It’s that time of the year again when most people gather the “Important Tax Documents” which they’ve recently received and anticipate with anxiety whether they will get a refund or end up owing money. Tax preparation software flies off of the shelves for the “do-it-yourself” crowd, accountants gear up for the busy season and an army of trained volunteers is deployed throughout the city to assist low-income filers.
Considering the unprecedented challenges in our economy and the financial markets, the level of anxiety has been further heightened. There has also been historic change in our country’s political landscape and sweeping changes to the tax laws in an effort to add “stimulus” to the lagging economy. So it’s a good time to talk about what tax benefits have been added, to ease the growing anxiety and fear of filing.
This year, there are four significant changes that you may benefit from as a taxpayer:
1 -- The First Time Home Buyer Credits of up to $7,500.00
This is available to taxpayers who’ve bought or buy a principal residence between April 8, 2008 and July 1, 2009. This credit is unique because it acts like a 15-year interest free loan (you do have to pay the money back). To find out if you qualify and get more information, check with the IRS website or visit a website dedicated to the housing tax credit.
2 -- Standard Deductions Increase
Standard deduction amounts have been increased regardless of your filing status.
Some tax filers will qualify for up to an additional $500.00 for single filers and $1,000.00 for joint filers, for state and local property taxes paid.
3 -- The Rebate Recovery Credit
If you had a child in 2008 or experienced a change in your income level, the rebate recovery credit allows you to “recover” the adjusted amount of the stimulus check that you already received last year. For those of you who qualify, the credit will be included in your tax refund and not sent separately as a stimulus check like last year. There is a link on the IRS homepage “How much was my stimulus payment” where you can find out the amount of the stimulus payment you received last year if you’ve forgotten or misplaced your records.
4 – Home Foreclosure Relief
In this economic climate, many homeowners faced foreclosure. If you’re one of them, relief may be available. Normally, a discharge of debt results in an increase in gross income, however, Form 982 will allow eligible homeowners to exclude up to $2 million of debt forgiven on their primary residence through foreclosure or mortgage workouts.
Tax season is always a time of stress and anxiety for not only the tax filers but also for tax preparers. To ease the stress and file your returns accurately, make sure you have received, and include, all of the forms -- W-2s and 1099s -- and that the social security numbers and amounts listed are correct. Often, early filers neglect or forget to include all of their income items and wind up having to amend their returns, which may create a tax liability.
There are lots of free resources available to tax filers including the IRS website: www.irs.gov and free tax filing services: www.freephillytaxes.org for eligible tax filers.
The best way to attack tax season is with preparation and patience: Gather those tax documents, then make sure you schedule the time you need to get those tax filings done.
We've asked members of Philadelphia's chapter of the National Association of Black Accountants to give you weekly tips leading up to tax deadline day, April 15, 2009. Wayne W. Williams is the President/CEO of WWWTax, Inc, a professional tax and financial planning practice that provides intelligent solutions to complex financial decisions for individuals and small businesses. In addition, he is Department Chair of the Economics & Accounting Department at the Community College of Philadelphia.