The following message was received from a friend and colleague who is a financial planner. I am forwarding the information to you, as it captures the important rules to qualify for this new deduction:
If you're purchasing a new car by the end of the year, you may benefit from a temporary new deduction created by the American Recovery and Reinvestment Act, which was signed into law in February. As a result of this legislation, if you purchase a new passenger automobile, light truck, or motorcycle (vehicles must have a gross weight rating of no more than 8,500 pounds) on or after February 17, 2009, and before January 1, 2010, you'll generally be able to deduct any state or local sales and excise tax you pay on the purchase on your 2009 federal income tax
return. New motor home purchases can qualify as well.
Individuals who itemize deductions on Form 1040, Schedule A, can include state or local sales and excise tax as part of their deduction for taxes paid. If you don't itemize deductions, you can deduct the qualifying sales and excise tax as part of your standard deduction.
There are, however, a couple of limitations:
• The amount of sales and excise tax that you can deduct is capped at the amount that would be paid on a vehicle with a purchase price of $49,500. So, if you purchase a $100,000 motor home, only the sales and excise tax attributable to the first $49,500 of your purchase price is deductible.
• You're not entitled to a deduction if your modified adjusted gross income (MAGI) is greater than $135,000 ($260,000 if you are married and file a joint return). And you're only entitled to a partial deduction if your MAGI is between $125,000 and $135,000 (between $250,000 and $260,000 if you are married and file a joint return).
Note: For 2009, you already had the option to deduct general state and local sales tax in lieu of state and local income taxes--the new rules allow you to deduct the state or local sales and excise tax attributable to a new vehicle purchase in addition to state and local income tax. The new rules are also more generous in cases where your state imposes sales tax on a new vehicle purchase at a rate that's higher than the general sales tax rate: the temporary deduction rules allow you to deduct the actual tax paid (subject to the limits noted above) instead of limiting you to the tax that would have been paid under the general sales tax rate.
Sunday, May 17, 2009
Monday, May 11, 2009
Commuter Tax Breaks Benefit Business!
Those who take public transportation can use pretax dollars for commuting expenses. Commuting benefits include mass transit costs, vanpools and certain types of parking arrangements. Employers save by paying less in payroll taxes, while reducing their carbon footprint, and boosting employee morale. The cost to administer the program is minimal making the program a win-win situation for all parties. For more information, go to www.exercisetheright.com
Sunday, April 12, 2009
This year, the Internal Revenue Service is offering a new way to file an extension request for free.
This year, anyone, regardless of income, can e-file their extensions at no cost from a home computer using IRS’s traditional FreeFile or the new FreeFile Fillable Forms introduced this season. E-filing a request for an extension using either form of FreeFile is safe and secure, the IRS said, and taxpayers will receive a confirmation to keep with their records. However, as always, the extension requests need to be filed by April 15.
The IRS expects to receive 1.9 million extension requests electronically this year. A total of almost 10 million extension requests are expected during 2009 compared with 9.5 million extensions received during 2008.
The extension gives taxpayers until Oct. 15 to file their tax returns. An extension does not give the taxpayer an extension of time to pay. Those who owe taxes can make a payment when they file the extension either by mailing a check or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments. Taxpayers can get an automatic six-month extension of time to file their tax returns by filing Form 4868, "Automatic Extension of Time to File."
Taxpayers can e-file the extension from a home computer or through a tax professional who uses e-file.
Some taxpayers can wait until after April 15 to file a return, pay any taxes due and make IRA contributions for 2008. As a general rule, those eligible get the extra time without having to ask for it. Eligible taxpayers include members of the military serving in Iraq, Afghanistan or other combat zone localities. Normally, the postponement is until at least 180 days after the service member leaves the combat zone.
This year, anyone, regardless of income, can e-file their extensions at no cost from a home computer using IRS’s traditional FreeFile or the new FreeFile Fillable Forms introduced this season. E-filing a request for an extension using either form of FreeFile is safe and secure, the IRS said, and taxpayers will receive a confirmation to keep with their records. However, as always, the extension requests need to be filed by April 15.
The IRS expects to receive 1.9 million extension requests electronically this year. A total of almost 10 million extension requests are expected during 2009 compared with 9.5 million extensions received during 2008.
The extension gives taxpayers until Oct. 15 to file their tax returns. An extension does not give the taxpayer an extension of time to pay. Those who owe taxes can make a payment when they file the extension either by mailing a check or by several electronic payment methods, such as electronic funds withdrawals from bank accounts and credit card payments. Taxpayers can get an automatic six-month extension of time to file their tax returns by filing Form 4868, "Automatic Extension of Time to File."
Taxpayers can e-file the extension from a home computer or through a tax professional who uses e-file.
