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Tax FILING 2009

Take some time to determine if you qualify for some of the often overlooked tax breaks. Some of these tax saving ideas require that you itemize your deductions. Others can be claimed by any qualifying taxpayer.

Tax Benefits You Might Overlook
1. Charitable Volunteering
2. Moving Expenses
3. Job Hunting Costs
4. Child and Dependent Care Credit
5. Mortgage Refinancing Points
6. Military reservists' Travel Expenses

More Special 2009 Tax Items
2009 marks another year of major tax law changes. While too vast to mention them all, here are some that will impact many
1) $2,400 of unemployment benefits are not taxed this year.
2) There is a one-year option to avoid the minimum retirement plan distribution rules for qualified accounts.
3) The "Cash for Clunkers" vehicle benefit that many took advantage of is not taxable. Plus sales and use tax paid on the purchase of a new vehicle creates a potential tax break!
4) Social Security benefits will NOT be going up next year so you need to plan accordingly.
5) The Hope Credit education expense deduction has been increased and expanded from two to four years of post secondary education.
6) The earned income and child tax credits have been changed and will likely benefit most (but not all).
7) A personal casualty and theft loss must now exceed $500. This is up from $100.

As always, please feel free to bring up any questions or concerns that may impact your situation.

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Mira Mesa San Diego California Income Tax Preparation Specialists


TAX FILING 2008

New legislation, expiring provisions and older provisions coming into effect make 2008 and 2009 interesting years for taxpayers.

More rebate money  Your rebate can increase if your income or filling status changes in 2008. The rebate can not go down, but it can go up.

First time home buyer credit  Federal law now provides up to a $7,500 credit on your return if you are a “first time home buyer” (you haven’t owned a home in three years). Warning: This “credit “ is really a loan and you will be charged $500 each year until you repay the $7,500 or you sell the house and repay the balance then. If you are considering using the credit, let’s talk about the ramifications.

Dividends and capital gains may be tax free  For tax years 2008 - 2010, dividends and capital gains may be taxed at either 0% or 15%. We need to look at two issues here: First, planning income to take advantage of 0% capital gains; second, with a new administration in the White House, the 15% rate could go away as early as 2009.

The AMT monster  More and more taxpayers are getting caught by the alternative minimum tax (AMT). Proper planning can avoid or minimize its effects especially in light of new laws providing for a refundable credit and other new benefits. Let’s plan how to deal with the AMT monster.

More real estate changes coming  Beginning January 1, 2009, any time your property is not used as your principal residence it will reduce the amount of your home sale exclusion. If you are planning to covert rental property to a principal residence to use the exclusion later, we need to talk about it.

Selling real estate  California requires withholding on a sale of real estate. The amount could be over $15,000 on property sold for just $500,000. There are exceptions from this withholding and ways to reduce it but you must file certain forms BEFORE escrow closes. Call us if you’re selling any real estate.

Losing real estate  If you’re losing or under threat of losing your home or other real estate in a foreclosure, let’s get together. As hard as it may be to understand, you can end up with a big tax bill after losing a home. Fortunately, there are tax strategies to avoid that. The same applies if the lender drops the amount of your loan.

Net operating losses (NOL)   California has just enacted a new law suspending NOLs in 2008 and 2009 but there is an exemption for “small businesses”. Let’s discuss this, and if you have an NOL, let’s make sure you qualify as a small business.

Charitable contribution of IRA is back  For 2008 and 2009, an individual aged 70 ½  or older may make a direct contribution of IRA funds to a charity. You may contribute your required minimum distribution to a charity and reduce your income. If you don’t itemize deductions, this is a perfect way to save tax and benefit your favorite charity.

IRA distribution  If you are age 70 ½ or older, you must make minimum distribution from your IRA or pension plan. Taking too little out of the plan can subject you to strict penalties. Taking too much may cause a tax burst. As your bank or investment firm will not automatically do this for you, let’s sit down and plan for the correct amount to withdraw. Remember, the withdrawal must happen prior to the end of the year.

Stock losses  If you have large capital gains, you may want to reduce them with losses. If you want to take losses but still like your stock, consider using the wash sale rules to sell the stock and repurchase it after 30 days. This can be tricky so we need to talk about the alternatives.

