Deductions

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Less Rich. Less Famous. Less Tax.

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Last week, we brought you a story from those party animals at the IRS Statistics of Income Division about an annual report on the 400 highest incomes in America. It turns out they're a very successful bunch — for 2009, they earned an average of $202.4 million and paid an average of $40.9 million in tax. This week, we're going to talk about a different group of taxpayers. Less rich, less famous, but maybe more successful in their own way.

Back in 1969, Treasury Secretary Joseph Barr was shocked to discover that 155 Americans had earned over $200,000 that year, yet paid nothing in tax. Zip. Zilch. Nada. ($200,000 isn't bad money now — back then, it had about the same buying power as $1.2 million today.) Washington huffed and puffed, then passed the "Alternative Minimum Tax," or AMT. In 1970, the new tax surprised 18,464 unhappy taxpayers. No one could have foreseen it growing into a complete "parallel" tax system, a many-headed Hydra that millions every year.

Fast-forward to today. With the AMT firmly in place, the IRS has just released a 61-page report revealing that in 2009, 20,752 taxpayers earned over $200,000 and paid — you guessed it — zero tax.

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Making the Most of Your Aircraft Deductions

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More than ever, the media, IRS and the Securities and Exchange Commission have expressed their disapproval of private aircraft use by businesses. They each hold a general perception that personal use of business aircraft is extravagant and difficult to justify. But, your purchase, lease, or charter of an aircraft by you or the corporation you own (remember if you’re married, “you” includes your spouse as well) can still create open the opportunity for significant tax benefits.

As you might imagine, the IRS does not take as kind of a view of the tax benefits of aircraft ownership as you or I might. The American Jobs Creation Act of 2004 reversed the favorable aircraft deduction strategies previously available to you as identified in a key Tax Court case (Sutherland Lumber-Southwest, Inc. v Commissioner).

An IRS notice now restricts certain aircraft deductions, requires specific treatment of business owners, and requires stricter, more detailed records of aircraft use. Even with these restrictions though, you can still increase your financial wellbeing by making the aircraft rules work for you.

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Updated tax deduction worksheets now available

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We've updated our tax deduction worksheets for the 2009 tax year. You can download these worksheets and use to help with your tax records.  The worksheets are geared directly to a number of professions and business types. Click any one of the following 16 profession-specific links to download your own copy.

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Watch out for Haiti earthquake charity scams

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As we all look for ways to offer support for the earthquake victims in Haiti we must also be careful not to be scammed in our efforts to help. The FBI and other agencies are now warning that there are also those who are looking for opportunities set up scams surrounding the latest disaster relief efforts.

You should be highly skeptical of any unsolicited appeals you may receive or find on the Internet. Even if it appears legitimate, you should only contribute when you have made the call to the charity. If you are contributing via the Internet do not click on a link taking you to a charitable organization's site, it could be a counterfeit site. Only contribute via the Internet if you yourself type in the Web address and go directly to the site. Even then, only contribute if it is a secure site. Make sure the Web address starts with "https" and not just "http."

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Want your home buyer tax credit? I hope you are patient.

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For all of you that are eligible for the home buyer tax credit this filing season I have some news from the IRS administrative front. Don't expect your tax refunds to come quickly. Oh, and you won't be able to file your federal income tax return electronically either. And make sure you have all your closing paperwork at your fingertips.

The Internal Revenue Service today (Jan 15, 2010) released the new form that eligible home buyers need to claim the first-time homebuyer credit this tax season and announced processing of those tax returns will begin in mid-February. The IRS also announced new documentation requirements to deter fraud related to the first-time home buyer credit.

The new form and instructions follow major changes in November to the home buyer credit by the Worker, Homeownership, and Business Assistance Act of 2009. The new law extended the credit to a

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Cash for Clunkers, Taxable?

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In June 2009 President Obama signed the Consumer Assistance to Recycle and Save Act of 2009 (how much caffeine had they had when they came up with that name?), commonly referred to as "Cash for Clunkers." Auto dealers that signed up for this voluntary program received vouchers for qualifying trade-ins on the purchase off new cars where the fuel efficiency of the new car is better than the fuel efficiency of the clunker. The vouchers were for $3,500 or $4,500 depending on the how much you stepped up in fuel efficiency and they were treated as part of your down payment on your purchase. This applied for the period of Jul 1, 2009 until November 1, 2009.