Thursday, October 30, 2008

Qualifying Dependents

I was recently asked by a client whether or not they could claim their father (who is over 65) that lives with them as a dependant. The answer is yes! This client takes care of her father, who is completely dependant upon her for his care both personally and financially. This is as long as they live in the same household.

For Example:
Ms. Hernandez is 72 years old and lives in an apartment. Last year she received $3,000 in nontaxable Social Security benefits and $400 in taxable interest income, all of which was used for her support. Ms. Hernandez's daughter, Theresa, paid $4,800 during the year toward her mother's support. Total support includes taxable and nontaxable income. Ms. Hernandez's total support is $8,200 ($3,000 + $400 + $4,800). Theresa paid more than half of her mother's support ($4,800/$8,200 = 59%).

Theresa can claim a dependency exemption for Ms. Hernandez.

Secondly, client also asked whether or not they could claim their handicapped child (who is 21) as a dependant. This answer to this is yes as well. The IRS allows a taxpayer to claim a child, no matter their age as a dependent, as long as they live in the same household.

A taxpayer can also claim a child as a dependent that is under 24 years old and the taxpayer cares for over 50% their expenses. Say for instance, a child in school and does not work is allowed to be claimed a dependent because they depend on their caregiver for over half of their living expenses. However, if the child is living at home, has a job, and prov, then they pays for more than 50% of their necessary living expenses, then they are not be considered a dependent because of the amount of income they generate. They would need to file an income tax return themselves.

Tuesday, October 28, 2008

Mortgage Revenue Bonds

With much anxiety our nation has been experiencing over the economy, there will be relief for those who have suffered in the housing market with forclosures. Under The Housing And Economic Recovery Act of 2008, the legislation authorizes up to $11 billion in additional tax-exempt bonds for refinancing sub-prime loans, lending to first time homebuyers, and investment in affordable housing.

Additionally, it offers nearly $4 billion in federal grants to state and local governments for the purpose of buying foreclosed homes, rehabilitating them, and then selling them as affordable housing.

The act raises to $625,000 the limit for loans backed by FHA, Fannie Mae, and Freddie Mac. This increase is primarily geared toward markets with very high values such as California, allowing for more refinancing opportunities and lower interest rates on the loans. Additional changes include a one-year moratorium on risk-based pricing by the FHA and reforms to the HECM and manufactored housing programs. The act also raises the minimum down payment required on FHA-backed loans to 3.5 percent from 3 percent.

HOPE:A Provision Of The Housing & Recovery Act 2008

There are other notable provisions to The Housing And Economic Recovery Act of 2008 that many taxpayers will benefit from in 2009.

The Home Ownership Preservation Entity (HOPE) section establishes a fund to assist distreessed borrowers in obtaining 30-year refinance loans.

To qualify, the lender must voluntarily agree to write down the loan to 90% of current appraised home value, and borrowers must give 50% of future home appreciation to the FHA.

If you have questions about this Recovery Act and what it entails (come tax time), contact a tax professional versus attempting to prepare your returns on your own. When preparing your own return, one might forget to factor in this opportunity.

Monday, October 27, 2008

Local Radio Station Bails Out Joe The Plumber

Shortly after John McCain made Ohio plumber Joe Wurzelbacher a household name following last Wednesday’s presidential debate, reporters and bloggers soon discovered a couple problems with Joe’s everyman story.

First, they discovered his name wasn’t exactly Joe—full name Samuel Joseph Wurzelbacher. Then, it turned out that while he practices the trade, Joe wasn’t a licensed plumber. And finally, while Joe was bemoaning Barack Obama’s proposed tax increases, the Ohioan was also delinquent on paying his own—with a $1,200 tax lien against him by the state of Ohio.

In response to the media coverage, two local Portland, Oregon radio hosts launched this article to help Wurzelbacher pay his back taxes.

Portland’s 1190 KEX’s afternoon News Radio hosts Mark Mason and Dave Anderson succeeded in that goal today, not only raising the $1,200 Joe the Plumber needs to pay his taxes, but also the $500 he’ll need to get his plumber’s license.

