Checking the Status of Your Federal Tax Refund is Easy

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

Where’s My Refund? is an interactive tool on the IRS web site at IRS.gov.  Whether you split your refund among several accounts, opted for direct deposit into one account, or asked the IRS to mail you a check, Where’s My Refund? will give you online access to your refund information nearly 24 hours a day, 7 days a week.

If you e-file, you can get refund information 72 hours after the IRS acknowledges receipt of your return.  If you file a paper return, refund information will be available within three to four weeks.  When checking the status of your refund, have your federal tax return handy. To access your personalized refund information, you must enter:

• Your Social Security Number (or Individual Taxpayer Identification Number);

• Your Filing Status (Single, Married Filing Joint Return, Married Filing Separate Return, Head of Household, or Qualifying Widow(er)); and

• The exact refund amount shown on your tax return.

Once your personal information has been entered, one of several responses may come up, including the following:

• Acknowledgement that your return was received and is in processing.

• The mailing date or direct deposit date of your refund.

• Notice that the IRS could not deliver your refund due to an incorrect address.  You can update your address online using the Where’s My Refund? feature.

Where’s My Refund? also includes links to customized information based on your specific situation.  The links guide you through the steps to resolve any issues affecting your refund.  For example, if you do not get the refund within 28 days from the original IRS mailing date shown on Where’s My Refund?, you can start a refund trace online.

Where’s My Refund? is also accessible to visually impaired taxpayers who use the Job Access with Speech screen reader used with a Braille display and is compatible with different JAWS modes.

If you do not have internet access, you can check the status of your refund by calling the IRS TeleTax System at 800-829-4477 or the IRS Refund Hotline at 800-829-1954.  When calling, you must provide your Social Security Number (or your spouse’s), your filing status and the exact refund amount shown on your return.

Refunds are sent out weekly on Fridays.  If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back.

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Choosing the Correct Filing Status

Everyone who files a federal tax return must determine which filing status applies to them. It is important that the correct filing status is chosen as it determines your standard deduction, the amount of tax you owe, and any refund that may be owed to you.

Here are several important facts about the five filing status options that may apply to your specific situation.

1. Your marital status on the last day of the year determines your marital status for the entire year.

2. If more than one filing status applies to you, choose the one that gives you the lowest tax obligation.

3. The Single Filing status generally applies to anyone who is unmarried, divorced or legally separated according to state law.

4. A married couple may file a joint return together.  The couple’s filing status would be Married Filing Jointly.

5. If your spouse died during the year and you did not remarry during 2009, you may still file a joint return with that spouse for the year of death, provided the joint return election is not revoked by a personal representative for the deceased spouse.

6. A married couple may elect to file their returns separately.  Each person’s filing status would generally be Married Filing Separately, unless they lived apart for the last six months of the year and one or both qualify as Head of Household.

7. Head of Household generally applies to taxpayers who are unmarried.  You must also have paid more than half the cost of maintaining a home for you and a qualifying person to qualify for this filing status.

8. You may be able to choose Qualifying Widow(er) with Dependent Child as your filing status if your spouse died during 2007 or 2008 and you have a dependent child.  Take note that certain other conditions must be met.

If you have questions regarding your filing status, please give this office a call.

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To File or Not To File

A frequent question asked is whether or not an individual needs to file a tax return.  There are two issues associated with this question:

• Is there is a requirement to file?

• Should the taxpayer file even when there isn’t a requirement to file?

The answers to these two questions are quite different. You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age and the type of income you receive. Different filing thresholds may apply for federal and state purposes.

For example, for 2009, a married couple both under age 65 generally is not required to file a federal return until their joint income reaches $18,700. However, self-employed individuals generally must file a tax return if their net income from self-employment was at least $400. There are special rules for children or other individuals who are, or could be, claimed as a dependent by someone else.

Even if you don’t have to file a federal return, here are six reasons why you may want to file:

• Federal Income Tax Withheld. If you are not required to file, you should file to get money back if Federal Income Tax was withheld from your pay, if you made estimated tax payments, or had a prior year overpayment applied to this year's tax.

