Explanations of some new tax laws
From the latest issue of Intuit’s ProConnection newsletter:
Three Versions of Homebuyer Credit May Confuse Clients – On a related note, the folks at Jennings Seminars have a handy table of the different applications of the homebuyer’s credits available for download.
New Law Mandates Electronic Filing by Return Preparers If Filing Ten or More Returns – As a stubborn hold-out on e-filing so that I can attach a lot of explanatory details to tax returns, this was something I was not happy to see. I will be investigating the penalties for not complying with this request and will most likely continue to only prepare paper tax returns. The Bob Jennings seminar speaker a few weeks ago mentioned that e-filing is going to allow attachments of pdf pages in the next few years, so that may be what I need to be able to attach all of the self defense documents that I like to include with tax returns. Until that is possible, I will continue to refuse to e-file.
22 Tax Breaks That Expire in 2009 - Handy recap from Intuit of many of the tax law changes that are currently scheduled for the end of this year. As we have seen quite often in the past few years, this is subject to change at the whim of our rulers in DC.
Tax Provisions In Porkulus Bill
Just as none of our rulers in DC had the time to actually read the humongous 1,000 plus page spending bill before voting on it, none of us in the tax profession have time to slog through it. The first summary of the tax provisions I have come across is this five page one from ClientWhys.
Here are some of the provisions about which I have received the most questions over the past few months:
Vehicle 50% Bonus Depreciation – Some years ago, to prevent higher-income taxpayers from creating large tax writes-offs from expensive vehicles, Congress implemented the "Luxury Auto Limitations," which places a cap on first-year depreciation. The provision that extends the 50% first-year bonus depreciation to 2009 purchases (mentioned elsewhere in this article) also extends the increased dollar cap for new vehicles placed in service in 2009 by $8,000. The regular luxury auto depreciation caps for 2009 have not yet been announced by the IRS. For 2008, the regular cap was $2,960 but was increased to $10,960 when the 50% bonus depreciation was claimed. The 2009 amount will likely be similar.
Bonus Depreciation Extended - Businesses are allowed to recover the cost of capital expenditures over time according to a depreciation schedule. Last year, Congress temporarily allowed businesses to recover the costs of capital expenditures made in 2008 faster than the ordinary depreciation schedule would allow, by permitting these businesses to immediately write-off 50% of the cost of depreciable property (e.g., equipment, tractors, wind turbines, solar panels, and computers) acquired in 2008 for use in the United States. This temporary provision has been extended through 2009.
Extension of Enhanced Small Business Expensing - In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write-off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. This is commonly referred to as the Sec. 179 deduction. Until the end of 2010, small business taxpayers are allowed to write-off up to $125,000 (indexed for inflation) of capital expenditures subject to a phase out once capital expenditures exceed $500,000 (indexed for inflation). Last year, Congress temporarily increased the amount that small businesses could write-off for capital expenditures incurred in 2008 to $250,000, and increased the phase-out threshold for 2008 to $800,000. Those increased amounts have been extended to 2009.
I'm sure more such summaries will be published over the next few weeks. I will post links to those as I learn about them.
From the latest Intuit ProConnection newsletter:
Emergency Economic Stabilization Act of 2008 – The folks at The TaxBook have been hard at work preparing an excellent 24+ page pdf summary of the new tax law that is a lot easier to cope with than the 451 pages of the actual law.
As I've mentioned on several occasions, I have been buying the All States and Deluxe editions of The TaxBook every year since they have been produced. I have also been purchasing the CD-ROM version and have found it useful for copying and pasting info I find in the printed book.
What has been very impressive this year is the new ability of the CD data to be updated via the internet, which I guess is why they call it a WebCD. So far, there have been four such updates, which integrate with the previously installed data beautifully.
I was just perusing the latest update and notice that they have included a worksheet for those who want to figure out how much of an advanced rebate they can expect to be sent to them. I uploaded a copy of it to my website to share with readers. Since the 2007 Lacerte cover letter already includes the estimated rebate amount, I won't need to use this worksheet; but others may find it useful.
Another summary of new tax law
Quick Summary of New Tax Law
The folks at the increasingly useful TaxCoach software have just produced the following handy and concise summary of the new tax law that can be automatically personalized for clients set up on their system.
President Bush has just signed a $168 billion stimulus package to prop up the economy and help prevent a recession. News reports have focused on tax rebates for individuals. But you may not realize that the package includes generous incentives for buying business equipment as well.
Want more cash in your pocket? The new law reduces the 10% federal tax bracket to zero for 2008 -- then delivers the savings now in the form of rebates ranging up to $600 for unmarried individuals, $1,200 for married couples, and $300 per child up to a maximum of $600. This break phases out for incomes above $75,000 ($150,000 for joint filers).
The new law also gives you a 50% bonus depreciation deduction for new equipment you buy for your business in 2008. It raises the Section 179 first-year expensing limit from $128,000 to $250,000. And it doubles the phaseout for Section 179 deductions from $400,000 to $800,000. This is great news if you're planning to buy vehicles or equipment for your business, or even to renovate business premises.
This is a special, limited-time break, so before you buy new equipment, be sure to call us.