Tax Hacks » Legislation

Changes for the 2008 Tax Laws

thursday — Tue, 03 Mar 2009 21:12:01 +0000

As we’re all in a rush to prepare last year’s tax return, it’s worth going over the changes that occurred to the tax laws that are applicable for your 2008 returns quickly.

Stimulus Payments Are Tax-Free
You need to report your stimulus payments as the recovery rebate credit on your federal income tax return, but you don’t owe any taxes on it. It is important to remember to record it: if you’re eligible for a further recovery rebate credit because you had a child in 2008 or did not receive a stimulus check, your income tax return will affect whether you can claim it.

AMT Exemption Increased
The Alternative Minimum Tax levels increased slightly in 2008. For married couples, it’s $69,950 — or $34,975 if you file separately. If you are single or a head of household, it’s $46,200.

Get Green Tax Breaks
There are several tax breaks if you’ve gone green over the last year, including the residential energy-efficient property credit and the alternative motor vehicle credit.

Standard Deduction Increased
The basic standard deduction went up in 2008. It’s now $10,900 for married couples — or $5,450 if you’re filing separately. It’s also $5,450 if you’re single. It’s $8,000 for heads of household.

Tax Relief for Disaster Areas
If you lived in the Midwest and were affected by the major storms, tornadoes and floods that hit Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin, you may be eligible for some tax relief.

Standard Mileage Rates Increased
For business mileage, the rates are 50.5 cents per mile driven from Jan. 1, 2008, to June 30, 2008 and 58.5 cents per mile driven from July 1, 2008 to Dec. 31, 2008. For medical or moving mileage expenses, the rates are 19 cents per mile driven from Jan. 1, 2008, to June 30, 2008 and 27 cents per mile driven from July 1, 2008 to Dec. 31, 2008. For charitable mileage deducations, the rate is 14 cents per mile for the entirety of 2008.

The Government Is Making Your 2009 Tax Return Interesting

thursday — Mon, 16 Feb 2009 23:42:00 +0000

President Obama is scheduled to sign a hefty economic stimulus program on Tuesday. It’s loaded down with tax credits, as well as some major changes to the current tax laws. The average taxpayer will come out ahead with all of these added benefits — the idea is that we’ll all have more money to cover our bills and maybe help keep this consumption-based economy going.

But the plan is also over 1,000 pages long. Even if you’re used to filing your taxes yourself, that’s a bit much as far as dry bureaucratic reading goes. I have a feeling that next spring, the IRS is going to get plenty of extra questions about how to claim and record the tax benefits that will go into effect on Tuesday.

Just so you know: the IRS offers free telephone assistance, Monday through Friday, 7:00 a.m. to 10 p.m. Individuals should call (800) 829-1040. Businesses should call (800) 829-4933.

Income Tax Holidays: Do We Really Want Them?

thursday — Wed, 10 Dec 2008 18:44:42 +0000

Louie Gohmert (R-TX) is the Representative in the House that has proposed an income tax holiday: his legislation essentially allows everyone to skip paying income tax and FICA tax for two month. His hope is that we’ll spend all that extra money and stimulate the economy.

As much as I hate the income tax system in this country, I think Gohmert is wrong. I think an income tax holiday is a bad idea and could cause far more trouble than it’s worth. There are so many reasons — Miranda at Yielding Wealth has already listed a few — but I have a few of my own:

I can easily see an income tax holiday become very expensive for companies with large payrolls: because just about everything is done with computer, I would expect at least a few companies have automated payroll to the point that handling a change of this size would be nearly impossible without creating a whole new payroll system.
While a few taxpayers will go along with the stated goal of the proposal (stimulating the economy), I think Gohmert will be surprised by the sheer number who use it to play catch up with credit cards, mortgages and other debt. I think more than a few will save it, as well, in the hopes of using it to cover expenses until the economy recovers. Sure, there are plenty of people who will rush out and use it to make purchases — but I don’t think enough will to make a difference.
Employers are going to have some pretty angry folks on their hands come March, if the income tax holiday goes through. No matter why — plenty of people will start counting on that larger paycheck in just two months. When they don’t get the same amount in March, there’s going to be plenty of yelling.

Tax policy in the U.S. is broken. An income tax holiday is just going to break it further.