• Earned Income Tax Credit. You may qualify for the Earned Income Tax Credit, or EITC, if you worked, but did not earn a lot of money.  EITC is a refundable tax credit meaning you could qualify for a tax refund.

• Additional Child Tax Credit. This credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

• First-Time Homebuyer Credit. If you purchased a main home during 2009 and did not own a main home during the prior 3 years, you may be able to take this refundable credit.

• American Opportunity Credit. The new American Opportunity Credit allows an education credit for the first four years of post-secondary education expenses. 40% of that credit is refundable even when you have no tax liability.

• Making Work Pay Credit. This is a new credit for 2009 and provides a refundable credit of up to $400 ($800 for a joint return).

If in doubt, please call this office to see if you are required or should file a tax return for 2009.

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The New Vehicle Sales and Excise Tax Deduction

If you purchased a new vehicle in 2009, you may be entitled to a special tax deduction for the sales and excise taxes on your purchase.

Here is some important information you should to know about this deduction:

1. State and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.

2. If a vehicle costs more than $49,500, you still receive a deduction for a prorated amount of sales tax and excise taxes.

3. You can deduct the sales tax for more than one vehicle purchased during the year.

4. Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles.

5. To qualify for the deduction, the new cars, light trucks and motorcycles must weigh 8,500 pounds or less.  New motor homes are not subject to the weight limit.
 
6. Purchases must have occurred after Feb. 16, 2009, and before Jan. 1, 2010.

7. Purchases made in states without a sales tax — such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon — may also qualify for the deduction. Taxpayers in these states may be entitled to deduct other qualifying fees or taxes imposed by the state or local government.  The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee.

8. This deduction can be taken regardless of whether the buyers itemize their deductions or choose the standard deduction.  Taxpayers who do not itemize can add this additional amount to the standard deduction on their 2009 tax return.

9. The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

If you purchased a car in 2009 and have questions about how this deduction will affect you, please give this office a call.

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Time is Running Out for the Homebuyer Tax Credit

If you (or your spouse) are at least 18 years of age and plan on taking advantage of the liberalized homebuyer tax credit, time is running out. Unless extended by Congress, this refundable tax credit will no longer be available for homes purchased after April 30, 2010 or after June 30, 2010 when a binding contract to purchase was entered into prior to May 1.

The homebuyer credit is 10% of the purchase price but not exceeding $8,000 for first-time homebuyers and $6,500 for long-time residents. This refundable credit is yours to keep, even if you are subject to the alternative minimum tax, as long as the home continues to be used as your principal residence for 36 months after purchase.

A qualifying home can include a conventional single-family structure, house trailer, mobile home, houseboat, cooperative apartment, condominium, duplex, or row house as long as it can qualify as the buyer’s principal residence but not exceed $800,000 in cost.

You also have the option to claim the credit on your 2009 tax return, thus putting the money into your hands more quickly. When making the decision to claim the credit in 2009 or 2010, the homebuyer will need to consider in which year the credit will provide the best benefit. This is because the credit phases out for higher-income taxpayers based upon the taxpayer’s AGI. So, if you qualify for the credit and your income is in the credit phase-out range, you probably will want to claim the credit in the year with the lower income. The credit is ratably phased-out for individual taxpayers between $125,000 to $145,000 ($225,000 and $245,000 for married taxpayers filing jointly).

A taxpayer is considered a first-time homebuyer if he or she had no present ownership interest in a principal residence in the U.S. during the 3-year period before the purchase of the home to which the credit applies. A long-time resident is any individual who has owned the same principal residence for any 5 consecutive years during the 8-year period ending on the date of purchase of a subsequent principal residence. Caution: If either spouse fails the first-time homebuyer or long-time resident definition, neither gets the credit (even if filing separately).

