligible individuals are allowed a refundable income tax credit for tax years beginning in 2009 and 2010.
The amount of the credit is the lesser of:
• 6.2% of the taxpayer's earned income (money you perform work for), or
• $400 ($800 for a joint return).
You will hear all of us talking about the $400 credit, but if you have less than $6,451 ($12,902 for a joing return) in earned income, you will only be entitled to 6.2% which will be less than $400 ($800 for a joing return).
An “eligible individual” for purposes of the credit is any individual, except
• A nonresident alien;
• An individual who can be claimed as a dependent by another taxpayer (which means there is nothing extra for dependents on your tax return either); and
• An estate or trust.
Each tax return on which this credit is claimed must include the social security number of the taxpayer (in the case of a joint return, the social security number of at least one spouse must be included).
The credit is phased out at a rate of 2% of the individual's modified adjusted gross income (AGI) above $75,000 ($150,000 for joint returns).
Revised income tax withholding schedules are designed to reduce the taxpayers' income tax withheld for the remainder of 2009 in such a manner that the full annual benefit of this credit is reflected on each paycheck during the remainder of 2009. If you get paid weekly it would amount to about $8 per week or every other week should be about $15 per payday.
Then at the end of the year when you file your income tax, you will receive the credit up to $400 ($800 if married), but your withholding has been less most of the year so ideally it balances out to show that you have already received that credit during the year.
Effective only for tax years beginning in 2009 and 2010.
The problem comes with these tax tables. The tax tables (or their creator) think that every household is a 1 paycheck household, which in reality is not always true so we need to make adjustments for that. I am going to give you some examples of situations so you can see what you need to do. In each example I am assuming you fall under the income guidelines. If you exceed the $74,000 ($150,000 for married), then you have further complications.
1 - You are married, you and your spouse both are employed, both of you file married at work, and both get paid every week. With the new tax tables that took effect in April, you should be taking home an extra $8 per week and your income tax withheld would show about $8 less. But because you filed married at work on your W-4, they are holding out for you and your spouse to receive this credit, meaning your paycheck will be about $15 extra each week and then at the end of the year you get the $800 credit and it should balance out. BUT your spouse is getting this same thing happening to that paycheck. So instead of $15 less held out, together you are getting $30 less held out. The bottom line to this is that you are having about $1600 less held out for the year, and only getting $800 in credits, so you got $800 of your refund during the year and when you file your taxes, your refund will be $800 less than it was last year.
2 - You are single, have 2 jobs, get paid weekly at both. $8 a week less held out under the new withholding tables, $400 credit at the end of the year. But both of your employers are using the tables so you are having about $8 less held out each week from each employer. $800 less held out during the year, $400 credit at the end of the year. Your refund on your tax return will be about $400 less than for 2008.
3 - You are married, 1 has 2 jobs, the other one has 1 job, all are weekly pay. This case is really bad. $2400 less held out during the year (3 jobs x $800), $800 credit on the tax return, refund is $1600 less than the year before.
4 - Retired taxpayers drawing a taxable pension - The pension plans use the same withholding tables as working folks do. Social security recipients will be getting the $250 in May for their payment and those who draw a taxable pension do not get additional $400 credit. BUT their plan administrator is still using that same chart, so it is reducing the necessary withholding depending on how you filed with your plan. Let's say you are married, you and your spouse are both receiving a monthly, both of you file married on your W-4P, you will have $1600 less held out of your pension checks but you get $0 credit so you now have received the $1600 in your pocket all year and not going toward your income tax at the end of the year.
5 - Single with 1 job - You should be fine.
6 - Married with only one person working and only 1 job - You should be fine.
7 - Self employed people - You should be fine.
8 - Retired folks who are paying estimated taxes instead of having it held out of their retirement checks should be fine.
Above all, if you have any doubts at all, feel free to call on us for assistance so we can prevent any surprises at tax time.
Here is a video provided by the I.R.S. http://www.youtube.com/irsvideos
Eligible individuals are allowed a refundable income tax credit for tax years beginning in 2009 and 2010.
The amount of the credit is the lesser of:
• 6.2% of the taxpayer's earned income (money you perform work for), or
• $400 ($800 for a joint return).
You will hear all of us talking about the $400 credit, but if you have less than $6,451 ($12,902 for a joing return) in earned income, you will only be entitled to 6.2% which will be less than $400 ($800 for a joing return).
An “eligible individual” for purposes of the credit is any individual, except
• A nonresident alien;
• An individual who can be claimed as a dependent by another taxpayer (which means there is nothing extra for dependents on your tax return either); and
• An estate or trust.
Each tax return on which this credit is claimed must include the social security number of the taxpayer (in the case of a joint return, the social security number of at least one spouse must be included).
The credit is phased out at a rate of 2% of the individual's modified adjusted gross income (AGI) above $75,000 ($150,000 for joint returns).
