David Kirkpatrick

September 13, 2010

February 16, 2010

New deductions and credits for 2009 tax year

Filed under: Business — Tags: , , , , , — David Kirkpatrick @ 1:27 pm

Here’s a handy list of ten new deductions and credits for this year’s taxes from Thomson Reuters.

From the link, numbers four and five — one for the employed and one for the unemployed:

4. Making work pay credit. Income tax withholding was reduced during 2009 to reflect the new making work pay credit, which slashes tax liabilities by up to $400 ($800 on a joint return). “Employers had to shoulder all the work of the withholding adjustment, but employees now need to claim the credit on their tax returns in order to hold on to that extra take-home pay,” Scharin explains. Tricky aspects of this credit arise from the eligibility rules; some folks whose withholding was reduced are not actually eligible for the credit. Ineligibility could arise because the credit phases out in the MAGI range of $75,000 to $95,000 ($150,000 to $190,000 for joint returns).

5. Unemployment compensation. Up to $2,400 of unemployment compensation benefits are completely tax-free in 2009. “These benefits are not included in your adjusted gross income, and that could help you to qualify for other tax benefits that have AGI restrictions,” Scharin points out.

October 20, 2009

UBS to clients …

Filed under: Business, Politics — Tags: , , , , — David Kirkpatrick @ 12:54 pm

… “oops.”

From the link:

UBS, the embattled Swiss bank that is being forced to divulge the names of about 4,450 account holders to the IRS, may have inadvertently tipped its hand on their identities by sending them registered letters through the U.S. Postal Service.

April 16, 2009

Obama’s tax return

Filed under: Business, et.al., Politics — Tags: , , , , — David Kirkpatrick @ 3:51 pm

For the very curious, here’s a PDF of the 43-page document.

The AGI? $2,656,902. Almost all of it royalties on his books.

March 17, 2009

Taxpayers worried about mistakes

There is a simple solution. Hire a qualified tax preparer, or better yet a licenced CPA to prepare your taxes. Unless your tax forms are kindergarten-level simple, a professional will save you more money than the expense.

From the link:

Taxpayers’ Fears of Errors and Oversights May Be Well Founded, CCH Survey Finds
RIVERWOODS, Ill.–(BUSINESS WIRE)– Most taxpayers are concerned they may be making costly mistakes or overlooking tax breaks that could save them money, according to findings from a nationwide CCH CompleteTax(R)survey.

The survey of more than 1,000 U.S. adults, commissioned by CCH and conducted by GfK Roper, found that nearly two in three (66 percent) taxpayers fear they may overlook tax breaks or make mistakes that could cost them in fines or penalties. At the same time, most taxpayers also were unable to determine which tax breaks may be most beneficial, indicating their concerns about costly oversights or mistakes may be well founded.

“It’s always important for taxpayers to understand what they can do to minimize their tax obligation, but it’s even more crucial in tough economic times when people are watching every penny,” said David Bergstein, CPA, a tax analyst for CCH CompleteTax, an online tax preparation and e-filing service for the do-it-yourself taxpayer. “Yet, many people are simply not up-to-speed on tax rules, which may mean they are paying more in taxes than required.”

Specifically, the CCH CompleteTax survey, also discussed in a podcast today, asked taxpayers about basic tax breaks. In each instance less than one-half of taxpayers were able to identify the most beneficial. For example:

  • Less than one-fourth could identify that tax credits are generally more advantageous than deductions;
  • Only about one-third identified the child-related tax break offering the greatest savings; and
  • Less than one-half identified the education-related tax break offering the greatest savings.

In addition, only about one-half of taxpayers report they are planning to contribute to tax-advantaged retirement plans in 2009, and the vast majority of taxpayers still perceive that getting a tax refund is better than owing taxes on April 15.

Take Credits When Eligible

Fewer than one in four individuals (22 percent) were able to answer correctly that a tax credit is generally more advantageous than a tax deduction of the same value, according to the survey.

“Tax credits save you more than tax deductions because they reduce your tax bill dollar for dollar,” said Bergstein.