To prevent fraudulent claims of this credit, the IRS is requiring additional documentation to be attached to the return, including a copy of the final settlement statement (generally Form HUD-1) from the purchase or the certificate of occupancy for a newly-built home. In addition, long-time residents must attach documentation such as mortgage interest statements, property tax records, or homeowner’s insurance records for the 5-out-of-8-years consecutive period being used to claim the credit.

In addition to the credit, the tax law also allows first-time homebuyers to make a penalty-free withdrawal of up to $10,000 from their IRAs for the purchase of a home. Married individuals each can withdraw up to $10,000 from separate IRA accounts for this purpose. Although the withdrawal is penalty-free, it is still taxable, so you should consider carefully the tax ramifications and the impact on your future retirement before invading your IRA accounts.

It would probably be appropriate to consult with this office in advance of a home purchase if you or family members are contemplating utilizing the new credit or withdrawing from an IRA.

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2010 Brings Increased Deduction for Domestic Production Activities

The domestic production deduction was created to encourage manufacturing and production within the U.S., and it provides a substantial business deduction equal to 9% (up from 6% in 2009) of the lesser of:

(1) the taxpayer’s net income from qualified production activities or

(2) the taxable income (modified adjusted gross income for individual taxpayers) without regard to this deduction for the tax year.

The deduction is further limited to 50% of the W-2 wages of the employer for the tax year allocable to the activities eligible for the deduction.

Domestic Production Activities – Although the definition of “domestic production activity” is a little elusive, it generally does not include retail sales or purely service activities. Among the more common eligible activities are:

• manufacturing and production activities in whole or in significant part within the U.S.,

• construction of real property in the U.S., and

• performance of engineering or architectural services in the U.S. in connection with real property construction projects in the U.S.

The following example, one that was used in a Congressional hearing, does a good job of defining what is and is not a qualified domestic production activity: Suppose you are a baker and in the business of producing donuts. Some of the donuts you sell retail directly to the consumers, and some you sell in bulk to hotels and restaurants. The production costs of the donuts sold at retail do not qualify for the deduction, while the costs associated with the wholesale sales to the hotels and restaurants do.

Computing the Deduction – The following is an example of how this deduction works: Suppose your business manufactures a product that you wholesale to retailers. Your net income from sales of that product for the year is $800,000, and the wages you paid to your employees to manufacture that product totaled $200,000. Your deduction for 2010 would be the lesser of 9% of the $800,000 in revenue or 50% of the $200,000 wages. Thus, the domestic production activities deduction for your business would be $72,000 (.09 x $800,000). The deduction is allowed for both regular and alternative minimum tax purposes.

Who Gets the Deduction – This deduction is allowed to all taxpayers, including individuals, C corporations, farming cooperatives, estates, trusts, and their beneficiaries. The deduction is allowed to partners and owners of S corporations (not to partnerships or the S corporations themselves) and may be passed by farming cooperatives to their patrons. And, despite the deduction’s history, it is fully available to taxpayers who do not export.

The foregoing is only an overview of this deduction. If you have questions related to how the domestic production deduction might apply to your specific circumstances, please give this office a call.

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Many Business Tax Breaks Expired at the End of 2009

Although there is some talk of extension, unless Congress acts to retroactively restore them, the following business tax breaks that expired on December 31, 2009 will not be available in 2010:

• The additional first-year 50% bonus depreciation for qualified property, generally equipment, machinery, electronics, etc.

• The $8,000 increase in the first-year depreciation limit for passenger automobiles used in business

• The Sec 179 expense deduction for 2010 is substantially reduced. The maximum amount that may be expensed is $134,000 (down from $250,000 for 2009). The maximum annual expensing amount generally is reduced dollar-for-dollar by the amount of property placed in service during the tax year in excess of $530,000 (down from $800,000 in 2009).

