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What’s your status? Are you MFS or MFJ? Tax Tip of the Week February 24, 2010

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If you were legally married on 12/31/09, the IRS considers you married for the entire year of 2009.rings

You now must decide if you are going to file as Married Filing Jointly (MFJ) or Married Filing Separately (MFS).  Note that if you file MFJ it is an irrevocable electionyou cannot go back and amend a MFJ return to a MFS return.

The primary reason to file MFS is to pay less tax.  This is particularly beneficial for Ohio taxes.  Another reason to file separately is to avoid joint liability.  Each spouse who signs a joint return is responsible for the accuracy and tax liability on the return.

Many times, for example, in a second marriage situation, we see couples who have a desire to maintain separate financial responsibilities.  While this is understandable, it could lead to paying several thousand dollars in additional taxes.  If you file MFS, you will lose the following:

Before filing your return, you need to look at both MFJ and MFS to see which lowers your tax burden the most.

As always, give us a call if you have any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.

ANOTHER new tax form – Tax Tip of the Week February 17, 2010

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Last week we talked about the new Schedule M.  This week we’ll look at the new Schedule L.letter_L

This form is designed for those who typically take the standard deduction on their tax return (those who cannot itemize.)  Specifically, it’s where you deduct real estate taxes, motor vehicle sales taxes, and disaster losses.

Real Estate Taxes: Again this year, taxpayers who do not itemize may claim up to $500 ($1,000 for a joint return) for property taxes paid on their home.

Motor Vehicle Sales Taxes: New this year is a deduction for the sales tax paid on a new motor vehicle.  The deduction is limited to the tax paid on the first $49,500 of the price of the vehicle; however, more than one purchase can qualify for the deduction.  The deduction is phased-out ratably for taxpayers with an AGI of $125,000 and $135,000 ($250,000 and $260,000 if married.)

Disaster Losses: None of us who live in the Greater Dayton area qualify for this deduction so we won’t discuss the details. However, if you have a second property in a region affected by a disaster or simply have questions, give us a call.

This now makes quite an alphabet soup of tax forms!  Be sure to consider all the form letters when doing your tax return.  They now include Schedules: A,B,C,D,E,F,H,J,L,M,R,SE, and T. Whew!

As always, give us a call if you have any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.

Introducing a new tax form: Meet Schedule M – Tax Tip of the Week February 10, 2010

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As you may or may not remember, your pay checks were a little larger last year as a result of the “Making Work Pay Credit.”  The larger pay checks were due to reduced tax withholdings.

If you received Social Security or received a government pension that does not participate in Social Security, you received a $250 check.  This was part of the “Government Retiree Credit.”

Confused by the new tax form?Schedule M is designed to reconcile these two credits.  Wage earners will receive $400 per individual ($800 if married) if your income is below $75,000 ($150,000 for joint returns.)

Confused? Download Schedule M and Schedule M Instructions to really get your head spinning.

We anticipate most tax preparation software will handle these calculations properly.  If you are doing it by hand….good luck!

As always, give us a call if you have any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.

Helping Haiti: How to claim donations in 2009 – Tax Tip of the Week February 3, 2010

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Haiti_textIf you are donating to charities providing earthquake relief in Haiti, you may be able to claim those donations on your 2009 tax return.  Here is what the IRS wants you to know:

1. A new law allows you to claim donations for Haitian relief on your 2009 tax return, which you will be filing this year.
2. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12th earthquake in Haiti.
3. To be eligible for a deduction on your 2009 tax return, donations must be made after January 11, 2010 and before March 1, 2010.
4. In order to be deductible, contributions must be made to qualified charities and cannot be designated for the benefit of specific individuals or families.
5. The new law applies only to cash contributions.
6. Cash contributions made by text message, check, credit card or debit card may be claimed on your tax return.
7. You must be able to itemize your deductions in order to claim these donations on your tax return.
8. You have the option to deduct these donations on either your 2009 or 2010 tax return, but not both.
9. Contributions made to foreign organizations are generally not deductible.  You can find out more about organizations helping earthquake victims such the U.S. Agency for International Development (www.usaid.gov)
10. As always, keep your receipts to document your donations.

We wish the people of Haiti the best as they recover from this disaster.

As always, give us a call if you have any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504. Or visit http://www.bradstreetcpas.com.

Rick Prewitt – the guy behind TTW

…until next week.