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MCDONNELL ACCOUNTING (PH 228 374-2374) IS LOCATED ON THE CORNER OF PASS ROAD AND
HILLER DRIVE IN BILOXI. IN 2010, RANDY MCDONNELL, RACHEL ROBERTSON,
PATTY LANKFORD, DARLENE EGGERT, AND CATHY BROOME WILL BE PREPARING 2009 INCOME TAX RETURNS.
WE WILL BE OPEN MONDAY-SATURDAY 9AM TO 9PM.
***** PLEASE DO NOT FAIL TO LOOK AT ITEMS 18, 19, AND 20 IN THE FIRST NUMBERED
LIST BELOW. THEY CAN MEAN TAX SAVINGS FOR A LOT OF OUR CLIENTS.
PLEASE BRING DOCUMENTATION FOR THESE ITEMS.
*****IF YOU RECEIVE SOC SECURITY OR RAILROAD RETIREMT BENEFITS, S S I, OR V A
BENEFITS, YOU NEED TO TELL US IF YOU RECEIVED AN "ECONOMIC RECOVERY PAYMENT" OF
UP TO $250 OR $500 DURING 2009, AS THIS WILL REDUCE A NEW CREDIT ON YOUR
FORM 1040.
NEW CLIENTS ARE URGED TO BRING A COPY OF THEIR 2008 TAX RETURNS AND BIRTH
DATES OF DEPENDENTS. EVERYONE SHOULD BRING FORMS W-2, K-1, 1099 (INCL
SOCIAL SECURITY BENEFITS), COST AND SELLING PRICE OF REAL ESTATE (TWO-PAGE
SETTLEMENT SHEETS ARE NEEDED) OR STOCKS AND BONDS SOLD. SELF-EMPLOYED
PEOPLE NEED TO BRING FIGURES FOR TOTAL REVENUES/SALES, EXPENSES BY CATEGORY,
BUSINESS MILEAGE, AND ENDING INVENTORY IF APPLICABLE. LOOK OVER LAST
YEAR'S RETURN TO HELP YOU PREPARE FOR THIS YEAR.
TWO OF OUR CLIENTS DID POORLY ON INCOME TAX AUDITS RECENTLY. THE LESSON
TO BE LEARNED FROM THESE AUDITS, ESPECIALLY FOR TAXPAYERS WITH BUSINESSES, IS
THAT WE SHOULD BE ABLE TO ACCOUNT FOR ALL DEPOSITS MADE TO OUR PERSONAL AND
BUSINESS BANK ACCOUNTS. THE FEDERAL OR STATE TAX AUTHORITIES OTHERWISE MAY
CLAIM THAT UNEXPLAINED BANK DEPOSITS CONSTITUTE UNREPORTED INCOME. MAKE
NOTES ON YOUR CHECK REGISTER AND KEEP DOCUMENTATION ON LOANS, INSURANCE
PROCEEDS, GIFTS, OR OTHER FUNDS BEING DEPOSITED.
EVERY YEAR SOME OF OUR CLIENTS TAKE TAX BEATINGS BY TAKING LARGE WITHDRAWALS
FROM THEIR PENSION PLANS. EVEN ASIDE FROM POSSIBLE 10% PENALTIES ASSESSED
BY IRS FOR EARLY WITHDRAWALS, THE MARGINAL TAX RATE CAN BE VERY COSTLY FOR THESE
TAXPAYERS. USING A SIMPLIFIED EXAMPLE, A TAXPAYER WITH INCOME OF $50,000
WILL PAY NO INCOME TAX ON THE FIRST $10,000 OF HIS INCOME BECAUSE OF THE
PERSONAL EXEMPTION AND STANDARD DEDUCTION. HE MAY PAY A TAX RATE OF 15% ON
THE NEXT $30,000, THEN 25% ON THE FINAL $10,000. THE $7,000 OF TAX
PRODUCES AN OVERALL RATE OF 14%. HOWEVER, IF HE DRAWS $10,000 OUT OF A
PENSION PLAN AND NOW HAS A TOTAL OF $60,000 INCOME, HE WILL BE PAYING A MARGINAL
TAX RATE ON THE $10,000 PENSION MONEY OF 25% OR $2,500. ONE REASON GIVEN
TO JUSTIFY THESE WITHDRAWALS IS THAT OUR CLIENTS WANT TO PAY OFF DEBT BEFORE
THEY RETIRE, BUT THIS IS COSTLY. WE RECOMMEND GRADUAL WITHDRAWAL OF
RETIREMENT FUNDS AFTER YOU RETIRE, WHEN YOU ARE USUALLY IN A LOWER BRACKET.