In an e-mail to Washington Wire, Mason writes that the hosts spoke to Wurzelbacher and his brother on air tonight to break the news. “We just spoke with Joe (and his brother) LIVE right now…felt that the media was unfair in that they never seemed to ask HIM about his background,” Mason wrote this evening, “He was very grateful for the $$.”

Still Missing Your Refund Or Stimulus Check???

The Internal Revenue Service is looking for taxpayers who are missing more than 279,000 economic stimulus checks totaling about $163 million and more than 104,000 regular refund checks totaling about $103 million that were returned by the U.S. Postal Service due to mailing address errors.

“People across the country are missing tax refunds and stimulus checks. We want to get this money into the hands of taxpayers where it belongs,” said IRS Commissioner Doug Shulman. “We are committed to making the process as easy as possible for taxpayers to update their addresses with the IRS and get their checks.”

All a taxpayer has to do is update his or her address once. The IRS will then send out all checks due.

Stimulus Checks
It is crucial that taxpayers who may be due a stimulus check update their addresses with the IRS by Nov. 28, 2008. By law, economic stimulus checks must be sent out by Dec. 31 of this year. The undeliverable economic stimulus checks average $583.

The “Where’s My Stimulus Payment?" tool on this Web site is the quickest and easiest way for a taxpayer to check the status of a stimulus check and receive instructions on how to update his or her address. Taxpayers without internet access should call 1-866-234-2942.

Regular Refunds
The regular refund checks that were returned to the IRS average $988. These checks are resent as soon as taxpayers update their address.

Taxpayers can update their addresses with the “Where’s My Refund?” tool on this Web site. It enables taxpayers to check the status of their refunds. A taxpayer must submit his or her social security number, filing status and amount of refund shown on their 2007 return. The tool will provide the status of their refund and in some cases provide instructions on how to resolve delivery problems.

Tuesday, October 21, 2008

Changes to $250 k/$500 k Exclusions on Home Sales Gains

Under the newly revised code, taxpayers can no longer take a full exclusion (up to $500,000 for joint filers) on gains from the sale of their primary residence if there was non-qualified periods based on the time it was designated as each. Also, portion of the gain assigned to the non-qualified period will not be excluded from homeowner income. So, if a real property was a rental for four years and then converted to a primary for six years prior to sale (a total of 10 years ownership), then 60% would qualify for exemption up to $500k joint threshold ($250K single).

State and Local Property Tax Deduction:
For tax year 2008, non-itemizing taxpayers can claim an additional real property tax standard deduction of up to $1000 for joint filers. This in addition to the standard deductions.

New Tax Credit For Some Home Buyers

In 2009 there is a temporary, one-time tax credit up to ten percent of property value , not to exceed $7500 for joint filers and subject to income phaseouts. Under the act's housing assistance section, first-time buyers of a principle residence who purchase the property between April 8, 2008 and July 1, 2009, can take this refundable federal tax credit, which phases out for joint filers and subject to income phaseouts. Under the act's housing assistance section, first-time buyers of a principle residence who purchase the property between April,8 2008 and July 1, 2009, can take this refundable federal tax credit, which phases out for joint incomes between $150,000 AND $170,000.

Although the tax credit limits are low for some areas of the country, many view this provision as a down payment assistance device, since it provides up to ten percent of a home's value . This credit is self-supporting, since it requires taxpayers who receive it to repay it over 15 years through their annual returns.

2008 Housing Bill Brings Many Tax Changes

As everyone is aware, our country has been experiencing great financial turmoil for quite some time. With the increased gas prices and the economical deficit of this country, we have entered what I consider to be (but has been consecrated for fear of shear mental panic) a recession. With the turmoil in the mortgage markets, new changes for tax professionals is on the rise for 2009.

The September federal takeover of Fannie Mai and Freddie Mac has, unfortunately , overshadowed much of the substantial legislation that was enacted a little earlier this year. However, theses changes are monumental and will affect many of our tax clients in the upcoming year.