Revised income tax withholding schedules are designed to reduce the taxpayers' income tax withheld for the remainder of 2009 in such a manner that the full annual benefit of this credit is reflected on each paycheck during the remainder of 2009. If you get paid weekly it would amount to about $8 per week or every other week should be about $15 per payday.
Then at the end of the year when you file your income tax, you will receive the credit up to $400 ($800 if married), but your withholding has been less most of the year so ideally it balances out to show that you have already received that credit during the year.
Effective only for tax years beginning in 2009 and 2010.
The problem comes with these tax tables. The tax tables (or their creator) think that every household is a 1 paycheck household, which in reality is not always true so we need to make adjustments for that. I am going to give you some examples of situations so you can see what you need to do. In each example I am assuming you fall under the income guidelines. If you exceed the $74,000 ($150,000 for married), then you have further complications.
1 - You are married, you and your spouse both are employed, both of you file married at work, and both get paid every week. With the new tax tables that took effect in April, you should be taking home an extra $8 per week and your income tax withheld would show about $8 less. But because you filed married at work on your W-4, they are holding out for you and your spouse to receive this credit, meaning your paycheck will be about $15 extra each week and then at the end of the year you get the $800 credit and it should balance out. BUT your spouse is getting this same thing happening to that paycheck. So instead of $15 less held out, together you are getting $30 less held out. The bottom line to this is that you are having about $1600 less held out for the year, and only getting $800 in credits, so you got $800 of your refund during the year and when you file your taxes, your refund will be $800 less than it was last year.
2 - You are single, have 2 jobs, get paid weekly at both. $8 a week less held out under the new withholding tables, $400 credit at the end of the year. But both of your employers are using the tables so you are having about $8 less held out each week from each employer. $800 less held out during the year, $400 credit at the end of the year. Your refund on your tax return will be about $400 less than for 2008.
3 - You are married, 1 has 2 jobs, the other one has 1 job, all are weekly pay. This case is really bad. $2400 less held out during the year (3 jobs x $800), $800 credit on the tax return, refund is $1600 less than the year before.
4 - Retired taxpayers drawing a taxable pension - The pension plans use the same withholding tables as working folks do. Social security recipients will be getting the $250 in May for their payment and those who draw a taxable pension do not get additional $400 credit. BUT their plan administrator is still using that same chart, so it is reducing the necessary withholding depending on how you filed with your plan. Let's say you are married, you and your spouse are both receiving a monthly, both of you file married on your W-4P, you will have $1600 less held out of your pension checks but you get $0 credit so you now have received the $1600 in your pocket all year and not going toward your income tax at the end of the year.
5 - Single with 1 job - You should be fine.
6 - Married with only one person working and only 1 job - You should be fine.
7 - Self employed people - You should be fine.
8 - Retired folks who are paying estimated taxes instead of having it held out of their retirement checks should be fine.
Above all, if you have any doubts at all, feel free to call on us for assistance so we can prevent any surprises at tax time.
Residential Energy Credit Back for a Short Visit
The nonbusiness energy property credit available to individual homeowners is modified and increased in the following ways:
• The 10% credit for building envelope components is increased to 30%;
• All energy property that was previously eligible for the $50, $100, and $150 credits is instead eligible for a 30% credit;
• The $500 lifetime cap ($200 for windows) is eliminated and replaced with an aggregate $1,500 cap for 2009 and 2010; and
• The credit is extended for one year, through December 31, 2010. Effective for tax years beginning after December 31, 2008. The credit won't be available for property placed in service after December 31, 2010.
This is a lot of technical information that most of us do not understand. However, the good news is that the manufacturers are responsible for publishing material on their products relating to the energy credit. So you should be able to talk to the store or sales person and find out what qualifies for the credit.
Click here for a video provided by the I.R.S.
Various changes have been made to the standards that property must meet to qualify for the nonbusiness energy property credit. These changes will take effect for property placed in service after 2009 (meaning 2009 stays the same with no changes in standards), except for the change regarding biomass fuel stoves. Insulation – must meet the prescriptive criteria for that material or system established by the 2009 International Energy Conservation Code, as in effect on February 17, 2009. Exterior windows, skylights, and doors – must have a U factor equal to or below 0.30 and a solar heat gain coefficient (SHGC) of 0.30. Electric heat pumps must meet the following standards:
• A seasonal energy efficiency ratio (SEER) greater than or equal to 15, energy efficiency ratio (EER) greater than or equal to 12.5, and heating seasonal performance factor (HSPF) greater than or equal to 8.5 for split heat pumps, and
• A SEER greater than or equal to 14, EER greater than or equal to 12, and HSPF greater than or equal to 8.0 for packaged heat pumps.
