As a reminder, the IRS requires a trade or business to report the name, address, and social security number or federal tax identification number of any self-employed individual or un-incorporated business that you paid $600 or more for rent, services, director fees, commissions, medical and health care payments, or other income payments during 2009. Additionally, all payments to an attorney or law firm exceeding $600 require a 1099. Please note that C&A is incorporated and we do not need to be issued a 1099.
Payments of $10 or more of interest or dividends also need to be reported on Form 1099. Mortgage interest of $600 or more also needs to be reported on Form 1098.

The standard mileage rates (in cents per mile) are as follows:

	2009	2010
Business	55.0	50.0
Medical/Moving	24.0	16.5
Charitable	14.0	14.0

The credit of $1,000 per dependent child under age 17 remains the same for 2009. The qualifying child must now be the taxpayer’s dependent to be able to take the credit.

The residential energy credit has been reinstated by the IRS for tax years 2009 and 2010 allowing a credit to be taken on certain home improvements. The credit is 30% of the cost incurred for qualified energy efficiency improvements during the tax year. The maximum credit allowable is $1,500. Some examples of qualified energy efficiency improvements are insulation materials, exterior windows, exterior doors, electric heat pump water heaters, central air conditioners, natural gas, propane or oil water heaters or furnaces, hot water boilers, and advanced main air circulating fans.

The IRS allows taxpayers who are 70 ½ or older to take tax free distributions from their IRA’s if the money is donated directly to charity by the custodian of the IRA. The taxpayer can donate up to $100,000. This tax free distribution is available through 2009.

For tax year 2009 there is no RMD distribution from IRA accounts for taxpayers age 70 ½ or older. In a recently issued Notice, IRS has given taxpayers an unusual opportunity to rollover any RMD received in 2009. Taxpayers have until November 30, 2009 to rollover the funds. Keep in mind though only one rollover is allowed per year.

The Section 179 Election (election to write off of business assets such as automobiles and equipment) remains at $250,000 for the tax year 2009. The IRS has also extended the additional 50% first year bonus depreciation deduction for qualified property placed in service in 2009. Please note bonus depreciation can only be taken on new assets not used.

The total depreciation deduction (including the section 179 expense deduction) you can take for a passenger automobile (that is not a truck or a van) that you use in your business and first placed in service in 2009 is $2,960 ($10,960 for automobiles for which the special depreciation allowance applies). The maximum deduction you can take for a truck or van you use in your business and first placed in service in 2009 is $3,060 ($11,060 for trucks or vans for which the special depreciation allowance applies).

The FICA limit has been raised from $106,800 in 2009 to $106,800 for 2010.

A refundable tax credit is available for homebuyers.  Please contact your local Cunningham & Associates office for further information or to see if you may be eligible for this credit.

The additional standard deduction for real property taxes to non-itemizing taxpayers remains in effect for tax year 2009. This deduction is the lesser of the amount of real property taxes paid that could be claimed if itemizing, or $500 ($1,000 for married filing joint filers).

The first $2,400 of unemployment compensation for 2009 is excluded from tax.

The IRS is allowing a deduction on sales tax paid on new vehicles purchased after Feb. 17, 2009 and before Jan. 1, 2010 on up to $49,500 of the purchase price. This deduction is available to non-itemizing taxpayers as well as those who itemize. The deduction phases out for individuals with modified adjusted gross income between $125,000 and $135,000 ($250,000 and $260,000 for married filing joint filers).

This credit formerly known as the Hope Credit has been increased to a maximum of $2,500 per student for qualifying tuition and related expenses. The credit phases out for individual taxpayer whose modified adjusted gross income is between $80,000 and $90,000 ($160,000 and $180,000 for married filing joint filers). The Hope Credit can now be claimed for the first four years of post-secondary education. The term “qualified tuition and related expenses” has been expanded to include expenditures for course material such as books, supplies and equipment needed for a course of study whether or not the materials are purchased from the educational institution as a condition of enrollment or attendance.

The Lifetime Learning Credit is a credit of up to $2,000 for qualified education expenses paid for all students enrolled in eligible educational institutions. There is no limit on the number of years this credit can be claimed for each student. However, a taxpayer cannot claim both the Hope or American opportunity credit and the lifetime learning credits for the same student in one year. The Lifetime Learning Credit is phased out if your modified adjusted gross income is between $50,000 and $60,000 ($100,000 and $120,000 for married filing joint). You can not claim the Lifetime Learning Credit if your modified AGI is $60,000 or more ($120,000 or more for married filing joint).

The Making Work Pay Credit allows a credit of the lesser of 6.2% of an individual’s earned income or $400 ($800 for married filing joint). Earned income for these purposes includes net earnings from self-employment that are includable in taxable income, as well as combat pay excluded from gross income. Please note this credit is phased out for individuals whose modified AGI is between $75,000 and $95,000 ($150,000 and $190,000 for married filing jointly). The credit is not available to nonresident aliens, individuals who may be claimed as a dependent by another taxpayer or any estate or trust. If you are a wage earner, you may have already seen a change in your take home pay due to a reduction in your wage withholding that would have taken place in April of this year. Sole proprietors will be able to take advantage of this credit when filing their 2009 taxes. Pensioners should make certain that their withholdings were not adjusted in April as they may end up owing taxes with their 2009 Form 1040.

The IRS is allowing convenience fees associated with the electronic payment of federal tax, including fees related to payment of estimated tax to be deducted as a miscellaneous itemized deduction. You have to be able to file Form 1040, Schedule A Itemized Deduction and deduct miscellaneous deductions exceeding 2% of your AGI to get this deduction.

The special 0% capital gain rate is in effect for tax years 2009 and 2010. This rate is limited by total adjusted gross income and total ordinary income to capital gain ratio. It is typically available to lower income taxpayers but may apply to higher income taxpayers if most income is from capital gain. For single and married filing separate filers the maximum savings is $4,833 and $9,765 respectively.