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January 2010 Newsletter

LIBERTY TAX TIPS FOR FILING A 2009 RETURN AND PREPARING FOR TAX YEAR 2010 

Taxpayers are ringing in 2010 with some extended tax breaks. Here are a few of the most significant measures. If you track your mileage for business and other purposes, it’s good to note your odometer reading at the beginning of the year. Later this month, you should receive your W-2.Your employer should provide your W-2 by February 1, 2010, because the normal January 31st deadline falls on a Sunday this year.

It’s good to get a tax refund…or is it? Until the IRS pays interest to use your money, you might rather have slightly bigger paychecks throughout the year. Owing at tax time is never pleasant, but can be minimized. Adjusting your withholding amounts by refiguring allowances claimed can easily alter the amount of taxes a consumer elects to have withheld from their paychecks throughout the year. The online Liberty Tax Withholding Calculator (at www.libertytax.com) can help consumers figure out if it’s time to adjust withholding, and how to accomplish that task.

FIRST-TIME HOME BUYER CREDIT IS EXTENDED INTO 2010

The first-time home buyer’s credit has been extended into 2010, and more peoplewill qualify for a tax break. The qualification period for first-time home buyers to purchase a home and qualify for the credit will continue through April 30, 2010. First-time home buyers who have not owned a principle residence for 3 years prior to the purchase of a new home will continue to be eligible for a credit of up to $8,000. For homes purchased after December 31, 2008, the credit will not have to be repaid if the home buyer uses the home as their principal residence for 3 or more years. Those serving in the military will not be penalized if they claimed the credit and then have to deploy and sell their home within three years.

EXPANSION OF FIRST-TIME HOME BUYER CREDIT

The first-time home buyer’s credit has been expanded so that more homeowners now qualify for a tax break. People who have owned a home and used it as a principal residence for a 5-consecutive-year period during the 8-year period ending on the date of purchase of a new personal residence may qualify as first-time homebuyers and receive a credit of up to $6,500. To claim this credit, the taxpayer must have a signed purchase contract for a principal residence in force before May 1, 2010 and must close on their home purchase by June 30, 2010 (this also applies to the up to $8,000 credit). This credit is available for purchases of principal residents after November 6, 2009. Taxpayers who make qualified purchases after December 31, 2008 do not have to repay the amount of the credit if they reside in the home as their principal residence for 36 months after the purchase

RELIEF FOR THE UNEMPLOYED, EXTENSION OF UNEMPLOYMENT BENEFITS

The “Worker, Homeownership and Business Assistance Act of 2009 provided a 14 week extension of unemployment benefits, and six additional weeks of unemployment benefits for those in states with unemployment rates of 8.5 % or more. There’s no extension or increase in the provision for out-of-work Americans to exclude any more than $2,400 of unemployment benefits from total gross income in 2009. (This measure was a part of the American Recovery and Reinvestment Act of 2009).

THE “MAKING WORK PAY TAX CREDIT” 

The Making Work Pay economic stimulus credit is a refundable tax credit of up to $400 for working individuals and $800 for working married couples for 2009 and 2010. This credit resulted in a decrease in withholding for most taxpayers. As a result it may also cause a surprise for some taxpayers who discover that they need to adjust their withholding amounts, or owe at tax time. Taxpayers who have more than one job and families with two working spouses may be having too little withheld. Working dependents, pensioners who have earned income, and some employees receiving Social Security, SSI, Railroad Retirement or Veteran’s Disability payments may also be in this category, and find it beneficial to check their withholding amounts.

EARNED INCOME CREDIT INCREASES FOR FAMILIES WITH THREE OR MORE CHILDREN

The earned income credit amounts will be temporarily increased for working families with three or more children. This increases the earned income tax credit to forty-five percent of the family’s first $12,570 of earned income for families with three or more children, and increases the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children) by $1,880.

NEW EARNED INCOME CREDIT (EIC) QUALIFYING INCOME LEVELS

The maximum amount of income that a taxpayer can earn and still get the Earned Income Credit has increased. The taxpayer may be able to take the credit if:

• They have three or more qualifying children and earn less than $43,279 ($48,279 if married filing jointly).
• They have two qualifying children and earn less than $40,295 ($45,295 if married filing jointly).
• They have one qualifying child and earn less than $35,463 ($40,463 if married filing jointly).
• They have no qualifying children and earn less than $13,440 ($18,440 if married filing jointly).

Have a tax question? Call 866-871-1040 to be directly connected to the nearest Liberty Tax office for free tax advice. Each Liberty Tax Service office offers customers free audit assistance, and a money back guarantee if you’re not completely satisfied. There’s also the online preparation option through eSmart Tax by Liberty Tax at www.esmarttax.com.