Central air conditioners must meet the following standards:
• A SEER greater than or equal to 16 and EER greater than or equal to 13 for split systems, and
• A SEER greater than or equal to 14 and EER greater than or equal to 12 for packaged systems.
Natural gas, propane, or oil water heaters - must have either an energy factor of at least 0.82 or a thermal efficiency of at least 90%.
Biomass fuel stoves - that burn biomass fuel to heat a dwelling unit that thetaxpayer uses as a residence, or to heat water for use in the residence, and that has a thermal efficiency rating of at least 75%. Furnaces and boilers – there are six separate categories:
1. A “qualified natural gas furnace” will mean any natural gas furnace that achieves an annual fuel utilization efficiency rate of not less than 95.
2. A “qualified propane furnace” will mean any propane furnace that achieves an annual fuel utilization efficiency rate of not less than 95.
3. A “qualified oil furnace” will mean any oil furnace that achieves an annual fuel utilization efficiency rate of not less than 90.
4. A “qualified natural gas hot water boiler” will mean any natural gas hot water boiler that achieves an annual fuel utilization efficiency rate of not less than 90.
5. A “qualified propane hot water boiler” will mean any propane hot water boiler that achieves an annual fuel utilization efficiency rate of not less than 90.
6. A “qualified oil hot water boiler” will mean any oil hot water boiler that achieves an annual fuel utilization efficiency rate of not less than 90.
Effective for property placed in service after February 17, 2009, except that the change regarding biomass fuel stoves takes effect for tax years beginning after December 31, 2008.
• The 10% credit for building envelope components is increased to 30%;
• All energy property that was previously eligible for the $50, $100, and $150 credits is instead eligible for a 30% credit;
• The $500 lifetime cap ($200 for windows) is eliminated and replaced with an aggregate $1,500 cap for 2009 and 2010; and
• The credit is extended for one year, through December 31, 2010. Effective for tax years beginning after December 31, 2008. The credit won't be available for property placed in service after December 31, 2010.
This is a lot of technical information that most of us do not understand. However, the good news is that the manufacturers are responsible for publishing material on their products relating to the energy credit. So you should be able to talk to the store or sales person and find out what qualifies for the credit.
Click here for a video provided by the I.R.S.
Various changes have been made to the standards that property must meet to qualify for the nonbusiness energy property credit. These changes will take effect for property placed in service after 2009 (meaning 2009 stays the same with no changes in standards), except for the change regarding biomass fuel stoves. Insulation – must meet the prescriptive criteria for that material or system established by the 2009 International Energy Conservation Code, as in effect on February 17, 2009. Exterior windows, skylights, and doors – must have a U factor equal to or below 0.30 and a solar heat gain coefficient (SHGC) of 0.30. Electric heat pumps must meet the following standards:
• A seasonal energy efficiency ratio (SEER) greater than or equal to 15, energy efficiency ratio (EER) greater than or equal to 12.5, and heating seasonal performance factor (HSPF) greater than or equal to 8.5 for split heat pumps, and
• A SEER greater than or equal to 14, EER greater than or equal to 12, and HSPF greater than or equal to 8.0 for packaged heat pumps.
Central air conditioners must meet the following standards:
• A SEER greater than or equal to 16 and EER greater than or equal to 13 for split systems, and
• A SEER greater than or equal to 14 and EER greater than or equal to 12 for packaged systems.
Natural gas, propane, or oil water heaters - must have either an energy factor of at least 0.82 or a thermal efficiency of at least 90%.
Biomass fuel stoves - that burn biomass fuel to heat a dwelling unit that thetaxpayer uses as a residence, or to heat water for use in the residence, and that has a thermal efficiency rating of at least 75%. Furnaces and boilers – there are six separate categories:
1. A “qualified natural gas furnace” will mean any natural gas furnace that achieves an annual fuel utilization efficiency rate of not less than 95.
2. A “qualified propane furnace” will mean any propane furnace that achieves an annual fuel utilization efficiency rate of not less than 95.
3. A “qualified oil furnace” will mean any oil furnace that achieves an annual fuel utilization efficiency rate of not less than 90.
4. A “qualified natural gas hot water boiler” will mean any natural gas hot water boiler that achieves an annual fuel utilization efficiency rate of not less than 90.
5. A “qualified propane hot water boiler” will mean any propane hot water boiler that achieves an annual fuel utilization efficiency rate of not less than 90.
6. A “qualified oil hot water boiler” will mean any oil hot water boiler that achieves an annual fuel utilization efficiency rate of not less than 90.
Effective for property placed in service after February 17, 2009, except that the change regarding biomass fuel stoves takes effect for tax years beginning after December 31, 2008.
Hope Credit - Post-Secondary Education Credit
The Hope credit is modified and renamed the American Opportunity tax credit for tax years beginning in 2009 and 2010. The credit equals the sum of:
• 100% of the first $2,000 of qualified tuition and related educational expenses, plus
• 25% of the qualified tuition and related educational expenses over $2,000 but not more than $4,000.
