Welcome to Our Tax Tips Newsletter:
Continuing our effort to provide you with valuable, practical tax information, we will periodically update this page with useful income tax tips and income tax advice from the best sources -- information on issues that you commonly deal with. Be sure to check our newsletter from time to time to stay on top on of the latest and most effective tax strategies.
CompleteTax will provide income tax tips that will help you save money when it's time to file your tax returns. It's a good idea to use a well planned strategy so that you aren't surprised in April. Using CompleteTax Income Tax Preparation Software and keeping good records could mean the difference between paying a large chunk of money in April and receiving a big refund check. Use our income tax tips as part of your ongoing preparation.
Congress Leaves Tax Breaks in Limbo for 2010
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So preoccupied is the leadership in the Senate with its massive health care restructuring effort that routine, yet essential, legislative work on important tax matters has been ignored. As a result, dozens of tax provisions benefiting individuals, businesses and charities--tax provisions that Senate leaders claim they support--were allowed to expire on December 31, 2009. Tax extender legislation, as it is called, never came up for consideration in the Senate.
Downplaying their failure to act, Senate Finance Committee leaders announced that they plan to move forward with a $30 billion package for tax extenders early in 2010. Finance Committee Chairman Max Baucus of Montana and Ranking Member Chuck Grassley of Iowa said that they intend to enact the extension of the tax breaks "without a gap in coverage," meaning that the enacted provisions will apply retroactively to the beginning of 2010.
Ignoring the legal and practical problems created by failing to act in 2009 and planning retroactively applied legislation in 2010, Senators Baucus and Grassley simply said, "Expiration of these provisions makes it difficult for taxpayers to fully and effectively realize the intended benefits by creating uncertainty and complexity in the tax law. In an effort to provide a seamless extension of these provisions with the fewest disruptions and administrative problems, we will take up legislation as quickly as possible in the New Year."
Tax breaks for individuals extended in the bill include the optional itemized deduction of state and local sales taxes; the additional $500 standard deduction ($1,000 for joint filers) for real property taxes; the $4,000 deduction for qualified tuition and tuition-related expenses (reducing adjusted gross income); and the $250 deduction for classroom supplies purchased by school teachers (also reducing adjusted gross income). Also expiring after 2009 is the alternative minimum tax (AMT) "patch" which will result in millions of new taxpayers being subject to AMT in 2010. Neither the House nor the Senate has addressed this issue.
To learn more about the tax implications for the coming year, please read Congress Leaves Tax Breaks in Limbo for 2010.
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Income Tax Tips from the 2012 Tax Guide
Keeping Good Records
Everyone who pays taxes is required to keep accurate, permanent books and records. Income, expenses, gains, losses, and other items that affect income tax liability must be accurately accounted for. You should retain basic records showing the source of all income you receive. For any deductible item, you should retain documents proving the expense itself and proving that you paid it. To learn more about the documentation you must maintain, please read Keeping Good Records.
Filing Status and Exemptions
Although there are six marginal tax rates for all individual taxpayers, the dollar levels at which the different tax rates kick in depend on your "filing status" - whether you file your tax return as a single individual, as a head of household, or as married filing jointly or separately. Different amounts of tax apply to specific income levels depending on filing status. Once you determine your filing status, you need to know how many personal exemptions you can claim, since you can deduct $3,650 per exemption from your taxable income for 2009. To learn more on filing status and personal exemptions, go to Filing Status and Exemptions.
Writing Off Assets in the First Year
For the 2009 tax year, a special tax provision allows small businesses the option of claiming a first-year deduction for up to $250,000 of the cost of qualifying business assets purchased and placed in service during the year. To qualify for this expensing election, the assets that you purchase must be tangible personal property that you actively use in your business and for which a depreciation deduction is allowed. For more details on how to qualify for this first-year expense deduction, take a look at Writing Off Assets in the First Year.
Computing and Paying Income Tax
The basic formula for computing your federal income taxes can be summed-up in the following equations: Total income - adjustments to income = adjusted gross income (AGI); AGI - deductions and exemptions = taxable income. Taxes are then calculated based on the amount of your taxable income. From this initial tax bill, your allowable credits are subtracted, and any additional taxes are added, to arrive at the amount of taxes you actually owe for the year. To gain greater understanding for calculating and paying your income tax, please review Computing and Paying Income Tax.
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Tax News
Standard Mileage Rate Drops in 2010
The IRS has issued its 2010 standard mileage rates (SMRs) used to calculate deductions for the expense of operating a vehicle for business, medical, moving or charitable purposes. The SMR for business use will drop from 55 cents per mile in 2009 to 50 cents per mile in 2010; the SMR for medical use or moving will drop from 24 cents per mile in 2009 to 16.5 cents per mile in 2010; the SMR for use in the service of charitable organizations will remain the same as it has been in 2009--14 cents per mile in 2010. To learn more about this matter, please read Standard Mileage Rate Drops in 2010.
IRS Offers Tax Tips for 2009 Tax Returns
While the April 15 filing deadline is still three months away, time keeps on moving, and it will be here before you know it. Before tax season really heats up, you may want to consider some tips from the Internal Revenue Service (IRS) to help you with your tax preparation and return filing this year. First, start gathering your records. Compile any documents or forms you'll need when filing your taxes--receipts, canceled checks and other documents that support any item of income or any deduction you intend to take on your return. To find out more about the advice the IRS is offering, read IRS Offers Tax Tips for 2009 Tax Returns.
IRS to Regulate Tax Return Preparers
The IRS kicked off the 2010 tax filing season proposing to impose new registration, testing and continuing education requirements on tax return preparers. More than 80 percent of American households use a tax preparer or tax software to prepare and file their taxes. New, higher standards are intended to provide greater protection and better service for taxpayers, increased taxpayer confidence in the tax system and improved compliance with tax laws. For more on how this helps taxpayers, read IRS to Regulate Tax Return Preparers.
Unemployment Taxes Will Rise in 2010
Businesses hit hard by the recession during the past two years are in for the tax system's version of a follow-up sucker punch in 2010. In 35 states, the rate for unemployment taxes will rise (automatically, in most cases) due to the heavy toll absorbed by the state trust funds for the payment of unemployment benefits. Their trust fund balances and current rates of tax are insufficient to cover their ongoing costs for unemployment compensation (UC). The states collected an aggregate of only $31 billion in state unemployment taxes in federal fiscal year 2009 while spending nearly $80 billion for benefits. To learn more about how this affects employers and employees, go to Unemployment Taxes Will Rise in 2010.
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