Haitian Relief Contributions

Like the 2005 deduction for contributions to the Indian Ocean tsunami disaster, on January 15, Ways and Means Committee Chair Charles B. Rangel (D-NY) and Ranking Member Dave Camp (R-MI) joined Majority Whip James E. Clyburn (D-SC) and House Republican Whip Eric Cantor (R-VA) introduced legislation allowing individuals who make charitable contributions to aid Haitian earthquake victims to elect to claim an itemized charitable deduction on their 2009 tax return (instead of having to wait until next year to claim the deductions on their 2010 tax return). Both the House and Senate passed HR 4462 very quickly and the President signed it late January 22nd.  The election applies only to Haitian relief contributions made after Jan. 11, 2010, and before Mar. 1, 2010. If the election is made, Haiti relief donations would be deductible on the 2009 return, not the 2010 return.

Taxpayers should remember that not all solicited donations to aid Haitian earthquake victims are tax deductible.  Contributions to foreign organizations generally are NOT deductible, nor are contributions to benefit specific individuals for families.  Only cash contributions are eligible.  Although the law requires that taxpayers keep a record of any deductible contributions they make, the IRS has announced that donations by text message can be substantiated by a copy of the phone bill if it shows the name of the donee organization and the date and the amount of the contribution. 

First Time Homebuyer Credit Expansion & Extension

The homebuyer credit was only available for qualifying first-time home purchases after April 8, 2008 and before December 1, 2009 before the President signed into law HR 3548 on November 6.  The credit is now extended to apply to a principal residence purchased before May 1, 2010.  A person entering into a written binding contract before May 1, 2010 can also qualify for the credit if the purchase closes before July 1, 2010.  For purchases made after November 6, 2009, a taxpayer can claim the credit if he/she maintained the same principal residence for any 5-consecutive year period during the 8-years ending on the date that a subsequent principal residence is purchased ("long-time resident"). There is no requirement that the old home be sold.  The maximum credit for such existing homeowners is $6,500 or 10% of the purchase price of the new home, whichever is less.  The purchase price of the home cannot exceed $800,000, and there is a AGI limitation.  The single taxpayers, the phase-out range is between $125,000 and $145,000.  For joint filers, the range is between $225,000 and $245,000.  The taxpayer also must be at least 18 years old and cannot be a dependent.  The new home cannot be purchased from a related taxpayer.  The IRS Form 5405 must be accompanied by a copy of the HUD-1 settlement statement and therefore any taxpayer claiming the credit is not eligible to e-file.  (For newly constructed homes, a copy of the certificate of occupancy showing the owner's name, property address, and date of certificate is required).  "Long-time residents" must show that they lived in their old homes for a 5-consecutive-year period during the 8-year period on the purchase of the new home by providing property tax, homeowner's insurance, or Form 1098 mortgage interest statements.

Rollover Relief for Waiver of 2009 RMD - November 30, 2009

Many taxpayers who took out their 2009 required minimum distributions ("RMD") despite the RMD waiver for 2009 have until November 30 to roll over the distribution.  Normally, rollovers must be completed within 60 days of distribution in order for the distribution to not be taxed.

State Board of Equalization (California)

The California State Board of Equalization has been sending out notices to all businesses that do not have a seller's permit to register with the State Board.  Businesses with gross receipts of at least $100,000 must register for use tax and file a return for 2009 (due by April 15, 2010).  Registrants are also being asked to report purchases for 2007 and 2008.

IRS Scam E-mail

The spam campaign, usually with "Notice of Underreported Income" on the subject line, is now the world's biggest e-mail virus problem. The spam was first spotted on September 9 and still continues.  The e-mail encourages victims to either install the Trojan attachment or click on a Web link or order to view their "tax statement", which takes the victim to a malicious website.  The Zeus Trojan is hard to detect and it hacks into bank accounts and drains money out of them.  Researchers estimate that the criminals are emptying more than a million dollars per day of of the victims' bank accounts.  

Cash for Clunkers

This popular program which allowed car buyers up to $4,500 in credit when they traded in gas-guzzlers will end promptly at 8 pm on Monday, August 24, 2009.  More than 457,000 dealer transactions have been recorded worth $1.9 billion dollars.  The program is expected to award $3 billion in rebates by the time all applications have been processed.

California IOU Warrants

Beginning July 2, 2009, registered warrants were issued for all personal and business tax refunds, including direct deposit.  A registered warrant is a "promise to pay" with interest that is issued by the State when there is not enough cash to meet all of the State's obligations.  If sufficient cash were available, the IOUs were to be paid on October 2, 2009 with interest (at 3.75% per year).  State Controller John Chiang has announced that on September 4, 2009, the State will stop issuing IOUs and the Treasurer may begin redeeming those warrants that have already been issued.  Since July 2, the State has issued 327,000 IOUs totaling $1.95 billion. Some banks and credit unions will accept the warrants and either cash or deposit them.  The disadvantage with this method is that although quicker, the banks/credit unions will get the interest.  To redeem the warrant with interest, redeem it directly with the State Treasurer's Office either by mail or in person at:  Attn:  Registered Warrant Desk, State Treasurer's Office, 915 Capitol Mall, Sacramento, CA  95814.  We highly recommend that you mail the warrant by registered mail.

