President Obama Signs Unemployment Insurance Extension Act; Contains Important
New Tax Benefits; Enrolled Agents Recommend End-of-Year Tax Planning
SACRAMENTO, Calif., Nov. 6 /PRNewswire-USNewswire/ -- As part of the
government's efforts to encourage people to spend money to help revive the
economy, the House voted 403-12 Thursday to expand a popular tax credit for
homebuyers. The bill, which also extends unemployment benefits and expands a
tax break for money-losing businesses, was signed on Friday by President
Obama.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050615/CSEALOGO)
The new Act contains several key provisions for both taxpayers and tax
professionals. End of year tax planning puts you in the best position to
minimize tax. Your Enrolled Agent can fill you in on the details of this
latest tax package, the other law changes that have occurred in this new
administration, as well as year-end moves sure to affect your tax bill for
2009.
Enrolled Agents (EAs) are tax professionals licensed by the federal government
to represent taxpayers and assist them with tax planning and the preparation
of tax returns. Key tenets of the new Act:
New/Extended Credit: Buy a home before May 1, 2010 and collect up to $6,500
from the government (up to $8,000 if you're a qualifying first-time
homebuyer).
Net Operating Loss Carryover: Small businesses with a loss in 2008 or 2009 can
claim refunds of taxes paid within the prior five years. There's no limit on
carrybacks for the first four years of the period, but for the fifth year the
carryback is limited to 50% of the company's taxable income.
E-Filing: The Act calls for mandatory e-Filing beginning in 2011 for any tax
professional who expects to file more than 10 individual, trust, or estate
returns.
End of Year Tax Planning
With these, other recent tax law changes, and an increase in concern about tax
issues as the economy continues to struggle, Members of the California Society
of Enrolled Agents urge taxpayers to sit down with their tax professionals for
end-of-year tax planning. Planning now will save you money and reduce your tax
liability not only with your federal taxes but also with your state taxes.
Here are a few tax tips that will help you accomplish your goal.
Basic Numbers
Because many tax benefits are tied to or limited by adjusted gross income
(AGI)--IRA deductions for example--a key aspect of tax planning is to estimate
both your 2009 and 2010 AGI. Also, when considering whether to accelerate or
defer income or deductions you should be aware of the impact this action may
have on your AGI and your ability to maximize itemized deductions that are
tied to AGI. Your 2008 tax return and your 2009 pay stubs and other income-
and deduction-related materials are a good starting point for estimating your
AGI.
Another important number is your "tax bracket," i.e., the rate at which your
last dollar of income is taxed. The tax rates for 2009 range from 10% to 35%.
Although tax brackets are indexed for inflation, if your income increases
faster than the inflation adjustment, you may be pushed into a higher bracket.
If so, your potential benefit from any tax-saving opportunity is increased (as
is the cost of overlooking that opportunity).
Deferring Income to 2010
If you expect your AGI to be higher in 2009 than in 2010 or if you anticipate
being in the same or a higher tax bracket in 2009, you may benefit by
deferring income into 2010. Deferring income will be advantageous so long as
the deferral does not bump your income to the next bracket and subject to a
20% additional tax.
Accelerating Income Into 2009
In limited circumstances you may benefit by accelerating income into 2009. For
example you may anticipate being in a higher tax bracket in 2010 or perhaps
you will need additional income in order to take advantage of an offsetting
deduction or credit that will not be available to you in future tax years.
Note however that accelerating income into 2009 will be disadvantageous if you
expect to be in the same or lower tax bracket for 2010. In any event, before
you decide to implement this strategy you should "crunch the numbers."
Members of the California Society of Enrolled Agents are required to fulfill
20% more education than required by the IRS and to adhere to a strict code of
ethics. Taxpayers in California who seek professional assistance with tax
planning can locate Enrolled Agents in their area online at www.csea.org or by
calling toll-free 800-TAXPRO-5. Outside California, the Enrolled Agent
referral number is 800/424-4339.
SOURCE California Society of Enrolled Agents
Clifford Weimer or Catherine A. Apker, CAE, both of the California Society of
Enrolled Agents, +1-800-777-2732, +1-916-366-6646, media@csea.org