• The five-year depreciation for farming business machinery and equipment

• The fifteen-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements

• The credit for construction of new energy-efficient homes (this provided a credit up to $2,000 for site-built homes and $1,000 to $2,000 for manufactured homes)

• The enhanced (greater than cost) charitable deduction for contributions of food inventory by a non-corporate taxpayer from its trade or business of apparently wholesome food inventory for the care of the ill, needy, or infants

• The enhanced charitable deduction for contributions of book inventories to public schools

• The enhanced deduction for corporate contributions of computer equipment for educational purposes

• The seven-year straight-line cost recovery period for property used for land improvement and support facilities at motorsports entertainment complexes

• The film and television producers’ election to expense the first $15 million of production costs incurred in the U.S. ($20 million if the costs are incurred in economically depressed areas in the U.S.)

• The credit for eligible small business employers equal to 20% of the sum of differential wage payments to activated military reservists

If you have questions relating to any of the above, please give this office a call.

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Have a Financial Interest or Signature with a Foreign Financial Account? Better Read This!

Each U.S. person who has a financial interest in or signature or other authority over any foreign financial accounts (including bank, securities, or other types of financial accounts in a foreign country), if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship to the U.S. government each calendar year.

The government uses this reporting mechanism as a means to uncover hidden foreign accounts and ensure that investment income earned in foreign countries by U.S. taxpayers is included on their U.S. tax returns. The Treasury Department has placed a new emphasis on foreign accounts, and taxpayers with a financial connection to a foreign country should determine whether they have a reporting requirement.

Reporting is accomplished by filing a “Report of Foreign Bank and Financial Accounts”—more commonly referred to as the “FBAR”—which is due on or before June 30 of the succeeding year. No extensions of time are available for filing this form. In addition, taxpayers generally are required to answer “yes” or “no” to questions related to foreign bank and financial accounts on their tax returns.

Penalties for failing to comply can be draconian. For non-willful violations, civil penalties up to $10,000 may be imposed; the penalty for willful violations is the greater of $100,000 or 50% of the account’s balance at the time of the violation. A reasonable cause exception to the penalty is available for non-willful violations but not for willful violations.

Overlooked Accounts – Many taxpayers overlook the fact that they have a reporting requirement in situations such as the following:

• Family Accounts – Recent immigrants to the U.S. may still have parents or other family members residing in the “old” country, and those relatives may have included them on an account in the foreign country. This is common practice for some ethnic groups. The taxpayer does not really consider the account his or hers, but it falls under the reporting requirement if he or she has signature or other authority over the account and the value exceeds $10,000.

• Inherited Accounts – Accounts in a foreign country and inherited fall under the FBAR reporting requirement even if the funds are subsequently transferred to the U.S. The FBAR rules state that reporting is required if at any time during the year the foreign account exceeds $10,000.

• Business Accounts – An officer or board member may have signature authority over a business account held in a foreign country and overlook the need to meet the FBAR reporting requirements.

In addition to including any reportable foreign income on one’s tax return, a taxpayer must ensure that the foreign account questions are completed correctly on the tax return and that the FBAR is filed when required. If you have questions regarding this reporting requirement, please contact this office.

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What to Do If You Are Missing a W-2

Have you received your W-2?  These documents are essential to filling out most individual tax returns.  You should receive a Form W-2, Wage and Tax Statement, from all of your employers each year.  Employers have until February 1, 2010 to provide or send you a 2009 W-2 earnings statement either electronically or in paper form.  If you have not received your W-2, follow these steps:

1. Contact this office – And let us know you are missing a W-2.  If your appointment is in the near future, we will advise you whether to keep the appointment or change it to another time.  Generally, when a W-2 or 1099 is missing, it is best to keep the appointment.  We can complete everything else for the return, except for the missing document, which you can mail or drop by the office at a later date.  That way, we can finish your return as soon as the W-2 or 1099 is available.  This will speed up your refund if you are receiving one.

2. Contact your employer - Contact your employer to inquire if and when the W-2 was mailed.  If it was mailed, it may have been returned to the employer because of an incorrect or incomplete address.  After contacting the employer, allow a reasonable amount of time for them to resend or to issue the W-2.