The Housing and Economic Recovery Act of 2008 was signed into law by our President Bush on July 30, with much media attention surrouding the forclosure provisions. But the act included changes to the mortgage programs, a new tax credit for the first time homeowner's, the ability for our non-itemizers to claim a state and local property tax deduction. Several revenue raising provisions were also included reduced exclusions for gains realized on home sales, the end of seller-funded down payment assistance programs, and increase in FHA loan down payments.

Monday, October 20, 2008

Pension Limitations: Part Two

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $32,000 to $33,000; the limitation under Section 25B(b)(1)(B) is increased from $34,500 to $36,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $53,000 to $55,500.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $24,000 to $24,750; the limitation under Section 25B(b)(1)(B) is increased from $25,875 to $27,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $39,750 to $41,625.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $16,000 to $16,500; the limitation under Section 25B(b)(1)(B) is increased from $17,250 to $18,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), from $26,500 to $27,750.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $85,000 to $89,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $53,000 to $55,000. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $159,000 to $166,000.

The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $159,000 to $166,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $101,000 to $105,000.

Pension Plan Limitations for 2009

The Internal Revenue Service today announced cost‑of‑living adjustments applicable to dollar limitations for pension plans and other items for tax year 2009.
Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. It also requires that the Commissioner annually adjust these limits for cost‑of‑living increases.

Many of the pension plan limitations will change for 2009 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, for others, the limitation will remain unchanged. For example, the limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $15,500 to $16,500. This limitation affects elective deferrals to Section 401(k) plans and to the federal government’s Thrift Savings Plan, among other plans.

Effective Jan. 1, 2009, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $185,000 to $195,000. For participants who separated from service before Jan. 1, 2009, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2008, by 1.0530.

Wednesday, October 15, 2008

Personal Versus Business Expense

Generally, you cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part.
For example, if you borrow money and use 70% of it for business and the other 30% for a family vacation, you can deduct 70% of the interest as a business expense. The remaining 30% is personal interest and is not deductible.

Business Use of Your Home
If you use part of your home for business, you may be able to deduct expenses for the business use of your home. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation.

Business Use of Your Car
If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage.

If you need your taxes prepared and you have business expenses, don't prepare them yourself, hire a tax professional.

Tuesday, October 14, 2008

Personal Side Trip While On Business

I recently had a client ask me whether or not they could deduct a personal side trip while away on business, as an expense? The answer is no ! While on business, if you plan on taking some extra personal time, you will be unable to deduct this as a business expense.

Say for instance, you are in Vegas on business, and you stop off in Arizona to visit family, you spend $2050 on travel,meals,and lodging and other travel expenses. If you had not stopped off in Arizona, you would have only spent $1150 pertaining to business only. Therefore you will only be able to deduct the $115o you would have spent on business alone and the round trip tickets it costs to travel to Vegas. In addition to this deduction, you will also be able to deduct 50% of your meals pertaining to business.

If your trip consist primarily of personal reasons, such as vacation, you will be unable to deduct this as a business expenses.

Business Expense Deduction:Meals & Incidental

If you are self-employed and often have expenses, you need to also include your meals and other incidental expenses as well. According to the IRS, you can deduct the cost of meals in either of the following situations:

*It is necessary for you to stop for substantial sleep or rest to properly perform you daiy duties while traveling away from home on business.

*The meal is business-related entertainment.

However, you cannot deduct expenses for meals that are lavish or extravagant. An expense is not considered lavish or extravagant if it is based on actual circumstances. Expenses will not be dissalowed merely because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts.

Gernerally you are able to deduct 50% of the cost of your meals according to the IRS regulations. If you consume the meals during incident to any period subject to the Department of Transportation hours of service limits,you can deduct a higher percentage. The percentage is 75% for 2006 and 2007 and 80% for 2008 and thereafter. These certain air transporation workers ae pilots,crew,dispachers,mechanics, and control tower operaters, interstate truck operaters and bus drivers.

