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Tax Tips Newsletter
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March 2009 - Vol 4, Issue 3
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Linda Head Short 0608

This issue deals with the new Federal tax law changes for 2009. Some of them you will start to see immediately in your paycheck.

If your tax information is in the office, we are working on your returns. If it is not, please get your information in as soon as possible. We will make every effort to get your returns done, or we will be contacting you regarding your extensions.

The office will be closed from April 16 - April 19th.

1040 with pen and calculator
You're probably aware that President Obama signed the "American Recovery and Reinvestment Act of 2009" on February 17. But have you checked to see what the new law contains that could benefit you? Here's a quick look at the law's tax changes and who's likely to benefit.

* MAKING WORK PAY CREDIT. Employees and self- employeds may qualify for a tax credit of up to $400 for singles and $800 for couples to be paid through lower withholding on paychecks or in a lump sum when tax returns for 2009 and 2010 are filed. The credit phases out if income exceeds $75,000 for singles and $150,000 for couples.

* FIRST-TIME HOMEBUYER CREDIT. Those who buy a first home before November 30, 2009, may be eligible for a refundable credit of 10% of the purchase price, up to a maximum of $8,000. Again income phase-outs fall at $75,000 for singles and $150,000 for couples. If the home isn't sold for at least three years, the credit does not have to be paid back.

* NEW CAR DEDUCTION. Those who buy a new vehicle from February 17 through December 31, 2009, may take an above-the-line deduction for state and local sales and excise taxes on the first $49,500 of the vehicle's cost. In general, this includes new cars, SUVs, light trucks, motorcycles, and even motor homes. The income phase-out starts at $125,000 for singles and $250,000 for couples.

* PAYING FOR COLLEGE. The Hope education credit is renamed the "American Opportunity Tax Credit," is increased to $2,500, and applies to four years of college, not just the first two. In addition, 40% of the credit is now refundable. Income limits apply. Another break for those paying higher education expenses: In 2009 and 2010, funds in Section 529 college plans can be used tax-free to pay for students' computers, computer technology, and Internet fees.
Happy Businessman
The "American Recovery and Reinvestment Act," signed by President Obama on February 17, 2009, contains a number of provisions that will affect businesses. Here's a brief overview.

* BONUS DEPRECIATION. First-year 50% bonus depreciation for new business equipment purchases is extended through 2009. Bonus depreciation is extended through 2010 for property with a 10-year or longer recovery period, for certain transportation property, and for certain aircraft.

* INCREASED EXPENSING. Code Section 179 first- year expensing of new and used business equipment purchases is extended through 2009 at the higher limit of $250,000. The deduction is reduced once purchases for the year exceed $800,000.

* LOSS CARRYBACK PERIOD. The new law allows businesses with average gross receipts of $15 million or less to carry back net operating losses for up to five years, rather than the normal two years. This extension applies only to losses incurred in 2008.

* WORK OPPORTUNITY CREDIT. Two new categories of targeted groups are eligible for the work opportunity tax credit if hired in 2009 or 2010: unemployed veterans and disconnected youth.

The new law is a massive 1,000 page document, so this quick review by no means covers all the provisions that may affect your business. For guidance in your business tax planning under this latest law, contact our office.
Golden Egg
The Tax Tip this week asks "Who Owes Self- Employment Tax?" If you received a 1099 for non- employee compensation, you may be subject to self- employment tax.

The Business Tip of the Month deals with finding cost savings for your business.

The Financial Tip of the Month deals with considering ways to streamline your housing and food costs.

The Fraud Alert has to do with foreclosure scams.

Photos © Bigstockphotos.com, istockphoto.com

Sincerely,
Linda Heineman
Linda L. Heineman, CPA, CITP

phone: 626-577-0979
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