3. Contact the IRS - If you still do not receive your W-2 by February 16, you can contact the IRS for assistance at 800-829-1040.  However, we recommend that you hold off from contacting the IRS until you are certain that you will not be receiving a W-2 from the employer, even at a date substantially later than February 16.  If, and when, you do call the IRS, have the following information at hand:

• Employer's name, address, city, and state, including zip code;

• Your name, address, city and state, including zip code, and Social Security number; and

• An estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer.  The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible. This office can assist you in making the estimate.

4. File your return – Even if you don’t receive a W-2, you still must file your tax return or request an extension to file by April 15. 

o If you anticipate that you will ultimately receive the missing W-2, this office can estimate your 2009 tax liability and file extensions for you.  If you have a substantial refund coming, you may opt to have this office prepare a substitute W-2 and you can file without the W-2.  Refunds for returns including substitute W-2s can significantly be delayed while the IRS verifies the W-2 information.  

o If you don’t anticipate receiving the missing W-2, then this office can prepare a substitute W-2, allowing you to file your 2009 tax return.  

If a substitute W-2 is used and it is later determined that the information used to prepare the substitute W-2 was in error, an amended return may have to be prepared for you to file.

Please call this office if you have any questions.

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New Limitation on Farm Losses

For tax years beginning after 2009, the farming loss of a taxpayer, other than a C corporation, is limited for any tax year in which any applicable subsidies are received.

The deductible loss is limited to the greater of

(a) $300,000 ($150,000 for a married person filing separately), or

(b) The taxpayer's total net farm income for the prior five tax years.

Applicable subsidies - are (1) any direct or counter-cyclical payments under title I of the Food, Conservation, and Energy Act of 2008 (or any payment elected in lieu of any such payment), or (2) any Commodity Credit Corporation (CCC) loan.

Partnerships and S corporations – For partnerships and S corporations the limit is applied at the partner or shareholder level.

Total net farm income is an aggregation of all income and loss from farming businesses for the prior five tax years. Any loss that is disallowed is carried forward to the next tax year and treated as a deduction attributable to farming businesses in that year. Farming losses due to fire, storm, or other casualty, or disease or drought, are disregarded when calculating the limitation.

Passive Activities – If the farming activity is a passive activity, the farming loss limitation rules apply before the passive activity loss rules.

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Long-Range Tax Planning Clouded

Long-range income-tax planning for individuals has always been challenging, what with the steady stream of changes and last minute action by Congress.  This year, it goes to an all-new level taking into account the sunset provisions for many current benefits – those provisions that were enacted with a specified ending date – and the President’s 2011 budget proposals. 

The following lists a number of provisions that will impact long-range tax planning.  However, one thing is for sure; for higher-income taxpayers, the tax bite is going up, and for some, substantially.

o Tax Rates – Currently, the lowest tax bracket is 10% and the highest is 35%.  Beginning in 2011, without Congressional action, the lowest bracket will be 15% (the 10% bracket goes away) and the top bracket increases to 39.6%.  So where we currently have 10%, 15%, 25%, 28%, 33% and 35%, beginning in 2011, we will have 15%, 28%, 31%, 36% and 39.6%.

Administration’s Budget Proposal – The budget proposal would have the rates increase for 2011 as follows:

(1) The four bottom brackets of 10%, 15%, 25% and 28% would be retained.

(2) The 28% bracket would be expanded to assure that taxpayers won't see their taxes rise as a result of the increase in the top two brackets.

(3) The top two brackets, currently 33% and 35%, would increase to 36% and 39.6%.

(4) For married taxpayers filing jointly, the 36% rate would apply to taxable income above $231,300 ($250,000 less the standard deduction and two personal exemptions), indexed from 2009; and for single taxpayers, it would apply to taxable income above $190,650 ($200,000 less the standard deduction and one personal exemption), indexed from 2009.

