President Signed The Worker, Retiree and Employer Recovery Act

On December 23, 2008, President Bush signed The Worker, Retiree and Employer Recovery Act into law. There still are no provisions for 2008 required minimum distributions (RMD), therefore taxpayers are required to take their RMDs in 2008.

Additional standard deduction for real property taxes.

The standard deduction for real property taxes for those not itemizing is extended through 2009. Taxpayers who do not itemize can add the lesser of their real estate taxes or $500 ($1000, if married) to the standard deduction.

2009 Standard Mileage Rates Announced

The IRS has issued Revenue Procedure 2008-72 announcing the 2009 standard mileage rates. The optional standard mileage rate for business miles will be 55 cents per mile beginning January 1, 2009. The depreciation component of the standard mileage rate is 21 cents per mile.
The standard mileage rate for medical and moving will be 24 cents per mile. The standard mileage rate for charitable purposes will remain at 14 cents per mile.

Answer to last week's poll question.

You receive a Form 1099-C in the mail. This means you

A.) had commission income.
B.) donated money to charity.
C.) had a cancellation of debt.
D.) are about to receive the mother of all tax audits.

The correct answer is C.) had a cancellation of debt. A cancellation, or forgiveness, of debt occurs in several instances where you might have a credit card balance cancelled, restructure your mortgage or sell your home for less than it's worth. Normally, this is considered taxable income and is reported on Form 1040, line 21 "Other Income". Recent enactments in the Bailout Bill state that in 2009, restructuring you mortgage or selling your home for less than it's worth will not generate a Form 1099-C.

Goodies in the Bailout Bill

Buried in the October bill are some nifty tax benefits for 2008 and beyond, as well as extensions of last year's breaks:

1.) An AMT fix. A one year patch might just save you from the alternate minimum tax. If your AMT-calculated income is below $69,950 for joint filers ($46,200 for singles), you likely won't have to pay.

2.) Mortgage debt forgiveness. Last year, Congress said that if you sold your home for less than you owed, restructured your mortgage or foreclosed through 2009, your canceled mortgage debt generally wouldn't be treated as taxable income. This deal is now extended throuhg 2012.

3.) A break on education. You can once again deduct up to $4,000 of school tuition if your adjusted gross income is $80,000 or less for singles ($160,000 for joint filers).

4.) A sales tax deduction. You still have the option to deduct state and local sales tax instead of income tax.

5.) Tax-free donations. If you're 70 1/2 or older, you can withdraw up to $100,000 from an IRA and give it to charity tax-free.

6.) Energy tax credits. In 2009, get a credit of up to $500 for energy-efficient fixes such as adding insulation and replacement windows.

Source: Money Magazine, December 2008

Answer to last week poll question.

According to "Kiplinger" magazine, which state has the worst tax burden?

A.) Massachusetts
B.) Rhode Island
C.) New York
D.) New Jersey

The answer is B.) Rhode Island. Of the 50 states and District of Columbia, Rhode Island ranks 51st, or dead last, when considering all tax implications on income, retirement and investments.

IRS Announces Filing Location Changes for 2009

For the 2009 processing year, the IRS is realigning the filing locations for four states. Paper returns from Delaware, New York, and Rhode Island will be sent to Kansas City and returns from Illinois will be sent to Fresno.
The IRS is also making some changes to filing locations for business returns. Beginning in 2009, business returns from Georgia and Tennessee will be filed at the Cincinnati processing site. Business returns from those two states were previously filed in Ogden.
The next site scheduled for closing is Andover. After the 2009 filing season, Andover will no longer process tax returns.