A taxpayer in the 25-percent tax bracket, for example, claiming a $2,000 credit will reduce his tax bill by $2,000. However, if he claimed a $2,000 deduction, he will only reduce his tax bill by $500.

Know About Other Tax Breaks

Taxpayers also were generally unable to identify the most beneficial tax breaks tied to various life events.

Child-related tax breaks

When asked to identify which child-related tax break offers the typical taxpayer the greatest savings, about one-third (36 percent) identified the child credit, which generally is most likely to yield the greatest tax break to most taxpayers. One in four (24 percent) selected the dependent and child care credit and 23 percent selected the personal exemption. The remainder of those surveyed said they did not know the correct answer.

Exemptions are similar to deductions in that they remove a certain amount of a taxpayer’s income from being taxed. However, unlike credits, they are not a dollar-for-dollar reduction in a person’s tax bill. So even though the personal exemption for a parent with a child under 19 or a full-time student under 24 is $3,500 for 2008, the tax savings for someone in the 15-percent tax bracket, for example, would amount to only $525 ($3,500 x 15%).

The dependent and child care tax credit ranges from 20 percent to 35 percent of expenses for the first $3,000 in care for a child up to age 13 or an older child who is physically or mentally challenged. This can result in a tax savings of $600 to as much as $1,050 for someone with a very low income.

The $1,000 child credit is available to taxpayers with a child under age 17. Income restrictions apply to each.

“Raising children is expensive. But it’s significantly more costly if you are not aware of or taking advantage of the tax breaks for which you may be eligible,” said Bergstein.

Higher education tax breaks

The survey found that people overwhelmingly leaned toward the education deduction over the credits as offering the most tax savings. Specifically, two in five respondents (41 percent) said a deduction for higher education will save a qualifying taxpayer the most compared to only 16 percent choosing the Hope Credit and 14 percent the Lifetime Learning Credit as the bigger tax breaks. The remaining 29 percent said they did not know.

However, the Lifetime Learning Credit or the Hope Credit would likely offer a qualifying taxpayer a bigger tax break than the higher education deduction. The Lifetime Learning Credit is $2,000 per return based on expenses for post-secondary education and the Hope Credit is up to $1,800 per student based on expenses in the first two years of post-secondary undergraduate education. The deduction for higher education is up to $4,000 for qualifying taxpayers. Income restrictions apply to both the deduction and credits.

As a result, if a taxpayer in the 15 percent tax bracket, for example, takes a $4,000 tuition and fees deduction, it would be a $600 savings. In comparison a Lifetime Learning Credit of only $2,000 would reduce a qualifying taxpayer’s tax bill by the full $2,000. The benefit of a credit is a dollar-for-dollar offset rather than the percentage reduction in tax that a deduction provides.

“Tax rules also change so it’s important to keep current. For example, for 2009 and 2010, the Hope Credit is being renamed to American Opportunity Tax Credit; the credit amount is increasing and the coverage expanding,” said Bergstein. “So, it’s important to stay current so that you can maximize your tax savings.”

Retirement tax breaks

Several tax breaks also exist for saving for retirement. Taxpayers were not quizzed on which was the most beneficial, but on whether they plan to contribute to tax-advantaged retirement accounts in 2009. Slightly more than one-half of respondents (51 percent) indicate they will be making contributions; an additional 27 percent of eligible taxpayers will not be contributing at all and 18 percent are not contributing as they’ve already retired; the remainder are not sure of how much, if at all, they will be contributing.

Those planning to contribute include 30 percent who will be contributing about the same amount they did last year, 13 percent who will be contributing more and 8 percent who plan to contribute less than in 2008, the survey found.

“Many people have immediate demands on their finances given the economy, but they should also try to save as much as they can for retirement. Using the available tax benefits offered for IRAs, 401ks and other retirement accounts means more money being set aside for retirement and less being paid in taxes,” said Bergstein.

Refunds Are a Penalty, Not Reward

Finally, taxpayers were asked whether or not they believed it is better to receive a refund or to owe taxes on April 15. Only 7 percent answered correctly that it is better to owe some money, according to the CCH CompleteTax survey.