(5) The 39.6% rate would begin at taxable incomes over $373,650 for married taxpayers filing jointly, heads of household and single filers, with the taxable income level indexed for inflation. 

o Alternative Minimum Tax (AMT) - Without Congressional intervention, the alternative minimum tax (AMT) exemption amounts for 2010 drop to $33,750 (down from $46,700) for unmarried taxpayers, $45,000 (down from $70,950) for joint filers, and $22,500 (down from $35,475) for married individuals filing separately. If the exemption amounts aren’t propped up again by Congress, an estimated additional 20 million taxpayers will be subject to the AMT in 2011. In addition, many nonrefundable personal credits claimed after 2009 can't exceed the excess of: (a) the individual's regular tax liability, over (b) the individual's tentative minimum tax, determined without regard to the AMT foreign tax credit. For 2009, this limitation didn't apply.

Anticipated 2010 AMT - Since Congress is bogged down with other issues and does not have time to deal with meaningful AMT relief, it is the general consensus, although not guaranteed, that Congress, as they have done in the past, will enact another one-year patch for the AMT.  If this happens, the exemptions will be temporarily restored to the 2009 levels (as indexed for inflation), and nonrefundable personal credits will be allowed to offset the AMT as well as regular tax.

o Capital Gains – Currently, most long-term capital gains are taxed at a maximum rate of 15%, and if the long-term capital gain would otherwise be taxed at a rate below 25% if it were ordinary income, it is taxed at a zero percent rate.  Beginning in 2011 without Congressional intervention, long-term capital gains tax rates will be increased to 20%.

o Qualified Dividends – Currently, qualified dividends are taxed using the same long- term capital gains rates as shown in the previous paragraph.  However, beginning in 2011 and absent Congressional intervention, qualified dividends will be taxed at ordinary income rates.

Administration’s Budget Proposal - Beginning in 2011, a 20% tax rate would apply to long-term capital gains and qualified dividends of married taxpayers filing jointly with income over $231,300 as indexed for inflation and $190,650 for single taxpayers.  These two income levels are determined in the same manner as the tax rate proposal above. Taxpayers below these income levels would be subject to the rates that currently apply (i.e., 0% or 15% rate) for long-term capital gains and qualified dividends.

o Deductions & Exemptions - Under current rules, the standard deduction for married taxpayers filing jointly (and qualified surviving spouses) is 200% of the standard deduction for single taxpayers.  In addition, for 2010, the phase-out of itemized deductions and exemption allowances has been eliminated for higher-income taxpayers.

Beginning in 2011, without Congressional action, the current rules will sunset and the standard deduction for married taxpayers filing jointly (and qualified surviving spouses) will revert to 167% (down from the current 200%) of the standard deduction for single taxpayers, and thus restoring the marriage penalty.

Also beginning in 2011, without Congressional action, the phase-out of itemized deductions and exemptions will return for higher-income taxpayers.

Administration’s Budget Proposal – For 2011

• The standard deduction for married taxpayers filing jointly (and qualified surviving spouses) would remain at 200% of the standard deduction for single taxpayers.

• The AGI-based reduction of itemized deductions and the AGI-based personal exemption phase-out would be reinstated only for higher-income taxpayers.

• The tax value of all itemized deductions would be limited to 28% whenever they would otherwise reduce taxable income in the 36% or 39.6% tax brackets. A similar limitation also would apply under the AMT.

• The optional deduction for state and local general sales taxes would be extended through 2011.

o Other Expiring Individual Tax Benefits – Additionally, and without Congressional action, the following tax benefits have or will expire soon.

• Up to $5,250 of tax-free, employer-provided education assistance – expires after 2010;

• The above-the-line education expense deduction – expired after 2009;

• Teacher’s $250 above-the-line deduction for classroom supplies - expired after 2009; and

• The $500 maximum ($1,000 for joint filers) standard deduction add-on for property taxes paid during the year - expired after 2009.
  