Incidental Expenses:

*These include tips to porters, baggage carriers,bellhops,hotel maids,stewards, or stewardesses and others on ships, and hotel servants in foreign countries.
*Transportation between places of lodging or business and places where meals are taken.
*Mailing costs associated with travel vouchers and payment of employer-sponsored charge card billings.

If you have questions, or need a tax profesional, don't hesitate to reach out for assistance.

Sunday, October 12, 2008

Business Expense Deduction

Business Use of Your Car

If you use your car in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. For a list of current and prior year mileage rates see the Standard Mileage Rates.

Other Types of Business Expenses

Employees' Pay - You can generally deduct the pay you give your employees for the services they perform for your business.

Retirement Plans - Retirement plans are savings plans that offer you tax advantages to set aside money for your own, and your employees' retirement.

Rent Expense - Rent is any amount you pay for the use of property you do not own. In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. If you have or will receive equity in or title to the property, the rent is not deductible.

Interest - Business interest expense is an amount charged for the use of money you borrowed for business activities.

Taxes - You can deduct various federal, state, local, and foreign taxes directly attributable to your trade or business as business expenses.

Insurance - Generally, you can deduct the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.
This list is not all inclusive of the types of business expenses that you can deduct

Deductible Traveling Expenses

Those that travel extensively away from home need to determine how and what is deemed as a tax deduction on their taxes. You can deduct ordinary and necessary you hate when you are travel away from home on business. The type of expense you can deduct depends on the facts and you can deduct on the facts and your circumstances.
When you travel away from home on business, you should keep good business records of all expenses you have and any advances you receive from your employer. You can use a log,diary,notebook, or any other written record to keep track of your expenses.
If you have one expense that includes the costs of meals, entertainment, and other services (such as logging and transportation), you must allocate that expense between the costs and the meals and entertainment and the cost of other services. You must have a resonable basis for making this allocation. For example, you must alliocate your expenses if a hotel includes one or more meals in its room charge. However, if a spouse, dependent, or other individual goes with you (or your employee) on a business trip or to a business convention, you generally cannot deduct his or her travel expenses.

Can deduct the travel expenses of someone who goes with you if that person:
1.Is your employee
2.Has a bona fide business purpose for the travel, and
3.Would otherwise be allowed to deduct the travel expenses.

Hurricane Grant Guidelines

The Internal Revenue Service today released a notice designed to help eligible homeowners who received federal reimbursement grants stemming from Hurricanes Katrina, Rita or Wilma take advantage of a new tax provision.
Notice 2008-95 provides guidelines to homeowners who received these grants, including the Louisiana Road Home Grants and the Mississippi Development Authority Hurricane Katrina Homeowner Grants.
The Housing and Economic Recovery Act, enacted this summer, included the new provision, aimed at helping grant recipients who previously claimed hurricane-related disaster-loss deductions on their main home. The new law gives affected homeowners the option of adjusting previously claimed deductions by treating their federal reimbursement grants as reimbursement for the losses they suffered on their main home from Hurricanes Katrina, Rita or Wilma.
Before this change, homeowners who claimed casualty loss deductions and received grants in a later tax year as reimbursement for the loss were required by law to pay tax on part or all of the grant to compensate for the tax benefit of the prior deduction. While individual circumstances varied, this meant that some taxpayers ended up paying more tax on the grant than they saved by claiming the deduction.
The notice explains how eligible taxpayers can amend prior-year returns to reduce the casualty loss deduction by the amount of the grant, and explains that taxpayers have one year to pay back any resulting tax due, penalty-free and interest-free. To qualify for this relief, these amended returns must be filed by July 30, 2009, and the entire resulting tax due paid by July 30, 2010, in most cases. The notice also provides special instructions for those taxpayers who have already filed an amended return.
Taxpayers should write the words, “Hurricane Grant Relief” in dark, bold letters at the top of their amended return, Form 1040X, and mail it to: Internal Revenue Service Center, Austin, TX 73301-0255. Amended returns cannot be filed electronically.
The IRS cautioned that, although filing an amended return may be a good option for many, it won’t necessarily be the right choice for everyone. The agency urges affected taxpayers and their representatives to consider carefully which option is best under their particular circumstances.

