2009 Filing Requirements for Most Taxpayers

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1 The following is a summary of 2009 tax information. Many of the most common tax deductions are explained below. Some credit s and deductions are phased out, or disallowed depending on the amount of your income. To keep the following a summary, exclusions and income limitations may or may not be explained below. Please contact me for more detailed information Filing Requirements for Most Taxpayers IF your filing status is.. AND at the end of 2009 File a return if your gross income was You were. at least. Single Under 65 $9, or older $10,750 Married filing jointly Under 65 (both spouses) $18, or older (one spouse) $19, or older (both spouses) $20,900 Married filing separately Any age $3,650 Head of household Under 65 $12, or older $13,400 Qualifying widow(er) with dependent child Under 65 $15, or older $16, Filing Requirements for Dependents If your parent (or someone else) can claim you as a dependent, use this chart to see if you must file a return. In this chart, unearned income includes taxable interest, ordinary dividends, and capital gain distributions. Earned income includes wages, tips, and taxable scholarship and fellowship grants. Gross income is the total of your unearned and earned income. Single dependents. Were you either age 65 or older or blind? No. You must file a return if any of the following apply. Your unearned income was over $950. Your earned income was over $5,700. Your gross income was more than the larger of $950, or Your earned income (up to $5,400) plus $300.

2 Yes. You must file a return if any of the following apply. Your unearned income was over $2,350 ($3,750 if 65 or older and blind). Your earned income was over $7,100 ($8,500 if 65 or older and blind). Your gross income was more than The larger of: $ 2,350 ($3,750 if 65 or older and blind), or Your earned income (up to $5,400) plus $1,700 ($3,100 if 65 or older and blind). Married dependents. Were you either age 65 or older or blind? No. You must file a return if any of the following apply. Your unearned income was over $950. Your earned income was over $5,700. Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Your gross income was more than the larger of $950, or Your earned income (up to $5,400) plus $300. Yes. You must file a return if any of the following apply. Your unearned income was over $2,050 ($3,150 if 65 or older and blind). Your earned income was over $6,800 ($7,900 if 65 or older and blind). Your gross income was at least $5 and your spouse files a separate return and itemizes deductions. Your gross income was more than The larger of: $2,050, or $3,150 if 65 or older and blind. Your earned income (up to $5,400) plus $1,400 ($2,500 if 65 or older and blind). Other Situations When You Must File a 2009 Return You must file a return if any of the four conditions below apply for You owe any special taxes, including any of the following. a. Alternative minimum tax. b. Additional tax on a qualified plan, including an individual retirement arrangement (IRA), or other tax favored account. But if you are filing a return only because you owe this tax, you can file Form 5329 by itself. c. Household employment taxes. But if you are filing a return only because you owe this tax, you can file Schedule H by itself. d. Social security and Medicare tax on tips you did not report to your employer or on wages you received from an employer who did not withhold these taxes. e. Write in taxes, including uncollected social security and Medicare or RRTA tax on tips you reported to your employer or on group term life insurance and additional tax on health savings account distributions. f. Recapture taxes.. g. Additional tax on a health savings account from Form 8889, Part III.

3 2. You received any advance earned income credit (EIC) payments from your employer. These payments are shown in Form W 2, box You had net earnings from self employment of at least $ You had wages of $ or more from a church or qualified church controlled organization that is exempt from employer social security and Medicare taxes. Standard Deductions IF Your Filing Status Is Base Amount Additional Amount for Blindness or Over Age 65 Single $5,700 $1,400 Married Filing Jointly $11,400 $1,100 Married Filing Separate $5,700 $1,100 Head of Household $8,350 $1,400 Qualifying Widow(er) With Dependent Child $11,400 $1,100 Dependent of Another $950 or Earned Income + $300 $1,100 or $1,400 single or HOH Personal and Dependent $3,650 Exemption Amounts and Phase out Type of Taxpayer Phase out Begins Phase out Ends Single $166,800 $289,300 Married Filing Jointly $250,200 $372,700 Married Filing Separate $125,100 $186,350 Head of Household $208,500 $331,000 Qualifying Widow(er) With Dependent Child $250,200 $372,700

