A Taxing Season - February 2009

"Where is My Refund?"

If your federal tax return is already filed and you are due a refund, you can check the status of your refund with the IRS online.

Go to the IRS web site for more information:
IRS: Where is My Refund?

Rumors and Facts

You're going to hear many rumors about proposed changes to the tax laws. The bill, signed by President Obama in February, did not revoke any of the more popular deductions, i.e. home mortgage or charitable contributions, but it did fix AMT for another year.

The bill contained approximately 282 changes to the Tax Code. Most important is the new Making Work Pay credit. Basically, this is a reduction in tax rates. The IRS released the new wage tables that are now available at http://www.irs.gov/pub/irs-pdf/n1036.pdf. Employers should start using the new withholding tables as soon as possible. There are a number of changes in the bill, and we plan to publish a special summary that will cover tax benefits for both individuals and businesses.

Another important note is the $8,000 first-time home buyer refundable credit. If, as a first-time home buyer, you buy a house in 2009, you do not have to repay the $8,000. The energy credit has been increased from $500 to $1,500, and any prior credits will be counted against it. Electric plug-in cars get a special credit, along with a deduction for sales tax on a new car. This is really nothing special since we already have that credit in Washington State, except the nice part about this deduction is that it will be above the line, so folks who don't itemize can take advantage of it.

The amount of qualified college tuition that can be written off has also been increased. For businesses, there is an increase in write-off for depreciation and a change in the net operating loss carry-back which can now go back five years. This can be a real boon for businesses that have been suffering.

This tax season has to be the most difficult and trying I've seen in my 30-plus years of practicing public accounting. All the other practitioners I've talked to say the same thing. Banks are extremely difficult to deal with --or they are not working with existing customers. Our priority right now must be to get work out for our business clients who need reports for financing. If these clients do not get first priority, they will be laying off employees.

We realize many of our clients are undergoing extreme hardship and, fortunately, because we've been able to invest in some new technology, we will be able to hold our fees inline with last year. If the required work is substantially less than prior years, fees should be lower. We are working hard to help as many people as we can through this crisis. Please bear with us. We will get to everyone.

Please keep in mind that the current demands placed on our profession are unprecedented in our lifetime. Although we've seen some softening in the position of the IRS, they are continuing to aggressively pursue delinquent taxes. We do have some special resources, and with the new tax bill, we have some tools to help you get through these difficult times.

---David S. Nelson, CPA

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====NOTICE REQUIRED BY IRS====
Circular 230 Disclosure:
To ensure compliance with requirements imposed by the IRS, we inform you that (i) any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.