FDIC Insurance

The standard insurance amount currently is $250,000 per depositor. The $250,000 limit is permanent for IRAs and other certain retirement accounts. The $250,000 limit is temporary for all other deposit accounts through December 31, 2013. On January 1, 2014, the standard insurance amount will return to $100,000 per depositor for all account categories except IRAs and other certain retirement accounts, which will remain at $250,000 per depositor.  If you have any questions regarding FDIC coverage, call 1-877-275-3342.

IRS  Announces Interest Rate for Calendar Quarters Beginning October 1, 2009

The IRS has announced that the interest rates for tax overpayments and underpayments for the calendar quarter beginning October 1, 2009 will remain at 4%.  

New Car Deduction     

The IRS has announced that taxpayers who buy a new passenger vehicle in 2009 may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns. The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle. The amount of the deduction is phased out for taxpayers with modified adjusted gross income between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers. The deduction is available for vehicles purchased after February 16, 2009, and before January 1, 2010, and may be claimed regardless of whether taxpayers itemize deductions on their returns. Taxpayers may not take this special deduction on their 2008 tax returns.

Unemployment Benefits for 2009

The IRS has announced that all or part of unemployment benefits received in 2009 will be tax free for many unemployed workers. Unemployed workers can choose to have income tax withheld from their unemployment benefit payments using Form W-4V, Voluntary Withholding Request. Withholding on these payments is voluntary and individuals who choose this option will have a flat 10 percent tax withheld from their benefits. (Unemployment benefits are tax-free for California purposes.)

California Tax Refunds

The California Franchise Tax Board (FTB) is working with the State Controller's Office to issue delayed corporation franchise and income and personal income tax refunds as quickly as possible. Individual taxpayers may check the status of their personal income tax refunds on the FTB's Web site. Individuals will need the following information to check their refund status: their Social Security number, their mailing address, the refund amount show on the return, and a compatible Internet browser and computer operating system. Refunds are processed first-come-first-served.  The latest information provided by the FTB is that the refunds will take up to 25 business days from the date of filing.  They are not required to pay any interest until 45 days after April 15.

The American Recovery and Reinvestment Act of 2009 ("the Recovery Act")

On February 17, 2009, President Obama signed into law many tax breaks for both individuals and businesses.  We will be posting more summaries of various provisions soon.

First-time Homebuyer Credit:  Taxpayers who qualify for the ffirst-time homebuyer credit and purchase a home before 12/1/09 can claim the credit on their 2008 tax returns due on 4/15/09 or on their 2009 tax return filed next year. Following changes by the recently enacted American Recovery Act, 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% of the purchase price up to $8,000, or $4,000 for married individuals filing separately. However, the new law does not affect people who purchased a home after 4/8/08 and before 1/1/09—the maximum credit remains 10% of the purchase price, up to $7,500 or $3,750 for married individuals filing separately, and the credit must be repaid in 15 equal annual installments beginning with the 2010 tax year.

California Refunds 

California State Controller John Chiang has announced that payment of corporate franchise/income and personal income tax refunds will be delayed by 30 days due to the State's financial situation.  If no corrective action is taken by the Governor and the Legislature, the state may have to further delay the refund payments or resort to issuing IOUs.

Required Minimum Distributions for 2009

The President signed on December 23, 2008 the tax legislation which waives the requirement to take RMDs from qualified retirement plans as well as IRAs.  The RMD for 2009 is based on the value as of December 31, 2008.  Individuals age 70 ½ and over may choose to continue taking the distribution or not withdraw any amount at all for 2009 only.  (Congress had hoped to make the change for tax year 2008, but many taxpayers had already taken out their RMD by the time this legislation made its way through Congress.)  Taxpayers who fail to take the RMD are liable for an excise tax of 50% of the amounts not distributed, so this is a 1-year reprieve.

IRS & FTB Announce Interest Rate for Calendar Quarters Beginning January 1, 2009

The IRS has announced that the interest rates for tax overpayments and underpayments for the calendar quarter beginning January 1, 2009 will decrease to 5% (from 6%).  The FTB rate will be the same, 5% through June 30, 2009.