Take a minute and view this video from I.R.S.
The maximum credit a taxpayer may claim for 2009 or 2010 is $2,500 and is allowed for the first four years (used to be 2 years) of the student's post-secondary education in a degree or certificate program. (Doesn't have to be college, can be most Vocational Technical Schools or Cosmetology Schools.)
The definition of qualified tuition and related expenses is modified to include tuition, fees, and course materials. The credit is phased out for taxpayers with modified AGI between $80,000 and $90,000 ($160,000 and $180,000 for joint filers). Up to 40% of the credit is refundable (meaning after you use the credit to zero out your income tax, you get the rest of it back in your pocket). Effective for tax years beginning after December 31, 2008, but only for tax years beginning in 2009 and 2010.
Whoever claims the student is allowed the credit.
• 100% of the first $2,000 of qualified tuition and related educational expenses, plus
• 25% of the qualified tuition and related educational expenses over $2,000 but not more than $4,000.
Take a minute and view this video from I.R.S.
The maximum credit a taxpayer may claim for 2009 or 2010 is $2,500 and is allowed for the first four years (used to be 2 years) of the student's post-secondary education in a degree or certificate program. (Doesn't have to be college, can be most Vocational Technical Schools or Cosmetology Schools.)
The definition of qualified tuition and related expenses is modified to include tuition, fees, and course materials. The credit is phased out for taxpayers with modified AGI between $80,000 and $90,000 ($160,000 and $180,000 for joint filers). Up to 40% of the credit is refundable (meaning after you use the credit to zero out your income tax, you get the rest of it back in your pocket). Effective for tax years beginning after December 31, 2008, but only for tax years beginning in 2009 and 2010.
Whoever claims the student is allowed the credit.
Guidelines for Monetary Donations
To deduct any charitable donation of money, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution. Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.
Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
These requirements for monetary donations do not change or alter the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet the requirements of both provisions.
For information, visit the IRS website.
Donations of money include those made in cash or by check, electronic funds transfer, credit card, and payroll deduction. For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.
These requirements for monetary donations do not change or alter the long-standing requirement that a taxpayer obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. However, one statement containing all of the required information may meet the requirements of both provisions.
For information, visit the IRS website.
New deduction for Real Estate taxes
There is an additional standard deduction for those who do not qualify to itemize tax deductions, but pay real estate taxes. The deduction is equal to the amount of real estate taxes paid up to $500 for single filers or $1,000 joint filers and is available for the 2008 and 2009 tax years.
Just bring the amount of taxes you paid when you visit your tax preparer.
Just bring the amount of taxes you paid when you visit your tax preparer.
2009 Unemployment
You will not have to pay tax on the first $2,400 of unemployment compensation benefits received in 2009. Effective for tax years beginning beginning in 2009.
Listen to this short explanation by the I.R.S.
Listen to this short explanation by the I.R.S.
Sunday, May 3, 2009
Sales Tax on New Vehicle
Qualified motor vehicle taxes are deductible either as part of the standard deduction or as an itemized deduction. This means that you can take the sales tax you paid on a new vehicle even without itemizing your deductions. Qualified motor vehicle taxes are any state or local sales or excise tax imposed on the purchase of a qualified motor vehicle. The deduction is limited to the amount of taxes attributable to the first $49,500 of the purchase price.
Here is an explanation from the I.R.S.
The deduction is phased out for a taxpayer with modified adjusted gross income between $125,000 and $135,000 ($250,000 and $260,000 on a joint return). A qualified motor vehicle is:
• A new passenger automobile or light truck, or motorcycle with a gross vehicle weight rating of 8,500 pounds or less and the original use of which begins with the taxpayer, and
• A new motor home of which the original use begins with the taxpayer.
NEW means the first owner, not used and not just new to you.
In order to get this deduction you have to purchase the vehicle described above on or after February 17, 2009, and before January 1, 2010.
If you purchase a new vehicle during this period of time, be certain to save the document that shows the amount of sales tax that you paid and bring it when you come in to have your 2009 income tax return filed.
Here is an explanation from the I.R.S.
The deduction is phased out for a taxpayer with modified adjusted gross income between $125,000 and $135,000 ($250,000 and $260,000 on a joint return). A qualified motor vehicle is:
• A new passenger automobile or light truck, or motorcycle with a gross vehicle weight rating of 8,500 pounds or less and the original use of which begins with the taxpayer, and
• A new motor home of which the original use begins with the taxpayer.
NEW means the first owner, not used and not just new to you.
In order to get this deduction you have to purchase the vehicle described above on or after February 17, 2009, and before January 1, 2010.
If you purchase a new vehicle during this period of time, be certain to save the document that shows the amount of sales tax that you paid and bring it when you come in to have your 2009 income tax return filed.
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