IF YOU NEED MONEY, GET A LOW-INTEREST HOME EQUITY LOAN OR A LOAN ON YOUR PENSION
PLAN.
LIST OF TAX CREDITS AND DEDUCTIONS AVAILABLE WITHOUT ITEMIZING
1. INTEREST PAID ON COLLEGE LOANS. ELIGIBLE LOANS COVER
TUITION, FEES, AND ROOM AND BOARD FOR TAXPAYERS OR DEPENDENTS OR FORMER
DEPENDENTS.
2. HIGHER EDUCATION CREDITS AND DEDUCTION FOR COLLEGE TUITION AND
REQUIRED FEES, BOOKS, AND COURSE MATERIALS (NOT ROOM AND BOARD) FOR TAXPAYERS AND DEPENDENTS.
HOPE CREDIT (RENAMED AMERICAN OPPORTUNITY TAX CREDIT) NOW APPLIES TO THE FIRST
FOUR YEARS OF COLLEGE. STUDENT
MUST BE AT LEAST HALF-TIME. LIFETIME LEARNING CREDIT IS ALLOWED FOR
ANY COLLEGE COURSE, INCLUDING THOSE TAKEN TO IMPROVE JOB SKILLS. ELIGIBLE
AMOUNTS FOR THESE CREDITS DO NOT INCLUDE EXPENSES PAID BY GRANTS OR SCHOLARSHIPS, BUT DO INCLUDE
AMOUNTS PAID WITH LOANS.
3. CHILD TAX CREDIT FOR DEPENDENT CHILDREN UNDER 17 ($1000
PER CHILD).
4. IRA CONTRIBUTIONS (WITH INCOME LIMITS ON DEDUCTIBILITY FOR A
PERSON COVERED BY A PENSION PLAN). NON-WORKING SPOUSE CAN CONTRIBUTE
TO AN IRA. MAXIMUM CONTRIBUTION IS $5,000 ($6,000 FOR THOSE 50 OR
OVER). FOR 2009 RETURNS, CONTRIBUTIONS CAN BE MADE AS LATE AS APRIL 15,
2010.
5. INTEREST PENALTY OR FORFEITURE DUE TO EARLY WITHDRAWAL
OF A CERTIFICATE OF DEPOSIT (CD).
6. ALIMONY. NAME AND SOCIAL SECURITY NUMBER OF
EX-SPOUSE MUST BE LISTED.
7. BAD DEBTS (MONEY OWED TO YOU). GENUINE EFFORT TO
COLLECT MUST BE MADE. IF YOU PAY A CONTRACTOR AN ADVANCE TO DO WORK ON
YOUR HOUSE AND HE DISAPPEARS, THIS MAY BE DEDUCTIBLE AS A BAD DEBT.
8. MOVING AND TRAVEL EXPENSES TO TAKE A JOB IN ANOTHER
LOCALITY (INCLUDES 24 CENTS PER TRAVEL MILE).
9. CHILD-CARE CREDIT FOR EXPENSES INCURRED WHILE WORKING,
LOOKING FOR WORK, OR GOING TO SCHOOL. YOU MUST LIST NAME, ADDRESS, AND TAX
ID NUMBER OF CARE PROVIDER. CARE FOR DISABLED ADULTS IS ALSO ELIGIBLE FOR
CREDIT.
10. CREDIT FOR ELDERLY OR PERMANENTLY DISABLED.
11. MEDICAL INSURANCE DEDUCTION FOR THE SELF-EMPLOYED.
12. HAVE YOU REMEMBERED ALL POSSIBLE DEPENDENTS? ARE YOU 65
OR OLDER OR BLIND?
13. DID YOU PAY ANY ESTIMATED TAX TO IRS OR YOUR STATE DURING THE
YEAR, OR DO YOU HAVE A CREDIT FROM OVERPAYMENT OF LAST YEAR'S TAX?
14. DID YOU PREPAY COLLEGE TUITION UNDER MISSISSIPPI PROGRAMS
IMPACT OR MACS?
15. RETIREMENT SAVINGS CONTRIBUTIONS CREDIT FOR IRA, ROTH, 401-K
IF INCOME UNDER $55500 MFJ, $27750 S OR $41625 HH.