2009 Auto Mileage Rates Increased

The mileage rate will decrease to 55 cents a mile for all business miles during 2009. The new rate for computing deductible medical or moving expenses will decrease  to 24 cents a mile. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

2009 Auto Depreciation Limits 

The IRS has announced that annual passenger auto depreciation limits for autos placed in service in 2009 will remain the same as 2008.   Please see the updated table in our Resources - Helpful Tables section.

 IRS Announces Pension Plan Limitations for 2009

The defined contribution plan limit (profit-sharing plans, SEP-IRA) will increase to $49,000 with the annual compensation limit increasing to $245,000.  Please see our updated Helpful Tables for more information.

  Social Security Announces 5.8 % Benefit Increase for 2009

Monthly benefits for social security recipients will increase 5.8% in 2009, the largest increase since 1982.  Based on that increase, the maximum amount of earnings subject to the social security tax will increase to $106,800.  Please see our Helpful Tables section of this website.

          Alternative Motor Vehicle Credit 2008 -  GM                                                                                                               

The Internal Revenue Service has certified five 2008 model year General Motors Corp. vehicles as meeting the requirements of the Alternative Motor Vehicle Credit for qualified hybrid motor vehicles. The credit amount for each vehicle is:
--Chevrolet Tahoe Hybrid (2WD) --$2,200;
--Chevrolet Tahoe Hybrid (4WD) --$2,200;
--GMC Yukon Hybrid (2WD) --$2,200;
--GMC Yukon Hybrid (4WD) --$2,200; and
--Saturn Vue Green Line --$1,550
This brings the total number of GM certified hybrid vehicles for the 2008 model year to seven. The Chevrolet Malibu Hybrid ($1,300.00) and the Saturn Aura Hybrid ($1,300.00) were previously certified.

Email Scams

Social Security Projection

The Social Security Administration's Office of the Chief Actuary (OCA) is projecting that the Social Security wage base will increase to $102,300 in 2008, and will reach $141,900 by 2016. The projections were included as part of the annual report to Congress by the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Fund programs.

Actual annual increases in the wage base are announced in October of the preceding year and are based on then-current economic conditions. As a result, the OCA's forecasts, especially the longer-range ones, are subject to change. Last year's actuarial estimate of $98,400 for the 2007 Social Security wage base was $900 greater than the actual amount of $97,500. The SSA forecasts through 2016 are as follows:

• 2008 — $102,300
• 2009 — $106,800
• 2010 — $111,600
• 2011 — $116,400
• 2012 — $121,500
• 2013 — $126,300
• 2014 — $131,700
• 2015 — $136,800
• 2016 — $141,900

                    IRS Alerts Taxpayers of Website and E-Mail Scams

The IRS has issued a warning to taxpayers regarding website and e-mail scams. Concern over the increase in websites purporting to be official websites prompted the IRS to alert taxpayers and remind them that the address for the official IRS website is www.irs.gov. The IRS warns that these phony websites look very much like the official IRS website; however, they prompt taxpayers to enter personal and financial data, which will then be used to steal the taxpayer's identity. Taxpayers are urged to closely check the address of the website. The phony addresses end with .net or .com; however, only irs.gov is the legitimate address.

The IRS further warned of e-mail phishing scams that lead the victim to one of these phony sites. Taxpayers have received e-mails, claiming to be from the IRS, advising them of a federal tax refund and directing them to open a link that takes them to one of these websites. Taxpayers are advised not to open unsolicited e-mail claiming to be from the IRS, or open any attachments or provide any personal information.

Watch Out for the Tax Scammers

The IRS does not communicate with taxpayers via email.  Watch out for emails claiming to be from the IRS instructing you to access a secure website to find out about your refund.  The website is not the official IRS website.  The website asks for social security numbers and credit and bank information.  The official "Where's My Refund" website is at:  https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp .

Electronic Tax Payment Options 

There are 2 ways that you can pay your taxes other than by manual check:

Credit Card Payments:  During tax season, we receive many inquiries regarding the payment of Federal and State income taxes by credit card.  There are 2 private companies awarded contracts by the IRS.  Both companies charge a convenience fee, approximately 2.49% of the payment amount.  Click on the links to set up a payment if you decide to use the credit card payment method, or call the toll free numbers.  Official Payments Corporation (1-800-272-9829) and Link2Gov Corporation (1-888-729-1040).

Electronic Federal Tax Payment System (EFTPS):  This is a free service provided by the US Department of Treasury.  You can pay federal taxes electronically, either by phone or online, 24 hours a day, 7 days a week.  To use EFTPS, you must first enroll.  Visit the EFTPS website or call the EFTPS at 1-800-555-4477 for an enrollment form.  You must access EFTPS at least by 8 PM (ET) at least one business day in advance of the due date to report your tax information.  Individuals can schedule payments up to 365 days in advance of their tax due date, and scheduled payments can be changed or cancelled up to 2 business days in advance of the scheduled payment date.