Tax Tips
Tax Tips is published by American Business Support, Inc. (ABS) to help keep you informed on Federal & State income tax related matters. Due to space limitation of this publication, only highlights of the tax code are covered. It is important, therefore, that you contact us for more details before using information on this web site in making tax related decisions or preparing your tax returns. We can be reached at (507) 288-2506 or ambussup@aol.com.
Prepare and EFile your form 1040 and your state tax return yourself for $15 to $20. Just click here--> www.1040.com/tx (see upper right hand corner of the new page)
Additional Deductions: Itemizers can now deduct the larger of income tax or sales tax. Also qualified education expenses up to $4000 and an educators out-of-pocket deductionn up to $250 can be taken even if you don't itemize. Be aware that Minnesota has not adapted all of these changes.
Minnesota Property Tax Refund: Renters should receive a CRP form from their landload that is used by your tax preparer to figure the size of your property tax refund (if any). Home owners use their current year Property Tax Statement for this purpose. As you might not receive this statement until after April 15th be sure to give ABS a copy of this statement upon receipt so they can determine if you will get a refund. These refunds are not part of the income tax return and checks are not sent out until after 8/ 1/08.
Additional Fixed Asset Write Off for Business: This bill includes capital equipment that can be expensed at the lessor of $250000 (was $125000) or net profit for tax year 2008. Phase out starts at $700000 of purchased section 179 property. SUV's are limited to $25000. In addition a special first year 50% depreciation allowance for new capital equipment is available. Because the Internal Revenue Code (IRC) for these deductions are complex it is suggested that you contact ABS to review these matters.
Standard Mileage Rates: For year 2009 the standard business mileage rate is 55.0 cents per mile, medical/moving it is 24 cents per mile and for charity 14 cents per mile. For year 2008 the standard business mileage rate is 50.5 cents/mile from 1/1/08-6/30/08 & 58.5 cents/mile from 7/1/08-12/31/08; medical/moving 19 cents/mile from 1/1/08-6/30/08 & 27 cents/mile from 7/1/08-12/31/08; and charity 14 cents/mile.
Business or Hobby?: Are you working full time and have a business on the side? The IRS might rule that you have a hobby and not a business. Losses then are limited to revenue and aredeductible if you itemize and only for those losses over 2% of your Adjusted Gross Income (AGI). An ABS representative can help you prevent this IRS ruling or help you during an audit.
Taypayer Rebate: This bill gives a rebate up to $600 to individual filers & $1200 to married filing joint (MFJ) filers plus an additional $300 for each child. Refunds will start in 2008 based on your 2007 income tax return income. Phase out of these amounts start with income of $75000 for single & $150000 for MFJ taxpayers. Also other reasons can cause your refund to be less. You will get another chance to receive the full amount on your 2008 income tax return and ABS can handle this for you.
Itemize or Standard Deduction: Often one can reduce income taxds by itemizing deductions vs taking the standard deduction. Some expenses are medical, state tax, property tax, car tags, mortgage interest, mortgatge insurance, investment interest, charitable contributions, tax preparation fees, employee expenses, investment expenses, etc. As a special note, ALL contributions must have a receipt or cancelled check, therefore, it is recommended that all cash contributions be by check (including the Salvation Army kettel donation). Also all property contributions must be in good or better condition. It is recommended that you contact ABS to assure that you are taking full advantage of all deductible items and are following the Internal Revenue Code in taking these deductions.
Why Pay Estimated Taxs: If you are self-employed or have income from shources that don't withhold income tax you might be subject to underpayment penalities if you don't make quarterly estimated tax payments. Most state have similar requirements. In addition, if you are self-employed you have to pay not only income tax but self employment tax. As tax law in this area is complex it is recommended that you contact ABS to learn more about this subject.
Home Foreclosures or Loan Forgiveness: The realestate market and many disasters have caused more home foreclosures or loan forgiveness by banks. If your bank has forgiven some or all of your loan balance or has foreclosed there can be some real income tax consequences. It is recommended that you contact ABS before any of these events occur so you can be briefed on potential income tax consequences.
Alternate Minimum Tax (AMT): If you itemize and have high medical expenses, second mortgages/home equity loans not used for home purchases/improvements and miscellaneous expenses you might have to pay AMT. Some other items that effect AMT are incentive stock options, asset depreciation and etc. AMT was designed in the 1960's to prevent the very top US wage earners from avoiding tax. Because AMT is not indexed for inflation like regular tax brackets more and more tax payers are moving into the sites of this tax. In 2009 the exemption amount is $70950 for married filing joint/surviving spouses and $46700 for single/head of household filers. It is recommended you contact ABS on this complex AMT law
Minimum Wage: The federal minimum wage effective 7/24/09 is increased to $7.25/hour from $6.55/hour.
