Tax time, right around the corner!

Time to get serious about 2009 year-end tax planning!

We're more than 90% done with 2009. What you do with the remaining 10% can have a lot to do with how happy you will be when taxes come due in April. Some items for your game plan:

Look at the scoreboard. You need to see what your taxable income is so far. Make special note of your business income and your capital gains. You can't know where you are going unless you know where you are.

What will happen between now and year end? Will you get a bonus? Will there be a big customer order paid before the end of the year? Do you have a big expense coming due?

What income and expense items can I switch between 2009 and 2010? These are key tax planning tools. Do you have a pending equipment purchase? Can you accelerate a bill collection to move income up if you want to? Can you sit on an invoice to defer collection? Do you have capital losses that you can take between now and the end of the year?

Have you done your gifting for the year? If you are charitably-minded, you might be able to do some year-end gifts to reduce your income. If you've had a bad year in your business, maybe 2010 is a better year to give to charity. If you have enough assets to make estate planning an issue, have you made full use of the $13,000 annual per-donee gift exclusion?

With these tools your tax pro can help you navigate the rest of the year. Decisions you should evaluate include:

- Payment of state and federal estimated taxes before year-end.

- Acceleration of capital asset purchases to reduce taxable income or maximize operating losses.
- Paying cash-basis business expenses before year-end.
- Using capital losses to offset year-to-date capital gains.
- Contribute to the College Savings Iowa Sec. 529 plan, if you are an Iowa taxpayer.
- Year-end charitable contributions of stock or appreciated property.
- Contributions to S corporation capital, or making loans to your S corporation, to ensure that you have basis to deduct corporate losses.

It's time to get moving!

We'll be covering these and other year-end planning moves between now and year-end at the web version of the Tax Update at www.taxupdateblog.com.

Thanks to Joe Kristan at Roth CPA's for this posting!

In Florida for 10 Days ONLY!

The federal government is preparing to roll out Cash For Appliances, a $300 million program offering rebates to buyers of more energy efficient appliances and other products with the Energy Star label.

The appliance-sale stimulus required individual states to submit plans to run their programs last month. Florida's Cash for Clunker Appliances program has been tentatively scheduled for 10 days in April.

Retailers would offer rebates for 20 percent off before taxes on most energy-efficient appliances from April 16-25 under the proposal submitted to the federal government by the Florida Energy & Climate Commission.

Consumers would receive an additional $75 for sending their old energy-sucking appliances to the landfill rather than reselling them.

Only federally designated Energy Star home appliances are eligible. Items covered under the state program include gas and tank-less water heaters, refrigerators, room air-conditioning units, washing machines and dishwashers.
This information was gathered from an article in the Orlando Sentinel.

Homeowner Tax Credit Extended and Expanded!

Senate Extends Homebuyer Tax Credit-

The Senate voted to extend the First-Time Homebuyer Tax Credit while also expanding the credit to existing homeowners who want to move to another residence.

The refundable credit was set to expire at the end of November. The new legislation extends the maximum $8,000 tax credit for first-time homeowners to April 30, 2010. It also includes a maximum $6,500 tax credit for existing homeowners who want to purchase a new home. However, they need to have lived in their current home for five consecutive years within the past eight years.

The level of qualifying income has also been expanded, allowing individual taxpayers who make up to $125,000 and joint filers earning up to $225,000 to qualify. The earlier credit had been limited to individuals earning up to $75,000 and couples earning up to $150,000.

A smaller credit would also be available to individuals who make up to $145,000 and couples who earn up to $245,000.

Tax credits could be claimed for homes that cost up to $800,000.

Repayment of the credit would be waived for members of the armed forces who are away from home on extended duty, and the credit would be extended for an additional year if they are away on duty.

Under the bill, first-time home buyers would receive the $8,000 tax credit if they sign a contract by April 30 and close on it by June 30. The plan would also make those who buy a new primary residence eligible for the $6,500 credit if they owned their current home for at least five consecutive years in the previous eight years.

7 facts you need to know about the consumer Enrergy Property Credits!

Seven Facts about the Nonbusiness Energy Property Credit

Taxpayers who take energy saving steps this year may get bigger tax savings next year. The Nonbusiness Energy Property Credit, a tax credit for making energy efficient improvements to homes has been increased as part of the American Recovery and Reinvestment Act of 2009.