Roth conversions  Had a bad year? Consider converting traditional IRA funds to Roth IRA for this year. Also, in 2010, you will be able to convert to a Roth, no matter what your income level. There are things to be done now to prepare for the change.

Social Security double whammy  At certain income levels, every dollar of additional income causes a $1.50 increase in taxable income. So we should plan when to recognize or avoid income whenever possible.

Kiddie tax  Students are now subject to kiddie tax as long as they are under age 24. Let’s look at some opportunities to postpone income for kiddies and increase their - spendable college cash.

Pension plans  Be sure to establish a pension or profit sharing plan prior to the end of 2008. You have until you file your return to fund the plan, but except for IRAs and SEPs, the plan must be established prior to the end of the year.

Bunching deductions  We should always look at the time-honored  strategy of bunching deductions to maximize their benefit. In doing so, we will look at itemizing versus standard deduction and the dreaded alternative minimum tax.

These are just a few of the common tax-planning strategies we should talk about. There may also be other things that relate to your specific situation. Please call our office and come in as soon as possible so we can plan to reduce your taxes.

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Didi's 1040 and More - Income Tax Enrolled Agent
Mira Mesa San Diego California Income Tax Preparation Specialists

ECONOMIC STIMULUS PAYMENT

The United States Congress passed and President George W. Bush signed into law the Economic Stimulus Act of 2008, which provides for economic stimulus payments to be made to over 130 million American households. Under this new law, you may be entitled to a payment of up to $600 ($1,200 if filing a joint return), plus additional amounts for each qualifying child. 

Based on this new law the IRS will begin sending the one-time payments starting in May. To receive a payment in 2008, individuals who qualify will not have to do anything more than file a 2007 tax return. The IRS will determine eligibility, figure the amount, and send the payment. This payment should not be confused with any 2007 income tax refund that is owed to you by the federal government. Income tax refunds will be made separately from this one -time payment. 

For individuals who normally do not have to file a tax return, the new law provides for payments to individuals who have a total of $3,000 or more in earned income, social Security benefits, and/or certain veterans' payments. Those individual should file a tax return for 2007 to receive a payment in 2008.

Individuals who qualify may receive as much as $600 ($1,200 if married filling jointly)  Even if you pay no income tax but have a total of $3,000 or more in earned income, Social Security benefits, and /or certain veterans' payments, you may receive a payment of $3,000 ($600 if married filling jointly). In addition, individuals eligible for payments may also receive an additional amount of $300 for each child qualifying for the child tax credit.

For taxpayers with adjusted gross income (AGI) of more than $75,000 (or more than $150,000 if married filling jointly), the payment will be reduced or phased out completely. To qualify for the payment, an individual, spouse, and any qualifying child must have a valid Social Security number. In addition, individuals cannot receive a payment if they can be claimed as a dependent of another taxpayer or they filed a 2007 Form 1040NR, 1040NR-EZ, 1040-PR, or 1040-SS. All individuals receiving payments will receive a notice and additional information shortly before the payment is made.

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Mira Mesa Rapid Refund Electronic Income Tax Filing
Mira Mesa San Diego California Income Tax Preparation Specialists

TAX FILING 2007 

Tax legislation and programmed tax changes offer a variety of tax benefits to most clients for 2007.  

Personal Exemptions and Standard Deductions  The personal exemption amount for 2007 increases to $3,400 per exemption. The Standard Deduction amount for non-itemizers are also slightly higher for 2007. Child Tax credit - the child tax credit for 2007 is $1,000 per child. The credit phases out for higher income taxpayers beginning at $110,000 for those married filling jointly and $75,000 for singles. 

Mortgage Insurance Deductibility  Premiums you pay or accrue for mortgage insurance issued during 2007 may be deductible. The premiums must be paid in connection with new mortgage debt from a primary residence in 2007. The amount you may deduct is reduced by 10% for every $1,000 ($500 if your filling status is married filling separately) by which your adjusted gross income exceeds $100,000 ($50,000 if your filling status is married filling separately).

Student Loan Interest Deduction  For 2007, the amount of the student loan interest deduction is phased out if your modified adjusted gross income (MAGI) is between $55,000 and $70,000 (between $110,000 and $140,000 if married filing jointly). You can not take the deduction if your MAGI is $70,000 or more ($140,000 or more if married filling jointly). 

