Tax Lawyer Blog

A Blog written by the Tax Attorneys for Individuals and Businesses

It's not too late to lower your taxes for 2009

What are you doing to lower your tax bill? Now is the time to take advantage of the remainder of 2009 to make changes that can lower your tax bill now and looking towards the future to make 2010 your year be proactive with the tax code. Please contact our office to make an appointment for tax planning. Our objective is to help with the important decisions necessary to enable you to make the best use of your resources.

The tax tips below will give you a place to start when looking at your tax situation. However, the tips included herewith are by no means a substitute for proper legal counsel.

1. Review your income, expenses and potential deductions. Before you can make any adjustments, you will need to look closely at how much you are earning, spending, and savings and what you can deduct.

2. Review your portfolio: Find out how you may mitigate investment losses with a tax deduction. Max out any tax beneficial plans such as 401K, 403(b), IRA, etc.

3. Defer Income: Unless you have reason to believe that next year will bring you a higher income and move you into a higher personal income tax bracket, you may want to defer income until after the first of the year. If you are self-employed, legally defer your income into the following year.

4. Use up your flex spending plan/Healthcare: If you have a flexible spending plan, which means you have put aside tax-free earnings to cover medical and dental expenses through a plan offered by your employer, you need to use it up. For schedule A filers, medical expenses may be deductible. Make doctor appointments now and buy necessary medical supplies.

5. Mortgage Interest: Pay your January 1st mortgage payment on or before December 31st: This allows you to take an additional deduction for interest paid. Remember to add the interest amount to the amount reported by your lender when they send you a 1098 form.

6. Teachers, take a deduction from your students: You can still take up to a $250 deduction on materials purchased to make the learning experience better for your students. This deduction is also applicable for principals and others who are employed in a school. If you’re not sure if this deduction applies to you, contact our office.

7. If you are self-employed, stock up: This is the time to buy all of the business equipment and supplies you haven't yet purchased. Make sure to mark and save your receipts.

8. Prepay your state and/or local taxes: If you don't think your personal income tax bracket will be higher next year, and you're not affected by the alternative minimum tax, you may want to make state and/or local tax payments before the end of this year so you can take a deduction this year.

9. Make charitable donations: If you have extra cash or qualified property, donate money or the property to charity. Save the receipts and use the charitable donations as deductions on your tax return. These are some of the ways in which you can make appropriate changes to lessen your tax bill.

10 . Make the American Recovery and Reinvestment Act of 2009 (ARRA) work for you:

Information for Individuals

Some of the provisions of the law primarily affect individuals.

  • Making Work Pay Tax Credit. This tax credit means more take-home pay for many Americans.
  • Homebuyer Credit. Certain homebuyers who purchase in 2009 may be eligible for a credit of up to $8,000 with no payback requirement.
  • Money Back for New Vehicle Purchases. Taxpayers who buy certain new vehicles from February 17 through December 31, 2009 may be eligible to deduct the state and local sales taxes paid.
  • Education benefits. The ARRA 2009 provides for enhanced credits/incentives for paying for higher education expenses.
  • Enhanced Earned Income and Additional Child Tax Credits for Tax Years 2009, 2010.
  • Increased Transportation Subsidy.
  • Up to $2,400 in Unemployment Benefits Tax Free in 2009.
  • Energy Efficiency and Renewable Energy Incentives.
  • Health Coverage Tax Credit. Credit increases from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.

Information for Businesses

Some of the provisions of the law primarily affect businesses.

  • Making Work Pay Tax Credit. Businesses should use the new withholding rates for their employees.
  • Work Opportunity tax credit. This adds returning veterans and "disconnected youth" to the list of new hires covered by the credit that businesses may claim. Certification by the state work force agency is required.
  • COBRA: Health Insurance Continuation Subsidy.
  • Net Operating Loss Carryback. Small businesses can offset losses by getting refunds on taxes paid up to five years ago.

October 15, 2009 Deadline for Voluntary Disclosure

United States citizens who have an interest in, or signature or other authority over, a financial account in a foreign country with assets in excess of $10,000 are required to disclose the existence of such account on Schedule B, Part III of their individual income tax return. Additionally, U.S. citizens much file an F-Bar with the United States Treasury, disclosing any financial account in a foreign country with assets in excess of $10,000 for which they have a financial interest in or signature authority, or other authority over.

The IRS is offering an amnesty program for offshore account holders. In general, the amnesty program offers the opportunity to avoid criminal felony tax charges if the taxpayer discloses the foreign bank account information along with additional information via a specific Voluntary Disclosure program. The deadline for special voluntary disclosures by taxpayers with unreported income from hidden offshore accounts is October 15, 2009. The IRS has announced that there will be no further extensions.

Those taxpayers who do not voluntarily disclose their hidden accounts by this deadline face much harsher civil penalties, where applicable, and possible criminal prosecution .

The U.S. Department of Justice is actively pursuing offshore account holders and has already begun criminally prosecuting taxpayers for failing to report offshore accounts and tax evasion. So far, the government has secured six guilty pleas in its effort, including one on Friday, where a New Jersey man pleaded guilty for failing to report about $6.1 million he had held in a UBS AG Swiss bank account.

We expect that the U.S. Department of Justice will publicize foreign bank account tax evasion prosecutions cases in an effort to encourage account holders to come forward.

We urge you to schedule an appointment with our office immediately if you believe you are subject to Foreign Bank Account reporting provisions.