4 Earned Income Credit (EIC) The EIC has been increased and expanded to include a third child for Listed are the maximum amounts. Beware! To be eligible for this credit, you must meet many rules not listed here. The EIC is available for all filing statuses except Married Filing Separate. The maximum EIC amounts for 2009 are as follows: With No Children $457, One Child $3043, Two Children $5028, Three Children $5657 Standard Mileage Rates Business Mileage Charitable Mileage Medical/Moving Mileage 55 cents/mile 14 cents/mile 24 cents/mile Regular Contributions $5, Traditional IRA Contributions Catch Up Contributions for Taxpayers 50 and over $ 6, Alternative Minimum Tax (AMT) ALTERNATIVE MINIMUM TAX (AMT): The Tax Increase Prevention Act of 2009 put the following changes for AMT into place for tax year 2009: Increased the exemption amount: Single or head of household $46,700 MFJ or qualifying widower $70,950 Married filing separately $35,475 Increased phase out brackets: Single or head of household $112,500 $299,300 MFJ or qualifying widower $150,000 $433,800 Married filing separately $ 75,000 $216,900

5 Nonrefundable credits that may offset AMT and regular tax: Dependent Care Credit for the elderly and permanently and totally disabled, Adoption credit, Child tax credit, Mortgage credit, Hope and lifetime learning credits, Lower income saver's credit, Energy credits, First time DC homebuyer credit. Congress has renewed the extensions for many deductions and credits scheduled to be expired. Some of them are: Non Taxable Combat Pay Educator Expenses Tuition and Fees Deduction State and Local General Sales Tax Deduction Student Loan Interest The modified phase out range for the student loan interest deduction has increased. Maximum Interest Deduction $2,500 Modified AGI Phase out Ranges : Married Filing Jointly (MFJ) $120,000 $150,000 Single/Head of Household (HOH) $ 60,000 $ 75,000 Medical Savings Account (MSA)

6 The range and maximum out of pocket expenses have increased. Individual Coverage $2,000 to 3,000 Family Coverage $4,000 to 6,050 Maximum out of pocket expenses: Individual coverage $4,000 Family coverage $7,350 Foreign Earned Income The maximum has increased to $91,400. Gifts The annual exclusion for gifts has increased to $13,000 and$133,000 for a spouse who is not an American citizen. Kiddie Tax The unearned income of child has increased to $1,900. For First Time Homebuyers: The New Homebuyer Credit

7 The American Recovery and Reinvestment Act of 2009 expanded the first time homebuyer credit by increasing the credit amount to $8,000 for purchases made in 2009 before Dec. 1. However, the new Worker, Homeownership and Business Assistance Act of 2009 has extended the deadline. Now, taxpayers who have a binding contract to purchase a home before May 1, 2010, are eligible for the credit. Buyers must close on the home before July 1, For home purchased in 2009, the credit does not have to be paid back unless the home ceases to be the taxpayer's main residence within a three year period following the purchase. First time homebuyers who purchase a home in 2009 can claim the credit on either a 2008 tax return, due April 15, 2009, or a 2009 tax return, due April 15, The credit may not be claimed before the closing date. But, if the closing occurs after April 15, 2009, a taxpayer can still claim it on a 2008 tax return by requesting an extension of time to file or by filing an amended return. Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the firsttime homebuyer credit. The credit: Applies only to homes used as a taxpayer's principal residence. Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar. Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed. For current home owners: The new law makes most current homeowners eligible for a tax credit of up to $6,500 when they purchase their next primary residence. Under the terms of the legislation, current homeowners must have lived in their home for five consecutive years over the previous eight to be eligible. Qualified home buyers can obtain the credit on homes purchased between Nov. 7 and the end of April That means they need a signed sales contract on a home before May 1, 2010, but they have until the end of June to close the sale. The income limits for current homeowners are the same as those for first time home buyers. Note: You do not have to sell your current home to qualify. Making Work Pay Credit This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with modified adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly. The maximum tax credit in 2010 for a single person is $400, and the maximum tax credit for joint return filers is $800. Instead of receiving a check from the government, most single taxpayers will see an adjustment to their tax withholding in their paychecks in 2009 and 2010, giving them about $45 extra per month for the rest of this year (married workers will receive an extra $65). If you're self employed, you can adjust your quarterly tax payments to benefit from the tax credit. Then you will claim the credit when you file your 2009 tax return next spring, bringing your tax bill in line with your reduced payments. The stimulus also provides a one time payment of $250 to recipients of Social Security, Railroad Retirement and Veterans Administration benefits.(people who applied for any of these benefits for the first time after January 31 don't get the money; only those on the rolls in November or December 2008