16. SCHOOL TEACHERS CAN DEDUCT UP TO $250 OF SCHOOL SUPPLIES.
17. REAL ESTATE OR PROPERTY TAXES CAN NOW BE DEDUCTED
EVEN IF YOU DON'T HAVE ENOUGH DEDUCTIONS TO ITEMIZE ON SCHED A AND MUST
TAKE THE STANDARD DEDUCTION.
18. HOMEBUYER CREDIT. ANYONE WHO BUYS A HOME IN
THE PERIOD FROM 04/09/08 TO 06/30/09, AND HAS NOT OWNED A HOME IN THE PRECEDING
THREE YEARS, MAY GET A REFUNDABLE TAX CREDIT EQUAL TO THE LESSER OF $7,500 OR
10% OF THE HOME'S PURCHASE PRICE, ON HIS 2008 OR 2009 INCOME TAX RETURN. THERE IS
NO CREDIT IF INCOME IS OVER $95,000 ($170,000 MFJ). THE CATCH IS THAT THE
CREDIT MUST BE REPAID TO THE GOVERNMENT RATABLY OVER 15 YEARS. NO INTEREST
WILL BE CHARGED ON THIS LOAN / CREDIT. ****** FEB 2009 TAX LAW
CHANGE: THE
HOMEBUYER CREDIT HAS BEEN GREATLY ENHANCED FOR HOMES BOUGHT IN THE PERIOD FROM
JAN 1, 2009 TO NOVEMBER 30, 2009 (LATER EXTENDED TO APRIL 30, 2010) THE MAXIMUM CREDIT HAS BEEN
INCREASED TO $8000 AND NEED NOT BE REPAID--BUT THE TAXPAYER MUST USE THE HOME AS
HIS PRINCIPAL RESIDENCE FOR THREE YEARS. THIS ENHANCED CREDIT MAY BE TAKEN
ON EITHER THE 2008 OR 2009 TAX RETURNS. ********NOV 2009 TAX LAW CHANGE:
TAXPAYERS WHO HAVE LIVED IN THEIR HOMES FOR FIVE CONSECUTIVE YEARS OUT OF THE
PREVIOUS EIGHT ARE ALSO ELIGIBLE FOR THE HOMEOWNER CREDIT IF, DURING THE PERIOD
FROM NOVEMBER 7, 2009 TO APRIL 30, 2010, THEY BUY ANOTHER
HOUSE TO USE AS THEIR PRINCIPAL RESIDENCE. THIS MIGHT APPLY TO RETIREES DOWNSIZING TO A
SMALLER HOUSE OR YOUNGER PEOPLE UPSIZING BECAUSE OF A GROWING FAMILY.
19. RESIDENTIAL ENERGY CREDIT FOR EXTERIOR DOORS AND WINDOWS,
INSULATION, AND ENERGY-EFFICIENT CENTRAL AIR CONDITIONERS AND HOT WATER HEATERS.
OTHER CATEGORIES MAY QUALIFY-- ASK THE MERCHANT OR CONTRACTOR.
20. SALES TAX PAID ON A NEW MOTOR VEHICLE OR MOTOR HOME PURCHASED
DURING THE PERIOD FROM FEBRUARY 17, 2009 TO DECEMBER 31, 2009.
21. MAKING WORK PAY AND GOVERNMENT RETIREE CREDITS.
ITEMIZED DEDUCTIONS
MINIMUM NEEDED $11400 MFJ, $5700 S, OR $8350 HH. BE AWARE
THAT ONLY THE AMOUNTS EXCEEDING THESE STANDARD DEDUCTION FIGURES WILL REDUCE
TAXABLE INCOME AND THUS THE TAX BECAUSE YOU GET THE STANDARD DEDUCTION
REGARDLESS.
1. AD VALOREM PART OF VEHICLE LICENSE PLATE FEES.
2. REAL ESTATE TAXES (PROPERTY TAXES).
3. STATE AND LOCAL INCOME TAXES PAID BY CHECK OR WITHHELD
FROM PAYCHECK IN 2009. IF YOU MADE A MAJOR PURCHASE SUCH AS A VEHICLE OR
BOAT, TELL US WHAT THE SALES TAX WAS--AS THIS MAY RESULT IN A BIGGER DEDUCTION.