“Taxpayers still have the misperception that a tax refund is new-found money. It’s not. It’s your money. During the time you’ve left it with the IRS, you have not had it available for your use and you’ve earned no interest on it,” said Bergstein.

For example, rather than receiving a $1,000 refund, had the $1,000 been put in a savings account, even at very low interest rates, a taxpayer could reasonably earn an additional $30 in interest over a year. That may not seem like a lot but even that will cover the cost of using tax software to help prepare and e-file their tax return.

About the Survey Methodology

The nationwide telephone survey was conducted by GfK Roper on behalf of CCH CompleteTax from February 13-25, 2009, among 1,004 adults (age 18 and over). The margin of error on weighted data is +/- 3 percentage points.

About CCH CompleteTax

CCH CompleteTax, an online tax preparation and e-filing service for the do-it-yourself taxpayer, continues to set the standard when it comes to making online tax prep and e-filing easy, efficient and affordable. CCH CompleteTax offers comprehensive support to help taxpayers through each step of preparing and e-filing both federal and state income tax returns.

About CCH, a Wolters Kluwer business

CCH, a Wolters Kluwer business (CCHGroup.com) is a leading provider of tax, accounting and audit information, software and services. It has served tax, accounting and business professionals since 1913. Among its market-leading products are The ProSystem fx(R) Office, CorpSystem(R), CCH(R) TeamMate, CCH(R) Tax ResearchNetWork(TM), Accounting Research Manager(R) and the U.S. Master Tax Guide(R). CCH is based in Riverwoods, Ill.

Wolters Kluwer is a leading global information services and publishing company. The company provides products and services for professionals in the health, tax, accounting, corporate, financial services, legal, and regulatory sectors. Wolters Kluwer had 2008 annual revenues of EUR3.4 billion, employs approximately 20,000 people worldwide, and maintains operations in over 35 countries across Europe, North America, Asia Pacific, and Latin America. Wolters Kluwer is headquartered in Amsterdam, the Netherlands. Its shares are quoted on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Visit http://www.wolterskluwer.com for information about our market positions, customers, brands, and organization.


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CCH CompleteTax

Source: CCH CompleteTax

February 4, 2009

Tips on finding a tax professional

Filed under: Business — Tags: , , , , , , — David Kirkpatrick @ 2:37 pm

This six-part list from H&R Block is a good place to start if you’re looking for a CPA or a professional to prepare your taxes this year.

Unless your taxes are outrageously straightforward, I heartily recommend employing a professional. Most likely whatever the cost will be offset by the money they save you. And do not count on tax preparation software to maximize your return. Over time, informally, I’ve found competent preparation along with advice beats the software every time.

From the link:

The federal tax code has more than one million words, is several thousand pages long, and in 2008 alone, there were 500 changes to the code, or more than one per day*. More than ever, Americans need the counsel of trusted tax professionals to decipher the complex tax code and apply it to their unique financial situations.

“The tax code is like a thousand-page instruction manual that’s always changing. Reading, interpreting and applying this technical document is no easy feat for the untrained eye,” said Amy McAnarney, executive director of The Tax Institute at H&R Block. “In this tough economic climate, taxpayers can’t afford to leave money on the table. So, they should only work with a tax advisor who’s up-to-date on the latest tax law changes.”

H&R Block (NYSE: HRB) offers six tips to help taxpayers find the right tax professional:

1. Ask about experience. Inquire about the tax preparer’s years of experience and continuing education. Does the preparer have the tax knowledge to accurately represent your interests? Many Americans don’t realize how important up-to-date training is when selecting a tax advisor. A recent survey from The Tax Institute at H&R Block found 76 percent of participants failed to list “knowledge of current tax laws” as an important trait when picking a tax professional**. One of the top traits survey participants chose? Location.

“Convenience is important but when it comes to taxes, knowledge can translate into dollars saved,” said McAnarney. “The tax code is always changing, so it’s critical taxpayers select a tax professional who receives ongoing education and training.”

