News

Tax Season Office Hours:
Begining 1/30/2012
Monday-Friday 8:30-6:00
Saturday 10:00-2:00

IRS:

IRS is back in the audit business. The new tactic is to delay, disallow, and ask for proof already given. Expect more audits in the future, especially on the business level.

Energy Credits:

Energy credits are still here, but very limited. We will need to discuss them individually.
Education Credits:

The American Opportunity Credit has replaced the Hope Education Credit. This credit is a maximum of $2500 per year and has been expanded to include the first 4 years of education. It also allows for the deduction of tuition, fees, books, supplies and equipment required for course study. What this means for you is if you are going in to your 3rd or 4th year of college, the deduction is now greater. If you are just starting school, the deduction is still greater but is currently only available to you for 2009 and 2010 expenses.

Cancelled Debt:

If you have a cancelled debt that you are individually liable for, it is generally taxable and reported to you on a Form 1099-C and must be included on your tax return

If you have debt cancelled in a Chapter 11 Bankruptcy, it is not considered income if the debt is cancelled by the bankruptcy court or in a plan approved by the bankruptcy court

If you have debt that is cancelled due to insolvency, it normally does not result in taxable income only if you were insolvent immediately before the cancellation of the debt and your debt is not in excess of the amount of insolvency

Qualified principal residence indebtedness up to 2 million can be excluded from income if it is cancelled after 1/1/07 and before 1/1/2013

Dependency Exemption:

The dependency exemption has been modified:

The custodial parent is the parent with whom the child resides the greater number of nights with during the year. If the custodial parent releases the claim to the exemption to the non-custodial parent, they must sign Form 8332 and that form must be attached to the non-custodial parent�s tax return.

This new rule applies to parents divorced after 7/3/08. If you were divorced prior to that date, the terms of the divorce decree can serve as proof.

Charitable Deductions:

  • All cash donations must be substantiated with a statement from the charity acknowledging the amount, and any donation exceeding $250 on any single day must be substantiated with a cancelled check and a statement from the charity. We do not have to see this to prepare your taxes; just keep it available in the event of an audit.

  • If you donated more than $250 of clothing, furniture, toys, etc (non-cash items) to Goodwill, Salvation Army, Vietnam Vets, Betty Griffin House, etc. we need a receipt with your tax papers. Donations of automobiles have special rules and special paperwork.

  • Items in fair condition are NOT DEDUCTIBLE. They must be good or better.

Some Tax Provisions that are still in effect OR are now extended:

  • The sales tax deduction is still available as an itemized deduction in lieu of state income tax paid or for people who live in states that do not have a state income tax.

  • The $250 Educator expense deduction for teachers grades K-12

  • Mortgage insurance premiums paid on a new home purchased after 12/31/06 are deductible

  • Military reservists can make penalty free withdrawals from IRAs and pension plans and they have penalty free access to unused amounts in their flexible spending accounts

  • If you do not itemize, you may take a credit for property taxes paid on real property as an addition to your standard deduction

  • Long-term capital gains rates of 0 and 15% are available through 12/31/2010

  • IRA direct distributions to charity for taxpayers age 70 and older up to $100,000 without paying tax on the distribution

Other important points of interest:

  • IRA contribution limit is still $5000 for 2010 & 2011 with a $1000 catch up contribution for individuals age 50+

  • The standard business mileage rate for 2011 is 51 cents per mile, up from 50 cents in 2010

  • The charitable mileage rate is still 14 cents and the moving and medical rates are 16.5 cents in 2010