4. MEDICAL EXPENSES NOT REIMBURSED BY INSURANCE--HOSPITAL,
DOCTOR, DENTIST, NURSE, CHIROPRACTOR, PHYSICAL THERAPIST, PSYCHOLOGIST, LAB
FEES, PRESCRIPTION DRUGS, INSULIN, EYEGLASSES, CONTACT LENS AND SOLUTIONS,
HEARING AID, DENTURES, CRUTCHES, WHEELCHAIR, AMBULANCE, TRANSPORTATION (ESTIMATE
ROUND-TRIP MILEAGE--24 CENTS PER MILE), LODGING, HEALTH/ DENTAL/ CANCER/
LONG-TERM CARE INSURANCE PREMIUMS, NURSING HOME (IF A PRINCIPAL REASON FOR
RESIDENCE IS THE AVAILABILITY OF MEDICAL CARE), ETC. A PORTION OF THE PAY
OF A HOUSEKEEPER HELPING AN INVALID AT THE INVALID'S HOME IS DEDUCTIBLE IF IT
INVOLVES BATHING AND DRESSING WOUNDS, CHANGING PADS, ADMINISTERING MEDICINE, AND
SEEING AS TO PROPER NUTRITION.
5. INTEREST ON DEBT--MORTGAGE OR HOME EQUITY LOANS,
INVESTMENT LOANS, AND LOAN ORIGINATION FEES OR "POINTS" (POINTS PAID ON A SIMPLE
REFINANCING MUST BE DEDUCTED OVER LIFE OF NEW LOAN). INTEREST PAID ON
SECOND HOMES IS ALSO DEDUCTIBLE. A BOAT MAY QUALIFY AS A SECOND HOME IF IT
HAS COOKING, SLEEPING, AND TOILET FACILITIES.
6. CASUALTY LOSSES--STORM, FIRE, THEFT, COLLISION, FLOOD,
VANDALISM, ETC. LOSS MUST EXCEED 10% OF INCOME.
7. CHARITABLE DONATIONS IN MONEY OR GOODS--CHURCH, UNITED
WAY, SALVATION ARMY, GOODWILL, HOMES OF GRACE, OUT OF POCKET EXPENSES AND 14
CENTS PER MILE FOR VOLUNTEER WORK (CHURCH CHOIR, SCOUTS, RED CROSS).
NON-MONETARY DONATIONS LIKE OLD CLOTHES MUST BE IN GOOD CONDITION.
CONGRESS HAS DECLARED THAT LOOSE CHANGE IN THE CHURCH PLATE IS NO LONGER
DEDUCTIBLE WITHOUT A RECEIPT.
8. UNREIMBURSED EMPLOYEE EXPENSES WHILE OUT OF TOWN
INCLUDING TRAVEL, LOCAL TRANSPORTATION, MEALS AND LODGING, LAUNDRY, AND
TELEPHONE. AN OUT-OF-TOWN TEMPORARY JOB SITE IS CONSIDERED INDEFINITE, AND
THUS NONDEDUCTIBLE IF THE JOB LASTS ONE YEAR OR MORE.
9. UNREIMBURSED EMPLOYEE TRANSPORTATION EXPENSES IN HOME
AREA INCLUDING WORK AT TEMPORARY JOB SITES (IF YOU HAVE A REGULAR WORKPLACE).
YOU MAY COUNT COMMUTING FROM HOME TO TEMPORARY JOB SITES BUT NOT TO REGULAR
WORKPLACE. TAKE BUSINESS PERCENTAGE OF ACTUAL VEHICLE EXPENSES OR 55 CENTS
PER MILE.
10. JOB-HUNTING EXPENSES (IF IN SAME TRADE OR BUSINESS).
LOCAL MILEAGE AND TRAVEL AWAY FROM HOME. PLEASE ESTIMATE MILEAGE (55 CENTS PER MILE). EMPLOYMENT AGENCY, RESUME TYPING, POSTAGE, LONG DISTANCE
CALLS.
11. UNION AND PROFESSIONAL DUES AND TRADE MAGAZINES, UNIFORMS,
SAFETY EQUIPMENT, TOOLS AND SUPPLIES USED ON JOB, LICENSES, MALPRACTICE
INSURANCE, REQUIRED PHYSICAL EXAMS, BUSINESS ENTERTAINMENT.
12. EXPENSES FOR EDUCATION OR TRAINING TO MAINTAIN OR IMPROVE
SKILLS IN YOUR PRESENT OCCUPATION OR WHICH IS REQUIRED BY YOUR EMPLOYER.
COMMUTING TO THE EDUCATION SITE IS DEDUCTIBLE IF THE TRAINING IS SHORT-TERM.