Some taxpayers can wait until after April 15 to file a return, pay any taxes due and make IRA contributions for 2008. As a general rule, those eligible get the extra time without having to ask for it. Eligible taxpayers include members of the military serving in Iraq, Afghanistan or other combat zone localities. Normally, the postponement is until at least 180 days after the service member leaves the combat zone.
Monday, April 6, 2009
Highlights of Connecticut Amnesty Program for 2009:
- Connecticut has established a state tax amnesty program effective May 1, 2009 through June 25, 2009, for persons that owe any tax imposed by any Connecticut law and required to be paid to the Department of Revenue Services for any affected taxable period.
- At this point, the Commissioner has been directed to prepare the amnesty application. Connecticut’s Voluntary Disclosure Program remains in effect. In many instances, Voluntary Disclosure will be the preferable option.
- The program is for individuals, corporations, or other taxpayers who owe any Connecticut state taxes other than motor carrier road taxes.
- The amnesty covers any taxable period ending on or before November 30, 2008 for which no return was filed, or for which a return that underreported taxes was filed and the return has not been examined by DRS.
- The state tax amnesty program eliminates civil penalties and provides for a 25% interest reduction for a taxpayer that files an amnesty application. Interest will be computed at a 9% annual rate. In addition, the Commissioner will not seek criminal prosecution for those taxpayers that file an amnesty application.
For additional information:
http://www.ct.gov/drs/cwp/view.asp?Q=430130&A=1436
- Connecticut has established a state tax amnesty program effective May 1, 2009 through June 25, 2009, for persons that owe any tax imposed by any Connecticut law and required to be paid to the Department of Revenue Services for any affected taxable period.
- At this point, the Commissioner has been directed to prepare the amnesty application. Connecticut’s Voluntary Disclosure Program remains in effect. In many instances, Voluntary Disclosure will be the preferable option.
- The program is for individuals, corporations, or other taxpayers who owe any Connecticut state taxes other than motor carrier road taxes.
- The amnesty covers any taxable period ending on or before November 30, 2008 for which no return was filed, or for which a return that underreported taxes was filed and the return has not been examined by DRS.
- The state tax amnesty program eliminates civil penalties and provides for a 25% interest reduction for a taxpayer that files an amnesty application. Interest will be computed at a 9% annual rate. In addition, the Commissioner will not seek criminal prosecution for those taxpayers that file an amnesty application.
For additional information:
http://www.ct.gov/drs/cwp/view.asp?Q=430130&A=1436
Sunday, March 22, 2009
Six Reasons to Keep a Mileage Log
If you're haven't been tracking your business mileage, the article in the link below might convince you:
http://www.mileagewiz.com/WhyKeepALog.aspx
The company sells a product to make it easy for users to create a mileage log. It's $39.95 annually, but you can try it for free, or contact me, and I'll customize an electronic log especially designed for your needs. Whether you travel by plane, train, or automobile, you'll be in compliance with IRS regulations.
Remember, log it or lose it.
http://www.mileagewiz.com/WhyKeepALog.aspx
The company sells a product to make it easy for users to create a mileage log. It's $39.95 annually, but you can try it for free, or contact me, and I'll customize an electronic log especially designed for your needs. Whether you travel by plane, train, or automobile, you'll be in compliance with IRS regulations.
Remember, log it or lose it.
Monday, March 16, 2009
New Law Extends Net Operating Loss Carryback for Small Businesses
The following news release from the IRS provides tax relief for small businesses:
The Internal Revenue Service announced today that small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision to get a refund of taxes paid in prior years.
To accommodate the change in tax law, the IRS today updated the instructions for two key forms – Forms 1045 and 1139 -- that small businesses can use to make use of the special carryback provision for tax year 2008. These forms are used to accelerate the payment of refunds.
The new provision, enacted as part of the American Recovery and Reinvestment Act of 2009, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years. The IRS released legal guidance today in Revenue Procedure 2009-19 outlining specific details. Some taxpayers must make the election to use this special carryback by April 17, 2009.
“The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,” said IRS Commissioner Doug Shulman. “We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.”
With the economic downturn and the new law, the IRS expects record numbers of small businesses to be eligible for the refunds. The IRS is putting in special steps to ensure timely processing of these refunds to help small businesses during this difficult period.
Small businesses with large losses in 2008 may be able to benefit fully from those losses now, rather than waiting until claiming them on future tax returns.
The normal two-year carryback remains available if the small business does not elect the special carryback provision. If the loss exceeds the income for the carryback period, the taxpayer can continue to carry forward the remaining balance of the NOL for up to 20 years.
For small businesses that use a fiscal year, this special carryback may be used for an NOL in either a tax year that ends in 2008 or a tax year that begins in 2008. Once a taxpayer makes this election, it may not be changed.
To qualify for the new five-year carryback provision, a small business must have no greater than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. Businesses with more than $15 million in gross receipts still qualify to carry back their 2008 NOL for two years.
