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2009 Tax Law Changes
There were several tax law changes for 2009. Here is a link to the IRS page which goes into detail on all of them:
Dallas Tax Expert Summary of 2009 Major Tax Changes
Social Security and Medicare
For 2009, the Medicare tax will remain at 1.45% while Social Security remains at 6.2%. The wage limit, or Social Security maximum, has been raised to $106,800 - an increase of $4,800 over last year's maximum.
Standard Deductions in 2009
Standard Deduction rates that apply to 2009 returns have increased from their 2008 levels. The standard deductions that apply in 2009 include:
||Single - $5,700
||Married filing separately - $5,700
||Head of household - $8,350
||Married taxpayers filing jointly / qualifying widow(er)s - $11,400
||Married taxpayers filing separately - $5,700
The amount you can deduct for each exemption you can claim on your federal income taxes has increased again in 2009. The 2008 value of $3,500 has increased to $3,650 in 2009.
Mileage Deduction Rates
The following table outlines the standard mileage rates for the tax year 2009:
Mileage Deduction Rates 2009
55.0 cents per mile
14.0 cents per mile
24.0 cents per mile
Earned Income Credit Increase
The maximum earned income tax credit for low and middle-income workers and working families with two or more children is $5,028 in 2009, up from $4,824 in 2008. The qualifying income limit for the credit for joint return filers with two or more children is $43,415 in 2009, up from $41,646.
New Education Credits
The American Opportunity Tax Credit is a refundable tax credit for undergraduate college education expenses. This credit provides up to $2,500 in tax credits on the first $4,000 of qualifying educational expenses. The tax credit is scheduled to have a limited life span: it will be available only for the years 2009 and 2010, unless Congress decides to extend the credit to other years. The credit is worth up to $2,500 on the first $4,000 of qualifying educational expenses, which include course materials as well as tuition. The American Opportunity credit applies to all four years of undergraduate college education. The credit is gradually reduced (or "phased out") for income from $80,000 to $90,000 (or $160,000 to $180,00 for joint filers).
There are many other changes to the law and Mike Johnson, E.A. would be happy to meet with you to discuss which may benefit you.
Most Tax Woes Avoidable
Treasury Secretary Geithner, Others Made Common Mistake
NAEA National Office, WASHINGTON, DC, January 23, 2009
The juxtaposition of two very divergent news items this week provides fair warning about the hazards of the tax season just ahead and what can be done to avoid them. Just about the time that Treasury Secretary-nominee Timothy F. Geithner revealed that he had prepared his erroneous tax return using an over-the-counter tax prep software program, the United States AttorneyϦfice in California was releasing details about a case that resulted in an 11-year sentence being handed down to Abdul Wahid. He is the Chino Hills (CA) man who operated several tax preparation businesses that defrauded both clients and the Internal Revenue Service.
In the case of Mr. Geithnerಥturn, heୡde it clear that he is not blaming the software. Nor, according to a story in The Washington Post, should he. In that story, Fernando Flores, a research assistant at the U. N. Economic Commission for Latin America and the Caribbean and a tax preparation volunteer assisting his American colleagues working for the international agency, is interviewed and reveals that he, too, uses an over-the-counter tax program崠with a bit of a tweak. By way of background, employees of international agencies do not receive a W-2 statement as most U. S. employees do. Instead, international agency personnel receive a statement of earnings either as a Form 1099 or as a year-end tally prepared specifically by the agency. To file an accurate U. S. tax return, according to the article quoting Mr. Flores, citizens must delve into the worksheets used in the software?[F]ilers are able to override the system and force it to calculate the self-employment tax owed.?br>
According to Robert Kerr, Senior Director of Government Affairs for the National Association of Enrolled Agents (NAEA), the trade group representing independent tax preparers who are licensed by the federal government, ing how to override a computer program takes immense skill, know-how, and㰥cially in the case of tax preparationmous courage. You堭arching off into uncharted territory, and in the main, itࡠvery dangerous idea. Youࢥ far better off using the services of a competent, professional, licensed tax preparerﲠinstance, an enrolled agent诳e career requires continuing education that provides the basis for asking the technical and nuanced questions that yield the proper result the first time around.?br>
Or, as Danny Underwood, EA, President of the Florida Society of Enrolled Agents is fond of saying: Ḡprograms are no substitute for tax knowledge.?/font>
Although mistakes in using an over-the-counter program are far more common than one might believe, the instances of unscrupulous preparer, as in the cases of Mr. Wahid, are insidious and have dire consequences for the unsuspecting filer and for the American people.
On Thursday, the Justice Department announced the sentencing of Abdul Wahid to an 11-year prison term earlier this month. Wahid not only admitted to defrauding customers of his tax preparation business, he further defrauded unwary customers by continuing to operate his scheme while out on bond. And while his clients face not only uncertainty about the whereabouts of their money, they will need to face the IRS, as well. Adding the final insult to all this injury, it was also revealed that Wahid failed to file his personal returns for the years 2002 through 2006, attempting to evade payment of nearly $1 million in federal taxes. The case was investigated by the Treasury Inspector General for Tax Administration (TIGTA), IRS-Criminal Investigation, the FBI, and the Social Security Administration.
Commenting on this egregious fraud, Californian David Hatt, EA, President of NAEA said, 촨ough taxpayers are ultimately responsible for the information reported on their returns, millions rely on programs or individuals to prepare correct returns.
⡵dulently or incompetently prepared tax returns are not victimless crimes. Law-abiding taxpayers are stuck with the tab, and those who are swindled by unscrupulous preparers are left dealing with the consequences天t, fines, additional taxes and interest. And taxpayers who find themselves in an adverse position with the IRS because they owe back taxes, didnle taxes, or knowingly filed a false return, should consider contacting a licensed tax preparer to help them set the record straight.
lled agents can make filing tax returns far less perilous. Their competency, demonstrated through fulfillment of continuing education requirements, and federal license makes them the most reliable source for tax advice over the long haul,?Mr. Hatt concluded.
The National Association of Enrolled Agents is a nonprofit membership organization dedicated to representing, promoting and enhancing the enrolled agent (EA) profession. EAs are unique as the only group of tax practitioner specialists required to maintain their credentials through continuing education reported directly to the Internal Revenue Service. NAEA provides a national, toll-free EA Referral Service hotline, (800) 424-4339, for taxpayers seeking the services of an enrolled agent. NAEAץb Site (www.naea.org) includes an online referral of licensed tax preparers available to the public.