Daniel J. Rayburn, CPA
D. J. Rayburn, P.C.
2700 South Park Road
Bethel Park, PA 15102
Phone: 412.833.3210
Fax: 412.833.3211
E-mail: info@djrayburncpa.com

Tax Tips

Current Tax Tips

Check back often to see updated tax tips for your information and planning. Click here for Prior Tax Tips.

Tax Changes – 2009

The American Recovery and Reinvestment Act (ARRA) was enacted on February 17, 2009 – here are some of the individual changes:

Make Work Pay Credit

The Work Pay Credit is a refundable credit, for 2009 and 2010, of the lesser of 6.2% of a taxpayers earned income or $400, if filing single ($800 married filing joint). The credit begins phasing out for taxpayers with adjusted gross income of $75,000 ($150,000 is married filing jointly) and is completely phased out for taxpayers with adjusted gross income of $95,000 ($190,000).

Most taxpayers will not notice this credit at tax time because the government has adjusted the withholding tables to reflect this credit.

Payments To Social Security Recipients

 

Those who do not have earned income but instead collect Social Security were eligible to receive an economic recovery benefit check for $250.

American Opportunity Tax Credit

 

This is the Hope Credit repackaged, with an increased credit to a maximum of $2,500 that can be partially refundable. The credit can be used for four years of post-secondary education and is based on the cost of tuition plus course materials (books).

The credit begins phasing out for taxpayers with adjusted gross income of $80,000 ($160,000 is married filing jointly) and is completely phased out for taxpayers with adjusted gross income of $90,000 ($180,000).

First Time Homebuyers Credit

 

The act increases the first-time homebuyers credit to 10% of the purchase price up to a maximum credit of $8,000 for principal residences purchased before December 1, 2009. The credit is refundable and does not need to be repaid.

The residence cannot be purchased from a related party, among other conditions, and the purchaser must not have owned a principal residence for three years prior to the purchase. The credit begins phasing out for single filers with adjusted gross income of $75, 000 ($150,000 if married filing joint) and is totally phased out at $95,000 ($170,000).

Unemployment Compensation

 

For any taxable year beginning in 2009, gross income shall include unemployment compensation only for amounts received in excess of $2,400.

Alternative Minimum Tax

 

The act increases the AMT exemption amounts for 2009 to $70,950 for married individuals filing a joint return ($46,700 for single filers).

Estimated Taxes

 

Presently certain taxpayers are required to make quarterly estimated payments based on 90% of tax shown on the current return or 100% of the tax shown on the return for the prior year (110% if AGI > $150,000).

The ARRA allows for taxpayer with an AGI of less than 500,000 for proceeding year )and greater than 50% the gross income on their returns from a small business) to pay in just 90% of the amount shown on the return for the prior year.

Energy Incentives

 

The ARRA establishes a non refundable 10% credit for the purchase of qualified energy–efficient improvements to existing homes.

These energy–efficient improvements need to be building envelope components (doors, windows, insulation, and certain roofs) that must meet specific criteria established by the International Energy Conversation Code.

 

Business Tax Tips

Mileage Rates - 2009

 

Standard mileage rates for 2009 are:

• 55 cents a mile for business use.
• 24 cents a mile for medical or moving expenses.
• 14 cents a mile for charitable activities.

Employee vs. Independent Contractor Classification

Congress is interested in reforming how workers are classified. Reforms will make it easier for the IRS to reclassify independent contractors as employees. The IRS has recently made it easier for workers to identify companies that may be misclassifying its workers.

Form 8919 is to be used by taxpayers to report the IRS that they believe they were incorrectly treated as independent contractors. They file this form declaring themselves employees and paying their share of the Social Security and Medicare tax.

You must file Form 8919 if all of the following apply:

• Your pay from the firm was not for services as an independent contractor.
• You performed services for a firm.
• The firm did not withhold your share of social security and Medicare taxes from your pay.

Personal Tax Tips

Charitable Deductions

New substantiation rules on charitable deductions:

You cannot deduct a cash contribution, regardless of the
amount, unless you have a record of the contribution with a
bank record. A record can include the canceled check, a bank
copy of a canceled check or a bank statement containing the name of the charity, the date and the amount -- or a written communication from the charity. The written communication
must include the name of the charity, the date of the
contribution and amount of the contribution.
• For more information, see Publication 526, Charitable Contributions.

IRS Audits

 

According to IRS statistics the service audited just under 1% of all returns filed for the fiscal year 2006. This percentage grew to almost 4% if you had a Schedule C business grossing over $100,000 or under $25,000. Most audits involve the IRS sending official correspondence, usually requesting additional information, sometimes requesting a meeting.

If you are contacted via e-mail or phone and are not certain that this is “official” please check the www.irs.gov site for warnings of scams. If you feel that you have received a questionable e-mail or telephone call please report this to the IRS by reporting or forwarding the suspicious e-mail to phishing@irs.gov.

According to the IRS the Tax Gap is ”The difference between the amount of tax that taxpayers should pay and the amount that is paid voluntarily and on time. The tax gap can also be thought of as the sum of non-compliance with the tax law.”

Social Security/Medicare Updates

 

 

The Social Security wage base is $106,800 for 2009, a 4.7% increase from 2008.

Lifetime . College . Planning . General Tax Tips

529 Plans

A person can put up to $65,000 at once in a 529.

• This is a gift and counts as a gift for this and the next 4 years.
• For estate purposes it is considered a completed gift (and out of estate) - but still with control!
• Can be used for tuition, fees, books, supplies, equipment, and reasonable room and board.
• Can change beneficiary.
• Tax and penalty on distributions not used for qualified expenses.

Gifting Strategies

 

Anyone can give $13,000 per year to another person without gift tax reporting issues.

Also, DIRECT payments of medical expenses (including insurance) and tuition (not books, supplies, dorm, etc.) do not count as gifts for gift tax purposes.

Pennsylvania Tax Planning Point

 

A contribution to a 529 Plan will provide a deduction for PA purposes of up to $12,000 per year, per beneficiary, per taxpayer.

The taxpayer making the contribution will need to have to have taxable income.

Contact us at (412) 833-3210 to set up an appointment today.