There are several methods that a small business uses to elect the new provision as detailed in the Revenue Procedure.
If a small business previously elected to waive the carryback of 2008 NOL but now wants to elect this special carryback, the small business may revoke its previous election to waive the carryback. The election revocation must be made on or before April 17, 2009.
Generally small businesses that are not corporations (including sole proprietorships filing schedule C with their Form 1040) may accelerate a refund by using Form 1045, Application for Tentative Refund.
Corporations with NOLs may also accelerate a refund by using Form 1139, Corporation Application for Tentative Refund.
The IRS will be closely monitoring these filings and will provide additional staff as needed to process these forms. The IRS will work to issue refunds within 45 days or even earlier to the degree possible.
In addition, Frequently Asked Questions have been posted on the IRS.gov web site. Small businesses that file Form 1040 can also call 1-800-829-1040 with NOL questions. Corporations can contact 1-800-829-4933 with NOL questions.
Form 1045 or Form 1139, whichever the taxpayer uses, generally must be filed within one year after the end of the tax year of the NOL. In addition, the current year’s tax return must be filed by the date the Form 1045 or Form 1139 is filed. Form 1045 and Form 1139 are filed at the same place the taxpayer’s return is filed, as listed on the return instructions.
Accelerated refunds paid via Form 1045 or Form 1139 is described as “tentative” because the applications for refunds are potentially subject to review at a later date. Form 1045 Instructions and Form 1139 Instructions on http://www.irs.gov/ provide more information on the accelerated refund option.
The Internal Revenue Service announced today that small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision to get a refund of taxes paid in prior years.
To accommodate the change in tax law, the IRS today updated the instructions for two key forms – Forms 1045 and 1139 -- that small businesses can use to make use of the special carryback provision for tax year 2008. These forms are used to accelerate the payment of refunds.
The new provision, enacted as part of the American Recovery and Reinvestment Act of 2009, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years. The IRS released legal guidance today in Revenue Procedure 2009-19 outlining specific details. Some taxpayers must make the election to use this special carryback by April 17, 2009.
“The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,” said IRS Commissioner Doug Shulman. “We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.”
With the economic downturn and the new law, the IRS expects record numbers of small businesses to be eligible for the refunds. The IRS is putting in special steps to ensure timely processing of these refunds to help small businesses during this difficult period.
Small businesses with large losses in 2008 may be able to benefit fully from those losses now, rather than waiting until claiming them on future tax returns.
The normal two-year carryback remains available if the small business does not elect the special carryback provision. If the loss exceeds the income for the carryback period, the taxpayer can continue to carry forward the remaining balance of the NOL for up to 20 years.
For small businesses that use a fiscal year, this special carryback may be used for an NOL in either a tax year that ends in 2008 or a tax year that begins in 2008. Once a taxpayer makes this election, it may not be changed.
To qualify for the new five-year carryback provision, a small business must have no greater than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. Businesses with more than $15 million in gross receipts still qualify to carry back their 2008 NOL for two years.
There are several methods that a small business uses to elect the new provision as detailed in the Revenue Procedure.
If a small business previously elected to waive the carryback of 2008 NOL but now wants to elect this special carryback, the small business may revoke its previous election to waive the carryback. The election revocation must be made on or before April 17, 2009.
Generally small businesses that are not corporations (including sole proprietorships filing schedule C with their Form 1040) may accelerate a refund by using Form 1045, Application for Tentative Refund.
Corporations with NOLs may also accelerate a refund by using Form 1139, Corporation Application for Tentative Refund.
The IRS will be closely monitoring these filings and will provide additional staff as needed to process these forms. The IRS will work to issue refunds within 45 days or even earlier to the degree possible.
In addition, Frequently Asked Questions have been posted on the IRS.gov web site. Small businesses that file Form 1040 can also call 1-800-829-1040 with NOL questions. Corporations can contact 1-800-829-4933 with NOL questions.
Form 1045 or Form 1139, whichever the taxpayer uses, generally must be filed within one year after the end of the tax year of the NOL. In addition, the current year’s tax return must be filed by the date the Form 1045 or Form 1139 is filed. Form 1045 and Form 1139 are filed at the same place the taxpayer’s return is filed, as listed on the return instructions.
Accelerated refunds paid via Form 1045 or Form 1139 is described as “tentative” because the applications for refunds are potentially subject to review at a later date. Form 1045 Instructions and Form 1139 Instructions on http://www.irs.gov/ provide more information on the accelerated refund option.
Friday, March 13, 2009
10 Common Mistakes of Prospective Franchisees
Franchise ownership can provide a lucrative business opportunity with proper planning, but as with just about everything, there are some things potential franchisees need to watch out for. An article that may be of interest to people considering franchise ownership was recently posted by Roger C. Rule on www.inc.com. Refer to the attached link for the complete reprint of the article.
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