13. LEGAL AND OTHER PROFESSIONAL FEES FOR INVESTMENTS OR FOR
PROTECTION OF INCOME. TAX PREPARATION FEE, CASUALTY LOSS APPRAISAL, SAFE
DEPOSIT BOX, IRA CUSTODIAL FEES, OTHER INVESTOR EXPENSES.
14. BUSINESS/ EMPLOYEE TELEPHONE CALLS--LONG DISTANCE,
WORK-RELATED PORTION OF CELLULAR PHONE. BASIC HOME SERVICE IS NOT
DEDUCTIBLE.
15. GAMBLING LOSSES, BUT ONLY TO EXTENT OF WINNINGS.
TAX TIPS AND ADVICE
TAXPAYERS NO LONGER HAVE TO BUY A NEW RESIDENCE TO AVOID BEING
TAXED ON THE SALE OF OLD RESIDENCE. IF THEY LIVED IN THE OLD HOUSE FOR TWO
OF THE PREVIOUS FIVE YEARS, IN MOST CASES THE SALE NEED NOT BE REPORTED,
WHETHER A GAIN OR LOSS.
ALWAYS MAIL IN YOUR TAX RETURN OR AN EXTENSION BY APRIL 15 EVEN
IF YOU CANNOT PAY THE TAX DUE.
IF YOU GAMBLE, KEEP RECORDS OF ALL WINNINGS AND LOSSES. IF
YOU RECEIVE A W-2G ON YOUR WINNINGS, YOU WILL WANT TO HAVE PROOF OF YOUR LOSSES
IN CASE OF AUDIT.
YOUR DEPENDENT CHILD WITH ONLY W-2 OR INTEREST/ DIVIDEND INCOME
MUST FILE A TAX RETURN IF HE EARNED OVER $300 OF INTEREST OR DIVIDENDS AND HIS
TOTAL INCOME IS MORE THAN $950. IF TOTAL W-2/ INTEREST/ DIVIDEND IS MORE
THAN $5700, A RETURN MUST ALSO BE FILED.
DO NOT PAY A BALANCE DUE NOTICE FROM IRS OR CASH A REFUND CHECK
FROM IRS IF YOU DON'T UNDERSTAND THE REASON IT WAS SENT. CALL MCDONNELL
ACCOUNTING.
KEEP TAX RETURNS FOREVER; KEEP SUPPORTING DOCUMENTS 7 YEARS.
ALWAYS STRIVE TO MAKE YOUR VOLUNTARY PRETAX CONTRIBUTIONS TO YOUR
PENSION PLAN AT WORK, AT LEAST TO THE POINT TO WHICH YOUR EMPLOYER MATCHES YOUR
CONTRIBUTION. ON THE OTHER HAND, IF YOU LEAVE YOUR JOB AND MUST WITHDRAW
YOUR PENSION FUNDS, ROLL THEM INTO AN IRA WITHIN 60 DAYS TO AVOID 10% PENALTY
AND BEING TAXED IN YOUR HIGHEST BRACKET (SEE FIRST PAGE). AVOID INCOME TAX
WITHHOLDING ON THE ROLLOVER BY HAVING A TRUSTEE TO TRUSTEE TRANSFER.
DO NOT HANDLE THE MONEY YOURSELF.
IF YOU DEDUCT VEHICLE EXPENSES FOR YOUR BUSINESS OR AS AN
EMPLOYEE, KEEP RECEIPTS VERIFYING THESE EXPENSES AND KEEP A LOG OF EACH LOCAL
AND OUT-OF-TOWN BUSINESS TRIP (MILEAGE, DATES, DESTINATIONS, BUSINESS PURPOSE).
MANY OF OUR CLIENTS HAVE VERY LARGE DEDUCTIONS IN THIS CATEGORY, AND THEY'RE
TAKING A BIG RISK IN NOT KEEPING TRACK OF THEIR MILEAGE (IN THE EVENT OF AN IRS
AUDIT).
IF YOU HAVE LOST RECEIPTS FOR DEDUCTIONS OR CREDITS, CAREFULLY
RECONSTRUCT FIGURES AND OTHER DETAILS FROM MEMORY AND WRITE THEM DOWN.
THE ABOVE LISTS OF DEDUCTIONS AND CREDITS ARE NOT ALL-INCLUSIVE.
DO NOT HESITATE TO CALL US ABOUT ANY OTHER EXPENSES YOU THINK MAY BE DEDUCTIBLE.
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