Administration’s Additional 2011 Budget Proposal Items:

o Make the saver's credit (maximum $1,000) refundable and raise the AGI phase-out limits;

o Expand the child and dependent care tax credit by increasing the AGI level at which the 35% credit starts to phase out to 20% from $15,000 to $85,000, thus raising the level at which the 20% rate takes effect to AGI in excess of $113,000 (currently $43,000);

o Making the American Opportunity Tax Credit for education (currently only available in 2009 and 2010) permanent; and

o Extending the Making Work Pay Credit (MWPC) through 2011 ($400 per person and $800 per family). The President would like this credit to be made permanent, but it is unlikely Congress will agree, due to the federal budget deficit.

o Other Expiring Small Business Tax Benefits – In addition to the expiring individual benefits, without a Congressional extension, the following business tax options have expired after 2009.

• The 50% bonus depreciation; 

• The maximum Sec 179 expense deduction will drop to $134,000 (down from the $250,000 allowed in 2009).  The investment-based phase-out will drop to $550,000 (down from $800,000 allowed in 2009); and

• The 15-year depreciable life for leasehold improvements and restaurant property.

Administration’s Small Business 2010 Proposal Items:

o A new $5,000 small business job creation tax credit.  It provides a tax credit of up to $5,000 for new workers added in 2010, plus a reimbursement for payroll taxes on wage increases.

o Temporary extension of Code Sec. 179 expensing benefits for small businesses through 2010, permitting a maximum of $250,000 to be expensed with an investment-based phase-out level of $800,000.

o Extension of bonus depreciation for qualifying property placed in service through 2010.

Keep in mind that the information included in this article is based primarily on proposed changes and expiring benefits that could be extended by Congress.  Hopefully, a clearer picture will develop as Congress tackles these issues during the year.

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Spring Cleaning: Personalize and Tidy Up Your QuickBooks Desktop

One of the reasons the QuickBooks line of desktop products has been so successful is because of its clean, simple appearance and efficient navigational tools. But there’s room for improvement and personalization. Everyone uses QuickBooks just a little differently. You can create a desktop that meets your specific needs, while maintaining the program’s inherent usability. Every desktop version of QuickBooks (except for Simple Start) offers several tools to accommodate your preferences, so we’ll show you some of the best.

Establish Default Windows for Startup

QuickBooks automatically opens to its default desktop (the Home page), which displays a set of the most commonly used navigational icons, separated by type. You can change this behavior so that every time you launch the program, it opens to the screen(s) you want to see first.

You’ll have to tweak your Preferences to make this happen. Click Edit | Preferences. In the list on the left, click Desktop View. You’ll see a window that looks like Figure 1:

 

Figure 1: In the Desktop View section of your Preferences window, you can choose to have one window or multiple windows open, and save a desktop configuration that will open when you launch QuickBooks.

Note: If you want be able to have multiple windows open simultaneously, be sure that option is checked.

There are three options for preserving your desktop layout. If you click Save when closing company, QuickBooks will open with the windows that were open when you last closed the company file. If you don’t want any windows to open, check Don’t save the desktop. And if you have a set of favorite windows that you want to open each time you launch QuickBooks, set up that configuration and click Save current desktop. Of course, you can simply choose to have the Home page display when you load QuickBooks.

There are other desktop-related options in this same window that have to do with QuickBooks’ help features. You may also want to adjust these if you commonly use those services.

Customize Your Icon Bar

This is probably the simplest thing you can do to improve navigation. QuickBooks comes with an icon bar pre-installed, a horizontal strip at the top of the screen whose icons take you to specific parts of the program. The default icon bar may serve your purposes well, but if not, you can easily modify it. Click View | Customize Icon Bar (or right-click directly on the icon bar). The window shown in Figure 2 opens.

Figure 2: The Customize Icon Bar window contains all the tools you need to modify the navigational icons displayed in the QuickBooks icon bar.

To add, edit, or delete icons, simply click on the appropriate buttons. A new window opens containing self-explanatory tools to help you make your changes. You can also add separators (vertical lines) that can divide related groupings of icons.

