Tax Provisions for Tax-Payers

With April 15 quickly approaching, a lot of people are digging out their W-2 or 1099 forms to begin filing taxes.

As with any federal tax preparation, filers will want to make sure they understand the significant changes within the IRS tax codes. As a CPA, here are the top 10 tax provisions that I believe could impact income tax preparation for 2009:

1. The first-time home buyer’s credit: Taxpayers should not forget that the well-publicized credit of $8,000 is available for those who purchased their first home in 2009. The IRS recently extended this credit so home buyers who sign a contract by April 30 and complete the sale by June 30 also can claim this credit.
2. Purchasing a new car: In Texas and other states without a state income tax, the IRS has allowed a deduction for the sales tax paid on the purchase of a new car for several years now.
3. Making work pay credit: Couples who earned less than $190,000 ($95,000 if single) in 2009 are eligible for a tax credit of 6 percent of their earned income, up to a limit of $800 ($400 if single). This is a major change, since virtually all returns filed will contain this credit in some form. Taxpayers can claim this credit on Schedule M of the tax return. This is a new form designed specifically for this credit.
4. Mileage rates: Business travelers can claim 55 cents per mile for business travel in 2009. The IRS will also allow 24 cents per mile for medical mileage, and 14 cents per mile for charitable mileage.
5. Unemployed benefits: For 2009, the first $2,400 of unemployment benefits received can be excluded from income. Previously, all unemployment benefits were taxable.
6. Losing a home during the housing crisis: Taxpayers who lost their homes during the housing crisis will not have to pay taxes on the amount the mortgage company wrote off on their debt. For example, if a taxpayer went into foreclosure on a home with a mortgage of $200,000 and the mortgage company sold the home for $185,000, the taxpayer will not have to claim the $15,000 difference as income.
7. Filing late fees: The penalties for filing late returns have increased. Now, if a return is more than 60 days late, the minimum penalty is $135 or 100 percent of the unpaid tax. In other words, late filers could end up owing double their original balance in a very short time.
8. Casualty losses: The minimum threshold for an event to qualify as a casualty must now be 10 percent of your income plus $500. Previously, it was the same percentage amount plus $100. This will make the casualty loss more difficult to claim.
9. Paying your taxes with credit cards: For those who pay off their tax liability with a credit card and incur a “convenience charge” to do so, that charge will now be deductible on their next itemized return.
10. Estimated tax thresholds lowered: Small businesses only need to pay in 90 percent of the previous