Last weekend there was a terrific diary written by kplatv, I Just Did My Taxes - WTF! that detailed the pleasant surprises she found doing her own and others' 2009 tax returns. The diary generated a lot of great information in the comments section and an overall sense of gratitude to the Obama Administration for doing something very simple and straightforward to try to help us all right where we feel it: in our pocketbooks. There are some very helpful credits and deductions appearing this year that might otherwise go unnoticed, but that are helping to ease some of the pain struggling Americans are feeling these days.
Why this diary?
Kite in a Gale suggested I do a diary on some of the changes that are in store for us taxpayers this year. For two reasons. First, there are helpful hints particular to this year's return that could either bring you a higher refund or reduce your tax burden. Secondly, with every 2009 return completed this year, the President deserves credit for putting forward ideas that directly help the people he was elected to lead and aid. This is the practical argument against the Faux News folks, the Tea Partiers, the Rushes, the Glenns and all of those other idiots and fools who claim against all evidence that Obama is failing this country.
Due to the American Recovery and Reinvestment Act - otherwise known as the February 2009 Stimulus Package, we Americans are poised to reap many benefits designed to be much more effective than the one-time taxable rebate checks we received from Bush. As more and more Americans sit down to the sometimes arduous task of banging out their taxes, this spring could be The Great Awakening. The realization that Government is not the enemy, doesn't want to eat your children or take your money. Gummit Boogie Mens don't actually exist, except as Republican members of Congress. Government doesn't have horns, fangs or a biforcated tail. It is us, and we elected a thoughtful caring leader who wants to help. It is working in spades at this very moment! Thanks, President Obama!
So, what are your qualifications?
I'm a volunteer tax preparer through the VITA program sponsored by the IRS. Like other VITA volunteers, I get certified through IRS training and testing. It's a tough slog for me every year to get certified, but it is worth it! It is a very rewarding volunteer experience. I helped a woman last weekend get just shy of $8000 back. She has three very young kids with a man she just divorced, so she files as Head of Household now, and an older kid she can't claim, but who will be going off to college this fall. She was bouncing between tears and giggles. (Interestingly, she had no federal withholding and was getting this huge refund but still commented 'why does the government hang on to so much of our money?' I had to explain to her that between zero withholding and no home ownership, the "government" didn't have a penny of her money except for the taxes paid on purchases she makes. I am not shy to counter false claims about the Government Who Comes In the Night.)
New for 2009
Due to the American Recovery and Reinvestment Act - otherwise known as the February 2009 Stimulus Package, there is a "Making Work Pay" credit this year that will be up to $400 this year for most everyone (it's for 6.2% of income up to $400; $800 for Married Filing Jointly). It will appear on Schedule M and page 2 of the 1040.
Even if you don't do deductions, instead taking the standard for your filing status, this year you can add your real estate taxes to that standard deduction! w00t! And the standard is already a bit higher this year for everyone ($5700 Single; twice that for Married; 8350 for HoH). Also, if you bought a new car, you can deduct those taxes as well! Also, if you bought a new house last year, you get back up 10% of the purchase price, capped at $8000. It's all on Schedule A.
Mileage rates have gone up and the two different rates for the first and the second halves of the year have gone by the wayside - yay! Business = $0.55; Medical = $0.24; Charitable = $0.14. Keep a little notebook and pen in your car to keep track of all of your miles. Google Driving Directions is awesome for calculating past trips that didn't get recorded.
Slight Bummer
The student loan interest as a deduction to your income is still capped at $2500. Grr. That should be a dollar for dollar subtraction! Still work to do on that one. There could be many young medical school grads, for example, could be helped with a greater reduction to income if they could subtract $7000 of interest versus $2500 on $100K student loans. Would maybe be a factor in some new grads choosing to work in lower paying, rural or NGO related jobs. A 'Do-Gooder Adjustment'!
Additional
The Earned Income Tax Credit (EIC) is starting to catch on, but is still under used. It allows large credits for lower income people, and the more kids you have, the larger the credit. Max credits: $457 no kids; $3043 one kid; $5028 two kids; $5657 three kids.
Child Tax Credit is still $1000, but the Additional CTC earning threshold is $5,500 lower than last year - this helps so many more families.
There are two educational credits: Lifetime Learning, which is good for anyone no matter your age or level in post-secondary education; and there is the American Opportunity Credit (formerly the Hope Credit), refundable for the first two years of post-secondary education. If you or your child qualifies for Hope, have your tax preparer try both credits, because you never know, Lifetime Learning could provide a larger credit.
There is also the Mortgage Forgiveness Debt Relief Act of 2007 which allows taxpayers who are facing hardship due to home foreclosure to exclude from income certain cancelled debt (up to $2 million) on their principal residences. It applies to qualified debt forgiven on or after Jan. 1, 2007 and before January 1, 2010. The debt must have been used to buy, build or substantially improve the taxpayer's residence and must have been secured by that residence. Debt used to refinance a principal residence is also eligible for exclusion, but only up to the amount of the old mortgage principal, just before refinancing. Claim this with Form 982.
Child and Dependent Care. A qualifying person for this is someone under the age of 13, or a spouse or dependent who is physically or mentally incapable of self-care. Expenses must be paid for the care of the qualifying person to allow the taxpayer to work or look for work. The care includes the costs of services for the qualifying person's "well-being and protection". Doesn't count costs for pre-school (must be full time day care, even if pre-school activities are involved), kindergarten or sleep-away camp, but summer day camp qualifies! If you paid the lady down the block to look after your kids, all you will need to get the credit is her social security number and address. She doesn't have to be a formal business owner.
This is all I can think of off the top of my head and with my reference material at hand. I know from the comments in kplatv's diary from last weekend that there are other VITA volunteers and professional tax preparers in the DKos community, so they can add to or edit the information I've given you here.
Happy Filing!