David Kirkpatrick

March 12, 2009

Tax break hints from AICPA

Helpful tax hints curtesy of the American Institute of Certified Public Accountants.

From the link:

AICPA to Taxpayers: Take Advantage of Tax Breaks to Help Offset Economic Hard Times
PR Newswire via NewsEdge :

WASHINGTON, March 11 /PRNewswire-USNewswire/ — The American Institute of Certified Public Accountants is reminding taxpayers to use the special provisions in the tax law that can help them save money and deal with the current difficult economic environment.

“In these tough economic times, taxpayers need every advantage they can get,” said Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. “Losing a home to foreclosure, losing money on investments, and/or losing a job are some of the most stressful events in people’s lives, and they need these breaks.”

Taxpayers who lost their homes to foreclosure or had their mortgage restructured get a pass on paying taxes on the amount of debt the lender discharged under the Mortgage Forgiveness Debt Relief Act of 2007. The exception applies only to principal residences, not to second homes or vacation homes. Married taxpayers can exclude up to $2 million and single taxpayers up to $1 million.

The Mortgage Bankers Association’s National Delinquency Survey reported on March 5 that mortgage delinquencies are continuing to climb, making it increasingly important that taxpayers remember this tax break. According to the survey, the seasonally adjusted delinquency rate for one-to-four-unit residential properties rose to 7.88 percent of all outstanding loans at the end of 2008. The 2008 fourth-quarter increase was up 89 basis points from the third quarter of 2008.

Individuals who sold investments at a loss in 2008 can use those losses to reduce their 2008 tax bill. First, they can use the losses to offset any profits made from selling stocks, bonds or property. Second, up to $3,000 of losses not used to offset capital gains can be deducted from other income. If losses exceed these amounts, the remaining losses can be applied in future years.

“If you lost your job and moved to take a new one, remember that moving expenses you paid are deductible, but only if the new job is at least 50 miles from the previous job site and you stay for a certain period of time,” said Ochsenschlager. “If you did not have a full-time job before the move, then the new job has to be at least 50 miles from your old home. Also, be sure to keep good records of your moving expenses and note that meals are not a deductible moving expense.”

Ochsenschlager also added some job search expenses, such as the cost of printing a resume or hiring a consultant to help with the job search, are deductible.

It’s important that taxpayers not procrastinate. “Always file your tax return on time – even if you do not have the money to pay the entire amount,” said Ochsenschlager. “The IRS often allows taxpayers to pay their tax bill in installments. If you are getting a tax refund, file your tax return as soon as possible, so you can put the money to work for you rather than making an interest-free loan to Uncle Sam.”

About the AICPA

The American Institute of Certified Public Accountants (www.aicpa.org) is the national, professional association of CPAs, with more than 350,000 CPA members in business and industry, public practice, government, education, student affiliates, and international associates.

It sets ethical standards for the profession and U.S. auditing standards for audits of private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination.

The AICPA maintains offices in New York, Washington, D.C., Durham, N.C., Ewing, N.J., and Lewisville, Tex.

SOURCE American Institute of Certified Public Accountants

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