Tuesday, October 7, 2008

Are IRA Distributions Taxable?

The answer is no! You don't have to include this on your bottom line gross income or distributions that are return of your regular contributions from your Roth IRA. You also do not include distributions from your Roth IRA that you roll over tax free into another Roth IRA. A qualified distributions is any payment or distribution from your Roth IRA that meets the following requirements:

1. It is made after 5-year period beginning with the first year for which a contribution was made to a Roth IRA set up your benefit and
2. The payment or distribution is...
* Made after the date you reach age 59 1/2
* Made because you are disabled
* Made to a beneficiary or to your estate after your death or
* To pay up to $10,000 of certain qualified first-time home buyer amounts.

What Is A Roth IRA?

A Roth IRA is an individual retirement plan that, except as explained in this chapter, is subject to the rules that apply to the traditional IRA. It can either be an account or an annuity. To be a Roth IRA, it was be designated as such (when it is first set up). However, a SEP-IRA and SIMPLE IRA can neither be designated as a Roth IRA.

Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA . But if you satisfy the requirements, qualified distributions are free. Contributions can be made to your Roth IRA after you reach age 70 1/2 and you can leave amounts in your Roth IRA as long as you live.

How Much Can Be Contributed-

You can make contributions to a Roth IRA for a year at any time during the year or by the due date of your return for that year (not including extensions).

Roth IRAs are tax-free retirement savings vehicles. By permitting tax-free withdrawls, contributions made early in your working life receive the greatest tax benefit.

Monday, October 6, 2008

Tax Evasion:Paying Cash "Under The Table"

Paying Employees in Cash-

Paying employees, whole or partially, in cash is a common method of evading income and employment taxes resulting in lost tax revenue to the government and the loss or reduction of future social security or Medicare benefits for the employee.

Unfortunately, with the unprecedented decline in our economy, withholding money from those who benefit from social security and medicare is a travesty. To me, paying cash under the table is just mere stealing from the government and from those that benefit from the rest of us paying taxes on our earned income.

Businesses that can't afford to put people on the payroll and pay payroll taxes, (failing to pay payroll taxes), we would in a lot better financial shape. Just because a business owner feels they can't afford it, does not make it right, it just makes you (as a business owner) richer.

Employment Tax Evasion

Employment Tax Evasion Schemes-

Employment tax evasion schemes can take a variety of forms. Some of the more prevalent methods of evasion include pyramiding, employee leasing, paying employees in cash, filing false payroll tax returns or failing to file payroll tax returns.


"Pyramiding" of employment taxes is a fraudulent practice where a business withholds taxes from its employees but intentionally fails to remit them to the IRS. Businesses involved in pyramiding frequently file for bankruptcy to discharge the liabilities accrued and then start a new business under a different name and begin a new scheme.

Employment Leasing-

Employee leasing is another legal business practice, which is sometimes subject to abuse. Employee leasing is the practice of contracting with outside businesses to handle all administrative, personnel, and payroll concerns for employees. In some instances, employee-leasing companies fail to pay over to the IRS any portion of the collected employment taxes. These taxes are often spent by the owners on business or personal expenses. Often the company dissolves, leaving millions in employment taxes unpaid.

Helio Castroneves: Another Case Of Celebrity Tax Evasion

Dancing With The Stars” winner and professional race driver Helio Castroneves has been indicted on conspiracy to defraud the U.S. and tax evasion.

Castroneves, his sister and his attorney are accused of trying to conceal Castroneves’ money to avoid paying the taxes on all of it. Castroneves won the dancing title in the fall of 2007 during season five. He might be a great dancer, but he is terrible when it comes to paying taxes.

As of October 3:

Former Dancing With The Stars winner and race car driver Helio Castroneves pleaded not guilty to tax evasion on six counts. Castroneves, his sister and his attorney are accused of trying to conceal $5.5 million of Castroneves’ money to avoid paying the taxes on it.

