Personal Taxes

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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.

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Top Ten Facts About Child & Dependent Care Credit

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Did you pay someone to care for a child, spouse, or dependent last year? If so, you may be able to claim the Child and Dependent Care Credit on your federal income tax return. Below are the top 10 things you should know about claiming a credit for child and dependent care expenses.

  1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child age 12 or younger when the care was provided. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return.
  2. The care must have been provided so you – and your spouse if you are married filing jointly – could work or look for work.

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Schedule A for itemized deductions, now Schedule L too

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Not since the direct deduction for some charitable contributions was removed has the standard deduction changed from its basic amount plus its additional amounts for the aged or blind.

In recent years, however, we've had three law changes that add to the standard deduction.

  • The American Recovery and Reinvestment Act of 2009 added sales taxes paid on the purchase of a new car to the standard deduction.

  • The Housing Act of 2008 added the property tax deduction for non-itemizers to the standard deduction.

  • The Economic Stabilization Act of 2008 added a standard deduction for net disaster losses.

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IRS eases (somewhat) rules to claim unrelated persons as dependents

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The IRS has ruled that an individual will no be treated as the qualifying child of a person if that person doesn't make enough to file a return and either does not file a return or files a return solely to obtain a complete refund of withheld income taxes. The code provides that the term "dependent" means a "qualifying child" or a "qualifying relative." Among other requirements, a qualifying relative cannot be the qualifying child of any other taxpayer.

So, to put it into an example. Jennifer supports as members of her household an unrelated friend, Rick, and Rick's four-year-old child, Lisa. Rick has no gross income and is

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New rules for divorced parents & depedent deductions

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The IRS issued in 2007 regulations addressing various issues pertaining to divorced parents and who can claim the dependent exemptions. These new rules take affect for most divorced parents with the filing of your 2009 income tax return.

Beginning for years beginning after July 2, 2008 (so 2009 for calendar year individual taxpayers) the IRS will no longer accept a divorce decree in lieu of Form 8332, Release of Claim to Exemption fro Child of Divorced or Separated Parents, even if the decree contains all of the information otherwise found on the Form 8332 and is not conditional in any respect (for example, conditioned on child support payments being current, etc.).

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You’re being audited and you’re missing records, now what?

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So you’re facing an audit and your records, or a portion of them, have gone missing. Or, you’re just a normal entrepreneur chasing from one project to another and your record keeping habits were just, well, not habits at all. You may not be able to produce receipts, bills or other written documentation for all the items on your tax return. That’s when you must turn to reconstructing your records or gathering together the best proof you have for the IRS.

The law does not require perfect record keeping habits—it’s just simpler that way. It’s perfectly legal to reconstruct your records in any way to provide adequate evidence that what you claimed on your return was, in fact, accurate.