Hope And Lifetime Learning Credits  For 2007, the amount of Hope ($1,650) or Lifetime Learning ($2,000) credits is phased out if your modified adjusted gross income (MAGI) is between $47,000 and $57,000) ($94,000 and $114,000 if you file a joint return).  

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Mira Mesa San Diego California Income Tax Preparation Specialists

Document Your Charitable Contributions  Give the recent changes to tax laws for donations, it is appropriate to recap the key things to remember. 

Cash Contributions  for cash contributions of any amount, you must retain a written receipt from the charity or a bank record showing the name of the charity, the date of the contribution, and the amount. So now, cash put in the Salvation Army kettle CAN NOT be deducted without a receipt.

Non-Cash Contribution  You'll also need a record of your non-cash contributions, and, if they exceed $500, you'll have to file a special form with your tax return. Larger gifts may require an appraisal. to obtain a deduction for donated clothing and household items, they must now be in good used (or better) condition. So toss the old socks, they are not deductible.   

Donating Your Vehicle  If you donate a car and the charity sells it, your deduction generally can't exceed the sale proceeds. You may still use the vehicle's market value if the charity uses or improves the vehicle before they sell it.

Volunteer Auto Expense  Keep track of any driving you do in connection with any volunteer work. You can deduct either your actual expenses or 14 cents per mile plus parking and tolls.

Good records and receipts are key when deducting charitable contributions. Should you have any questions about these issues feel free to call.

Income Tax Preparer Income Tax Services 
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Didi's 1040 and More - Income Tax Enrolled Agent
Mira Mesa San Diego California Income Tax Preparation Specialists

Coverdell or 529 Plan  Which is right for you? With the growing cost of college tuition, saving for your children's education expenses has never been more important.

Contributions  Contributions to both account types are not tax deductible, but earnings grow tax-free if used for qualified expenses when distributed. However, the annual contributions to a Coverdell account and the 529 account vary greatly. Contributions to Coverdell are limited to $2,000 per year, but may be made a April 15th of the year following the year to which the contribution applies. In contrast, 529 plan annual contribution limits are pegged at the annual gift tax limit (currently $12,000). In addition, there are provisions to allow you to gift up to 5 years at one time within a 529 program. There are no income limitations applied to 529 programs, while the ability to contribute to a Coverdell account phases out for joint filers with income between $190,,000 - $220,000. 

Distributions  All funds in a Coverdell account must be distributed by the the time the student reaches age 30 or taxes and penalties will apply. Although each 529 plan has its own rules, there is no age limitation on when funds may be rolled over to a plan for another member of the beneficiary's family. In most cases, qualified distributions from Coverdell accounts and 529 plans are federal tax free. State tax treatment varies by state, If you use a distribution from Coverdell or 529 plan you must exclude the amount from expenses when taking the Hope or Lifetime Learning Credits.

Income Tax Preparer Income Tax Services 
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Didi's 1040 and More - Income Tax Enrolled Agent
Mira Mesa San Diego California Income Tax Preparation Specialists

Thinking About Refinancing Or Buying A Home

Deciding to refinance your home mortgage loan is something that requires some thought. A borrower needs to consider how the transaction will affect their financial situation, not only now, but in the future, should the economy or their circumstances change. Every borrower has their own reason for wanting to refinance their mortgage loan. Sometimes, it is simply to take advantage of a lower interest rate. Other reasons could be more complex. Whatever the reason, borrowers should be well informed. You could consolidate all your bills into one incredibly low monthly rate, call us now to refinance (858) 549-3434.

Make Your Home Work For You

Few People look forward to the beginning of tax season. However, like it or not, we are faced with it every year. There are numerous federal and state tax policies and programs designed to encourage homeownership by providing tax relief. For more information on how your home can save you money you should speak to your accountant or you can call us.