We heard a similar story of indiscretion where celebrity/actor Wesley Snipes was prosecuted as a result of being ill advised or just plain untruthful. Nevertheless, he evaded paying taxes on earned income that was transfered off shore. At the end of the day, tax evasion is a crime, and one where these individuals are justly accused. Moreover, the embarrassment is devastating them both personally and professionally. Why should these individuals that are suppose to be role models be let off the hook so to speak. Besides, those that are affluent should pay their taxes just as civilians do in which make a lot less income.

Every year just around the time tax returns are due, the IRS is looking for such celebrities to indite on tax evasion. Money made in the US, that have been transferred to foreign shores are still subject to income tax. Those that participate in this are in part stealing from the IRS ; the IRS deems this as a dissipated asset which can bring about serious repercussions if caught.

Transferee Liability To Private Organizations

A termination under sec­tion 507(a) does not result from either a transfer of all its assets or a significant disposition of its assets by a private foundation unless it chooses to terminate under section 507(a)(1), or an involuntary termination occurs. If a private foundation incurs any liability for the private foundation excise taxes before or in connection with the transfer, transferee liability may be ap­plied against the transferee organization for pay­ment of those taxes.

Example. The White Foundation is a private foundation that had net assets of $100,000 on January 1, 1987. In 1987, in addition to distribu­tions made out of current income, the White Foundation transferred $10,000 to the Rose Foundation, $10,000 to the Black Foundation and $10,000 to the Green Foundation, all of which are private foundations. Therefore, the White Foundation made a section 507(b)(2) dis­tribution because it disposed of more than 25 percent of the fair market value of its net assets on January 1, 1987.

Vehicles That Qualify For Lean Burn Technology

The Internal Revenue Service has acknowledged the certifications by manufacturers that certain advanced lean-burn technology vehicles qualify for the alternative motor vehicle tax credit.

Before, only hybrid vehicles, fuel cell vehicles and alternative fuel vehicles had been certified, but now certain advanced lean-burn technology vehicles, which generally run on diesel fuel have been certified. These vehicles are passenger cars or light trucks with an internal combustion engine designed to operate primarily using more air than is necessary for complete combustion of the fuel. The vehicles also must incorporate direct fuel injection technology and achieve at least 125 percent of the 2002 model year city fuel economy rating.

Available credit amounts may vary and include a base credit amount based on fuel economy compared to the 2002 model year city fuel economy rating and an additional amount based on the vehicle’s lifetime fuel savings. For a taxpayer to claim the credit, the original use of the vehicle must begin with the taxpayer and the vehicle must be acquired for use or lease by the taxpayer and not for resale.

The alternative motor vehicle tax credit was enacted by the Energy Policy Act of 2005 under Internal Revenue Code Section 30B and includes the advanced lean-burn technology motor vehicle credit and the qualified hybrid motor vehicle credit.

There is a limitation on the number of qualified hybrid and advanced lean-burn technology vehicles eligible for credit. The phase-out period begins when a manufacturer sells 60,000 qualified hybrid and advanced lean-burn technology vehicles.

Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th hybrid passenger automobile or light truck or advanced lean-burn technology motor vehicle. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.
The qualifying vehicles and their credit amounts are:

• 2009 Volkswagen Jetta 2.0L TDI Sedan manual or automatic — $1,300
• 2009 Volkswagen Jetta 2.0L TDI SportWagen manual or automatic — $1,300
• Mercedes GL 320 BLUE TEC — $1,800
• Mercedes R 320 Blue TEC — $1,550
• Mercedes ML 320 Blue TEC — $900

Thursday, October 2, 2008

Fourth Quarter 2008 Interest Rates as Of 10-1-08

The Internal Revenue Service has announced in Revenue Ruling 2008-47 that interest rates for the calendar quarter beginning Oct. 1, 2008 will increase by one percentage point.
The new rates are:
Six (6) percent for overpayments [five (5) in the case of a corporation];
Six (6) percent for underpayments;
Eight (8) percent for large corporate underpayments; and
Three and one-half (3.5) percent for the portion of a corporate overpayment exceeding $10,000.
Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points. Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate based on daily compounding determined during July 2008.