8 or January 2009 are eligible.) You'll get the money electronically or by check, depending on how you receive those benefits. Retired government employees who don't receive Social Security won't get a check, but they will get to claim a $250 tax credit when they file their 2009 returns. The American Opportunity Tax Credit Many of you with children in college are very much aware of the credits available for college tuition and related expenses. This credit was formerly known as the HOPE CREDIT. That credit is being renamed The American Opportunity Tax Credit and it has been enhanced under the Stimulus Act as follows: The amount of the credit available has been increased to a maximum of $2,500 per eligible student per year. An eligible student is defined as a student who is at least a half time student in a degree or other credential program. This represents an increase from $1,800 in prior years. The rate has been changed to 100% of the first $2,000 in expenses; 25% of the next $2,000, with a maximum $2,500 per year allowed. In other words, in order to take the maximum $2,500 credit, you must have eligible expenses of $4,000 or more. In the past, tuition and related expenses meant only expenses paid directly to the college. Under the new enhanced credit, eligible expenses can include text books, computers, internet access and certain other expenses not necessarily purchased from the educational institution. The credit will now apply to all four years of college instead of only the first two years as in the past. Also new under the enhanced credit, up to forty percent of the credit will be refundable. This means that if the credit exceeds your tax liability, up to 40% of the credit will be refunded to you instead of lost as in the past. As is the case with most of the tax benefits that Congress enacts, there are limits as to who may qualify. Most of these are called phase outs and that is what we have for the new American Opportunity Credit. The income limits or phase out levels have been dramatically increased to $80,000 in Adjusted Gross Income ($160,000 if you are married and file jointly). Life Time Learning Credit Even though the Lifetime Learning credit has not been changed, this is a good time to review it so that you are aware of an opportunity to take advantage of the tax breaks available for education expenses. This credit is available to anyone attending post secondary school. The student is not required to be at least a half time student, and in fact may even take only one course. In other words, the education expenses for the taxpayer, the taxpayer's spouse, or a qualifying dependent may qualify for the Lifetime Learning Credit.

9 The maximum credit allowed is $1,000 calculated at 20% of qualifying expenses. Different from the American Opportunity Credit, under the Lifetime Learning credit, this is the maximum credit allowed per tax return, not per student. There is no limit on the number of years that you can qualify for this credit. Qualifying expenses as defined by the regulations are, student activity fees and expenses for courserelated books, supplies and equipment are included in qualified education expenses only if the fees and expenses must be paid to the institution as a condition of enrollment or attendance. The Lifetime Learning Credit is also subject to phase outs based on income. As qualifying expense discussed in the above paragraph, the increase in the phase out level has not yet been addressed as it has for the enhanced American Opportunity Credit. Residential Energy Property Credit To qualify for the Non Business Energy Property Credit, the energy efficiency improvements and property expenditures must be made to the taxpayers principal residence(some property includes a second home, but not rental or business). The residential property must be located in the U.S. For 2009 and 2010, The credit equals 30% of the amount paid or incurred for: Qualified Energy Efficiency Improvements consist of insulation materials or systems primarily designed to reduce heat loss/gain; exterior windows; exterior doors; and certain metal or asphalt roofs installed on a dwelling unit with pigmented coatings or cooling granules to reduce heat gain. Residential Energy Property Expenditures to qualify, these expenses must meet specific standards set forth in IRC code. Some examples of qualified expenditures are; 1, electric heat pump water heaters, electric heat pumps; central air conditioner; natural gas, propane or oil water heaters; or burning biomass fuel stoves that meet specific energy efficiency standards; (2) qualified natural gas, propane, or oil furnaces; or qualified natural gas, propane, or oil hot waters boilers; and (3) advanced main air circulating fans. There is a $1,500 cap on aggregate credits claimed in 2009 and 2010 for all types of eligible expenditures (i.e., the $1,500 cap applies to the aggregate amount of credits claimed in both years combined). The manufacturer will provide the purchaser with a qualified property certificate. The certificate must be kept with the taxpayers records along with a receipt and/or invoice from the installer. Expenditures include installation costs except for Insulation, qualifying metal roofs, windows, doors, and skylights.