Tracking Open Windows

If you’ve chosen to have multiple windows open simultaneously, you can easily keep track of what’s open—and navigate there quickly—by using the Open Windows list. To get there, click View | Open Window List. QuickBooks will open the sidebar shown in Figure 3. This list appears to the left of the main desktop or any open windows. To close it, simply click View, then uncheck Open Window List.

Figure 3: You can use the Open Window List to keep track of which windows are open. Clicking on one takes you there.

Customizing the Home Page

QuickBooks’ Home page is one of the program’s best feature. It not only serves as a navigational tool—you can click on an icon labeled, for example, Enter Bills, and QuickBooks will take you to that page—but it also illustrates the workflow of some processes.

You have some control over what appears on the Home Page. To make changes, click Edit | Preferences, then Desktop View and then Company Preferences tab to display the window in Figure 4.

Figure 4: In this window, you can turn on or off some of the icons that appear on the Home page.

Here, you can check or uncheck icons like Sales Receipts. But in order to show or hide icons, you’ll have to make sure that the actual features enabling them are active or inactive.

Your current preferences are displayed at the bottom of the window. You can easily alter them by clicking on one of the hyperlinks. So if Sales Tax is off, for example, click on it, and a window opens that lets you set up a sales tax item.

Finding Favorites

There’s yet another way to isolate the functions you use most often: the Favorites list. Click Favorites | Customize Favorites to access the list of options (like Chart of Accounts and Price Level List). Highlight one, then click Add. When you’re done with your list, click OK. Click the Favorites menu anytime you want to access these.

QuickBooks desktop is a powerful navigational tool, and provides simple maps to all of the program’s functions.  Such versatility and customizability contribute to the program’s overall ease of use, and make it a pleasure to use.

Setting up Preferences correctly in QuickBooks—for elements like Items & Inventory and Payments—will make the program work the way you need it to. If you have any questions on how to do this, please call us.

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Substantial Penalty for Late Partnership and S-Corporation Returns

Income from both partnership and S corporation returns passes through to the partners or stockholders. Therefore, filing these returns late creates hardships for the partners or stockholders to timely meet their own filing obligations. As a result, the government has imposed some substantial penalties for failure to timely file partnership and S corporation returns.

The penalty is a statutory dollar amount times the number of partners or shareholders for each month (or fraction of a month) that the failure continues, up to a maximum of 12 months. The base amount on which a penalty is computed is $195 per partner or shareholder for returns due for tax years starting in 2010. This is a substantial increase from the previous amount of $89 per partner or shareholder that applies if the entity’s tax year began in 2009. As an example, if your partnership files its 2010 return late and has four partners, the penalty will be $780 ($195 x 4) per month. The IRS may waive the penalty if there is reasonable cause for the late filing.

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First-Time Homebuyer Credit Documentation Requirements

Claiming the First-Time or Long-Time Resident Homebuyer Tax Credit on either your 2009 or 2010 return includes some complex documentation requirements.  The IRS recognizes that the settlement documents can vary from location to location, so they have provided some clarification related to these requirements.

1. Settlement Statement - Purchasers of conventional homes must attach a copy of Form HUD-1 or other properly executed Settlement Statement.

2. Properly Executed Settle Statement - Generally, a properly executed settlement statement shows all parties' names and signatures, property address, sales price and date of purchase.  However, settlement documents, including the Form HUD-1, can vary from one location to another and may not include the signatures of both the buyer and seller.  In areas where signatures are not required on the settlement document, the IRS encourages buyers to sign the settlement statement when filing their tax return -- even in cases where the settlement form does not include a signature line.

3. Retail Sales Contract - Purchasers of mobile homes who are unable to get a settlement statement must attach a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.

4. Certificate of Occupancy - For a newly-constructed home, where a settlement statement is not available, attach a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

5. Long-Time Residents - If you are a long-time resident claiming the credit, the IRS recommends that you also attach documentation covering the five-consecutive-year period such as Form 1098, Mortgage Interest Statement or substitute mortgage interest statements, property tax records or homeowner’s insurance records.

If you have questions related to this credit or the documentation required, please contact this office.

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