Here are seven things the IRS wants you to know about the Nonbusiness Energy Property Credit:

1. The new law increases the credit rate to 30 percent of the cost of all qualifying improvements and raises the maximum credit limit to $1,500 claimed for 2009 and 2010 combined.
2. The credit applies to improvements such as adding insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.
3. To qualify as "energy efficient" for purposes of this tax credit, products generally must meet higher standards than the standards for the credit that was available in 2007.
4. Manufacturers must certify that their products meet new standards and they must provide a written statement to the taxpayer such as with the packaging of the product or in a printable format on the manufacturers' Website.
5. Qualifying improvements must be placed into service after December 31, 2008, and before January 1, 2011.
6. The improvements must be made to the taxpayer's principal residence located in the United States.
7. To claim the credit, attach Form 5695, Residential Energy Credits to either the 2009 or 2010 tax return. Taxpayers must claim the credit on the tax return for the year that the improvements are made.

Homeowners who have been considering some energy efficient home improvements may find these tax credits will get them bigger tax savings next year.

New rules for travel, lodging, meals expenses

The Internal Revenue Service has issued new rules for travel, lodging, meals and other expenses, including a new optional method for computing the deductible costs.

Revenue Procedure 2009-47 provides rules for employees who are reimbursed for lodging, meals, and incidental expenses, or meals and incidental expenses only, while traveling away from home, to substantiate the expenses by per diem allowance in lieu of actual expenses.

The revenue procedure also provides an optional method for employees and self-employed individuals who are not reimbursed to use in computing the deductible costs they pay or incur for business meal and incidental expenses, or for incidental expenses only if they pay or incur no meal expenses, while traveling away from home.

Use of a method described in the revenue procedure is not mandatory, and a taxpayer may use actual allowable expenses if the taxpayer maintains adequate records or other sufficient evidence for proper substantiation.

Pulled cash out of an IRA, you can put it back this year penalty free!

Here's a chance for a tax-saving do-over you might want to use. The IRS says it will give some taxpayers who took payouts from an individual retirement account or 401(k) this year the chance to put the money back in without paying any taxes or penalty.

New Retirement vehicles brought to you by the IRS!

IRS Boosts Tax Incentives for Retirement Savings

September 8, 2009

The IRS released several pieces of guidance Tuesday designed to boost tax incentives for retirement savings. The initiatives include expanded opportunities for automatic enrollment in 401(k) plans, vehicles for taxpayers to save their tax refunds and convert accrued vacation time into savings, and better explanations of the available options for taxpayers receiving rollover distributions from Roth and non-Roth employer plans.

Retirement Plans

The IRS issued pre-approved automatic enrollment language so that 401(k) plan sponsors will not have to seek IRS approval to adopt automatic enrollment (Notice 2009-65). The notice includes two sample plan amendments. This should allow plan sponsors to adopt automatic enrollment more quickly.

The IRS also issued guidance that will allow automatic enrollment in SIMPLE-IRAs (Notice 2009-66 and Notice 2009-67). Notice 2009-66 gives guidance for plan sponsors, and Notice 2009-67 contains a sample plan amendment.

The IRS also issued a ruling that allows 401(k) plans to institute voluntary automatic contribution increases (Revenue Ruling 2009-30). The new procedures are illustrated using two specific fact situations: One involves a basic automatic contribution arrangement, and the other involves an eligible automatic contribution arrangement described in IRC § 414(w).

Tax Refund Savings

Another new initiative announced Tuesday will allow taxpayers to purchase U.S. savings bonds with their tax refunds by checking a box on their tax return. This will be implemented in 2010, and starting in 2011 taxpayers will also be able to add co-owners to the bonds.

Converting Vacation Time Into Savings

Two new revenue rulings will allow workers who leave their jobs and receive cash payments for their unused vacation time to contribute those amounts to their 401(k) plans (Revenue Ruling 2009-31 and Revenue Ruling 2009-32).

Plain-English Explanation of Rollovers

The IRS also issued updated “plain English” explanations of the various options involved in rolling over money from a retirement plan when changing jobs that may be given to recipients of eligible rollover distributions from an employer plan to satisfy the requirements of IRC § 402(f). (Notice 2009-68). One explanation covers distributions from IRC § 402A Roth accounts and the other covers distributions not from Roth accounts.