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ROBERT D. FLACH, LLC

FEDERAL TAX UPDATE
ROBERT D. FLACH TAX PLANNING INSTITUTE
TAX HISTORY
SPEAKING OF TAXES
ROBERT D. FLACH, LLC HOMEPAGE

November 24, 2008:  2009 STANDARD MILEAGE ALLOWANCE RATES ANNOUNCED
 
The IRS has announced the new Standard Mileage Allowance rates for 2009.
 
These rates are posted on the WHAT'S NEW FOR 2009 Page of this website.
 
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June 24, 2008:  STANDARD MILEAGE ALLOWANCE RATES INCREASED
 
According to IR-2008-82:
 
"The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008.  Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
 
The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through December 31, 2008.  This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc 2007-70.
 
In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008.  The IRS normally updates the mileage rates once a year in the fall for the next calendar year.
 
The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008.  The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile."
 
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February 14, 2008:  IMPORTANT NOTICE REGARDING THE FEDERAL REBATE
 
IRS Fact Sheet FS-2008-16 provides the following instructions:
 
"Individuals who might not otherwise be required to file a 2007 tax return will need to file a return this year to receive the stimulus payment.  The return must show at least $3,000 in qualifying income.
 
Low-income workers who had at least $3,000 in earned income in 2007 but do not otherwise earn enough to be required to file a federal tax return need to file a return in order to get the stimulus payment.  Likewise, Social Security recipients, veterans and retired railroad workers who might not otherwise need to file a tax return must do so to receive the economic stimulus payment."
 
More information on the "economic stimulus payment" (i.e. the federal rebate checks) to come.
 
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December 21, 2007:  CONGRESS HAS BUSY WEEK BEFORE ADJOURNING FOR THE YEAR
 
Last week Congress sent George W five (5) bills, all of which the President has signed or will sign:
  • the Tax Increase Prevention Act of 2007
  • the Mortgage Forgiveness Debt Relief Act of 2007
  • the Energy Independence and Security Act of 2007
  • the Technical Corrections Act of 2007
  • the Prevent Taxation of Payments to Virginia Tech Victims and Families Act

* The Tax Increase Prevention Act of 2007 provides for a one-year patch of the AMT for 2007 but does not offset the revenue cost with revenue raising provisions.

The AMT exemption amounts before phase-out for 2007 for individuals are:

  • $66,250 for married individuals filing jointly and surviving spouses,
  • $44,350 for unmarried individuals (Single and Head of Household),
  • $33,125 for married individuals filing separately

This is a temporary fix only. Without future Congressional action, the AMT exemption amounts for individuals in 2008 will revert to 2000 levels.

In addition, personal nonrefundable credits may offset AMT and regular tax.  For tax years beginning in 2007, the combined total of the following credits is limited to the sum of: (1) regular tax liability reduced by the foreign tax credit, and (2) the AMT:

  • Dependent care credit,
  • Credit for the elderly and permanently and totally disabled,
  • Mortgage credit,
  • Child tax credit,
  • Hope and Lifetime Learning Credits,
  • Adoption Credit,
  • Saver's Credit,
  • Nonbusiness energy property credit for energy-efficient improvements to a principal residence,
  • Residential energy efficient property credit for photovoltaic, solar hot water, and fuel cell property, and
  • First-time DC homebuyer credit.

Again,absent future Congressional action, personal nonrefundable credits, with the exception of the child tax credit, adoption credit, and the saver's credit, can't exceed the excess of regular tax liability over tentative minimum tax in 2008.

* The Mortgage Forgiveness Debt Relief Act of 2007 excludes from taxable income up to $2 Million of “debt forgiveness” from a mortgage secured by a principal residence and incurred in acquiring, constructing or substantially improving the residence.  This relief is available for debt forgiveness taking place between January 1, 2007 and December 31, 2009.

The relief applies to refinancing of qualifying debt to the extent that the refinancing did not exceed the amount of the original debt.  No relief is provided for home-equity debt where the funds were not used for substantial improvement to the personal residence.  The forgiveness of home-equity debt where the cash was used to pay off credit card debt, education, medical expenses, etc is fully taxable.

The cost basis of the principal residence is reduced by any debt forgiveness income excluded under this relief. 

The Act also extends for three (3) years, through December 31, 2010, the deduction for qualified mortgage insurance premiums.  The deduction is permitted for contracts entered into after December 31, 2006, and prior to January 1, 2011.  It is phased-out as AGI goes from $100,000 to $110,000 (or $50,000 tp $55,000 for Married Filing Separate).

Effective with tax years beginning on or after January 1, 2008, gain on the sale of a personal residence that had been jointly owned by a surviving spouse and a deceased spouse for the will qualify for the full $500,000 exclusion if the sale closes no later than two (2) years after the date of death of the deceased spouse.  Previously the full exclusion was only available if the home was sold during the year that the spouse died.

Volunteer firefighters and volunteer “emergency medical responders” can exclude from income up to $360.00 of refunds, rebates or payments received because of their volunteer services, effective with tax years beginning after December 31, 2007 (tax year 2008).

The "offsets” that “pay for” the relief apply to partnerships and corporations and do not directly affect the 1040.

* The Energy Independence and Security Act of 2007 does not include any 1040 tax items.  The extension of the current residential energy tax credits did not make it into the final bill – but may be addressed in 2008 legislation.

The only item of tax consequence involves a one-year extension of the FUTA (federal unemployment) 0.2% surtax, which had been extended continuously since its initial passage as a temporary measure in 1976. 

* The Technical Corrections Act of 2007 provides some obscure corrections that do not directly affect most 1040 filers, with the possible exception of a slight change in the definition of the AMT refundable credit to more effectively utilize long-term unused AMT credits.

* The Prevent Taxation of Payments to Virginia Tech Victims and Families Act excludes from gross income payments received from a special memorial fund by victims of the April 2007 Virginia Tech incident.

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