10 For more details visit Sales Tax Deductions for vehicle purchases The American Recovery and Reinvestment Act permits taxpayers to take a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction is available on new vehicles purchased from Feb. 17, 2009, through Dec. 31, In states that don't have a sales tax, the law provides a deduction for other taxes or fees paid. This deduction is available whether or not a taxpayer itemizes deductions on Schedule A. Autos used in a trade or business do not qualify, as these costs are generally deducted as a business expense. The deduction is limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify. An eligible motor vehicle is a passenger automobile, light truck or motorcycle which has a gross vehicle weight rating of 8,500 pounds or less. A motor home is also considered a qualified motor vehicle. There is no limit on the number of cars for which you can claim the deduction, provided each car is a qualified vehicle under the law. Business Benefits of the Stimulus Act Even though most of the publicity about the Stimulus Bill has been about those provisions geared toward individual taxpayers, the act includes numerous measures that benefit businesses, large and small. Most notable is the expanded depreciation and Section 179 expensing (in lieu of depreciation), longer Net Operating Loss (NOL) carrybacks, new hire tax credits, and energy incentives. 50% Bonus Depreciation The new bill extends the same provisions that were included in the 2008 stimulus act, providing a 50% first year bonus through 12/31/2009. The old bill was set to expire on 12/31/2008. It also makes it retroactive back to 1/1/2009. An additional year of bonus depreciation is offered through 2010 for some fixed assets. Property must be placed in service prior to 1/1/2010 or prior to 1/1/2011 for some property. In effect, you cannot take more than the allowed depreciation over the life of the asset you will just be able to take a bigger chunk in the first year. Vehicle Depreciation The new bill also raises the caps on vehicle depreciation by $8,000 for 2009 for vehicles purchased in

11 2009. Limits are now $10,960 for cars, and $11,160 for small trucks, SUV's and vans. Code Section 179 Expense Last year's stimulus act increased the amount of qualifying expenses for treatment under Section 179 from $125,000 to $250,000. This was set to expire at the end of 2008, but the new bill continues this level. NOL Carryback Provision Under the American Recovery and Reinvestment Act of 2009, small businesses, with average gross receipts of $15 million or less, were allowed to carry back net operating losses (NOLs) incurred in 2008 to claim a refund of taxes paid within the prior five years (previously there was only a two year carryback allowed). Now under this latest Act, the five year carryback has been extended and modified. The new five year carryback election is allowed for losses incurred in either 2008 or 2009 (i.e., it is not allowed for both years) and is permitted for all businesses, regardless of size. However, this provision is not available to any business who received TARP (Troubled Asset Relief Program) funds. Although there is no limit on the NOL carryback amount to the first four years, if carried back to the fifth year, the carryback amount is limited to 50% of the business s taxable income for that year. If a small business had elected to carry back a 2008 NOL under the provision in the American Recovery and Reinvestment Act, the limit of 50% of taxable income will not apply. Furthermore, if such an election had been made prior to the passage of the Worker, Homeownership, and Business Assistance Act, then the business may take advantage of the five year carryback period for both 2008 and the 2009 NOLs. The Act suspends the 90% limitation on the use of any NOLs for calculating AMT for an extended carryback year. Estimated Tax Payment Change Prior to 2009, estimated payments had to be based on 100% of the tax liability shown on a taxpayer's prior year's return. That requirement has been changed so that for 2009, estimated payments may be based on 90%, as long as the taxpayer s income is less than $500,000, and at least 50% of the income shown on the prior year's return is from a business.

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