Income Tax Preparer Income Tax Services 
Filing Income Tax with home foreclosure or short sale we can help
Call Now (858) 549-3434
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Didi's 1040 and More - Income Tax Enrolled Agent
Mira Mesa Rapid Refund Electronic Income Tax Filing
Mira Mesa San Diego California Income Tax Preparation Specialists

Both Spouses Must Meet First-Time Homebuyer Test

When Jeffrey Olup met his future bride, in January 2000, he was living in a townhouse he had bought in 1995 and she was living with her parents. When they married in June 2001, Louise moved into Jeffrey’s townhouse. A year later, in June 2002, they purchased land and began construction of a single family home close to Louise’s parents. They used a $20,617 distribution from Jeffrey’s IRA to help pay the acquisition costs. They moved into the new residence in April 2003.

On Form 5329 filed with their 2002 joint return, Jeffrey and Louise claimed that $10,000 of Jeffrey’s IRA distribution was exempt from the penalty on pre-59 1/2 distributions, as it was used for first-time home-buyer expenses. The IRS imposed the penalty on the entire distribution. Jeffrey clearly did not qualify as a “first-time homebuyer” as defined in section 72(t)(8)(D)(i)(I) because he had an ownership interest in a principal residence, his townhouse, during the two-year period ending on the date that the new home was acquired.

Jeffrey and Louise argued that they should qualify for the penalty exception because they were a married couple buying their first marital residence. The Tax Court disagreed. The plain language of the statute allows the exception for a married taxpayer only if neither spouse had an ownership interest in a home within the two-year period. There is no basis in the text or legislative history of the statute for conducting that Congress intended a more favorable rule for a married couple buying their first marital home.

Your Income Tax, 8.12
Jeffrey Thomas Olup, TC Summary Opinion 2005-183

Income Tax Preparer Income Tax Services 
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Didi's 1040 and More - Income Tax Enrolled Agent
Mira Mesa San Diego California Income Tax Preparation Specialists

Child Adoption Allows Home Sale Exclusion

If you sell your principal residence before it was owned and used for two years and the sale is triggered by an unforeseen circumstance - one that you could not have reasonably anticipated before you bought and moved into the house  you may claim a prorated portion of the maximum $250,00 or $500,000 (qualifying joint filers) gain exclusion. A prorated exclusion is also allowed on a sale primarily due to a change in the place of employment or health reasons.

The IRS allowed a prorated exclusion to a married couple who had to move to a larger home in order to adopt a child. After they moved into a three  bedroom home with their three sons, they decided to try to adopt a foreign child, a girl, but they did not have a separate bedroom for her as required by state law. They decided to rent a larger home with an additional room so they could meet the separate bedroom requirement. It was important for them to accelerate the adoption process because one of the spouses was serving in the military and expecting a transfer and the adoption process would have to start over if they moved before the state completed its home study inspections and reviews.

The couple submitted the initial paperwork required for the adoption, including medical tests, letters of recommendation, and an application (Form I-600A) for advance processing with the Immigration and Naturalization Service. They also arranged for inspections of the rented residence. Substantial fees for these and other adoption  related services were paid. The couple then moved into the rented residence and sold their three  bedroom home, which they had owned and used for less than two years .

With no elaboration, the IRS agreed that the planned adoption was an unforeseen circumstance. The couple was allowed to exclude the gain on the sale up to the reduced maximum exclusion amount.

Your Income Tax, 29.4
Letter Ruling 200613009

Income Tax Preparation Services Since 1992
Filing Income Tax with home foreclosure or short sale we can help
Call Us Today (858) 549-3434
Tumawag Ngayon Filipino Po Tayo   Llamame Ahora
Didi's 1040 and More - Income Tax Enrolled Agent
Mira Mesa San Diego California Income Tax Preparation Specialists

Didi's 1040 and More
10717 Camino Ruiz, Suite 101, San Diego, California 92126
Office Mall Mira Mesa San Diego California directions, Mira Mesa near Miramar, Penasquitos, Scripps Ranch, Sorrento Valley, Poway, Carmel Valley, Rancho Bernardo, Carmel Mountain, Kearney Mesa. Few Miles from Clairemont, Tierra Santa, Linda Vista, Serra Mesa, Escondido, San Marcos, Vista, Oceanside, Carlsbad, La Jolla, Pacific Beach, Point Loma, Old Town, Encinitas, Del Mar, Mission Beach, Fashion Valley, Mission Valley, Hillcrest. Few minutes drive from National City, Paradise Hills, Spring Valley, Chula Vista, Imperial Beach, La Mesa, El Cajon, Lemon Grove.

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