December 20, 2008

IRS 2008 tax guide now online

Filed under: Media, Politics — Tags: , , , , , — David Kirkpatrick @ 4:44 pm

Come one, come all and get the latest update to the US tax code from the Internal Revenue Service. For free!

The release:

Comprehensive Tax Guide Available for Free at IRS.gov

IR-2008-142, Dec. 17, 2008

WASHINGTON — The IRS has placed its comprehensive tax guide for individuals on  IRS.gov, updating it for tax year 2008. The updated on-line version of IRS Publication 17, “Your Federal Income Tax,” contains more than 900 interactive links.

Publication 17 has been updated with important changes for 2008, including information on the new recovery rebate credit, new first-time-homebuyer credit, and an additional standard deduction for real estate taxes.  It has been published annually by the IRS for more than 65 years and has been available on the IRS Web site since 1996.

As in prior years, the publication provides information on how to file an individual tax return, what to include as income, how to calculate capital gains and losses, how IRAs and other expenses can affect how much income to report, whether to take the standard deduction or itemize, and how to figure taxes and credits. 

Publication 17 is available on line, however, those who do not have access to the Internet can call 1-800-829-3676 to request a free copy from the IRS. Printed copies will be available in January 2009.

July 15, 2008

A meaner, tougher IRS?

Filed under: Business, Politics — Tags: , , , — David Kirkpatrick @ 1:13 pm

Looks that way. The IRS is heavily litigating tax shelter schemes and winning regularly in court. This aggressive stance toward taking disputes to court has been growing over the last several years and looks to be what will become the standard modus operandi of the IRS for all manner of disputes.

From the CFO.com link:

LILOs and SILOs haven’t been the only shelters in the IRS’s crosshairs. Last April, in a case involving a so-called intermediary transaction, a Texas federal court judge decided that Enbridge Energy was liable for more than $155 million in past and future taxes, plus penalties. Enbridge had bought stock in a pipeline company in 2001 through what was eventually deemed a sham company, thus gaining tax deductions.

Even companies that aren’t harboring any tax shelters on their books may not be safe. Experts say the IRS’s treatment of all types of tax disputes is changing as the agency applies the tough tactics it used in shelter cases to more-ordinary transactions. Gerald Kafka, global chair of Latham & Watkins LLP’s tax-controversy practice group, calls this “the trickledown effect,” which includes more national coordination on issues, a greater involvement of attorneys, and more requests for information from corporate advisers and other third parties. This new approach, coupled with an unprecedented amount of new disclosure required from companies, has made the IRS a fundamentally tougher opponent, both in court and out. “The odds are overwhelmingly in our favor,” says Donald Korb, chief counsel for the IRS since 2004.

May 23, 2008

McCain’s medical records

Filed under: Politics — Tags: , , , , — David Kirkpatrick @ 12:29 am

I sense this becoming a real problem as the real campaign ramps up.

Putting bad news out on Friday afternoon is an old dodge that really no longer works for a major story in the now internet political universe. Putting it out on a holiday weekend is a more damning dodge, and not allowing a full vetting of the documents will only invite more scrutiny and questions.

A similar issue is brewing with McCain’s wife not releasing her separately-filed tax reports. I don’t think it’s pertinent to the presidential race, but it’s going to be an issue and will become a real sore spot as the race develops. (Hate to bag on McCain’s age, but I can’t resist the joke that both issues may become bed sores if left  ignored and “untreated” …)

From the link:

As Americans kick off the first holiday weekend of the summer Friday, Sen. John McCain will release 400 pages of his medical records to a handpicked group of reporters who can neither photocopy nor keep the documents, illustrating the sensitivity the campaign places on the 71-year-old candidate’s age and health.

April 15, 2008

The Straight Dope on the federal income tax

Filed under: Business, et.al., Politics — Tags: , , , — David Kirkpatrick @ 5:08 pm

For the edification of US readers facing the tax man today, here’s Cecil Adams on income tax and the Thirteenth Amendment.

The shortest verdict from the link:

Despite judicial rejection of every imaginable antitax argument, the protesters keep trying them anyway.