What’s new for the 2009 tax season?

Here are some important changes you may want to know when preparing your 2009 tax return. Our CPA firm is prepared to assist you with questions regarding these items as well as all other tax items that may affect you.

The American Recovery and Reinvestment Act
There are several updates that have an effect on individual tax returns due April 15, 2010 including tax incentives for first-time homebuyers, sales deductions for new vehicle purchases, tax credits for college tuition, credits for energy efficient homes, and partial exclusions for people who received unemployment benefits.

Increased Standard Deduction
The 2009 standard deductions have increased to $11,400 for married couples filing a jointly, $5,700 for singles and married individuals filing separately, and $8,350 for heads of household.

IRA Deduction
You can take a full IRA deduction if you are covered by a retirement plan at work and your modified adjusted gross income is $55,000 or less (single or head of household) or $89,000 or less (married filing jointly). You are allowed to take a partial deduction if your modified adjusted gross income is more than $55,000 but less than $65,000 (single or head of household) or more than $89,000 but less than $109,000 (married filing jointly).

Social Security Tax
The maximum amount of wages subject to the social security tax for 2009 is $106,800. This is up from $102,000 in 2008. The Medicare rate remains at 1.45 percent, with no limit to the amount of wages subject to the tax.

Personal Exemptions
You can deduct $3,650 on your 2009 tax return for each personal exemption. A portion of that exemption is lost if your adjusted gross income is higher than $125,100 for those who are married but filing separately, $166,800 for single individuals, $208,500 for heads of households, and $250,200 for those who are married filing jointly. Each exemption cannot be decreased to less than $2,433.

Kiddie Tax
A child can have up to $1,900 of taxable investment income before it is taxed at the parent’s rate. This is up $100 from 2008.

Failure to File Income Tax Return Penalty
You may be subject to a failure to file fine if you do not file your tax return by the due date (including extensions). The minimum penalty for returns filed more than 60 days after the due date is the lesser of 100% of the tax due on the due date or $135.

2009 Standard Mileage Rates
The new standard mileage rate for business use of a vehicle is 55 cents per mile. For operating your car for medical reasons or for a deductible move, the standard mileage rate is now 24 cents per mile. The rate for using a car to for charitable objectives continues to be 14 cents per mile.

New Vehicle Sales Tax Deduction
If you bought a new vehicle after February 16, 2009 and before January 1, 2010, you can deduct the state and excise sales and local taxes paid on the vehicle. If you do not itemize deductions, this is still available by adding the amount of taxes paid to your standard deduction. This is available for the purchase of new cars, light trucks, motorcycles, and more homes. Taxes paid on the first $49,500 of the cost of the vehicle are eligible for this deduction. The amount of the deduction is reduced for married couples who are filing jointly with adjusted gross income over $250,000 and for single individuals with adjusted gross income over $125,000.

Baker and Company, PC is a Certified Public Accounting firm located near downtown Dallas. Ford Baker has been a CPA serving the DFW Metroplex, Plano, Collin County, and all of North Texas for 20 years. The firm has grown to nine professionals who stand ready to assist small business and individuals on taxation issues, tax preparation, small business accounting using QuickBooks, PeachTree, and a variety of other solutions and/or assistance with financial statement preparation and reporting to lenders. For more information about these changes in the tax law or what we can do to help you, please feel free to contact our office at 214.827.9118 and schedule a time we can meet.

 

IRS CIRCULAR 230 REQUIRED NOTICE
IRS Regulations require that we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended to be used and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code or for the purpose of promoting, marketing or recommending to another party any transaction or tax-related matter.