The calendar just flipped to November, which means the holidays are fast approaching. I don’t know about you, but for me it seems like the year is practically over once Thanksgiving hits. My holiday season will be full with travel and a newborn at home, so I thought now would be a good idea to look at some end of year tax planning.

End of year tax planning

There are several new ways to save on taxes this year due to the personal tax breaks in the economic stimulus packages passed by Congress earlier this year. Some of these include exemption from the first $2,400 of federal unemployment compensation benefits, extended COBRA benefits, AMT relief, and more.

Retirement contributions.

You can make tax deductible retirement contributions that will lower your taxable income.

• Maximize 401k contributions. Calculate how much you have left under your 2009 401k contribution limits and determine if you can increase your contribution through work. This scan be a great move if you can work it into your budget.
• Traditional IRA contributions. You can deduct up to $5000 if you qualify. Here is more information about 2009 IRA contribution limits.
• Self employed retirement plan contributions. Several self-employed retirement plans are tax deductible, including SEP IRA, Solo 401k, SIMPLE Plan, and Keogh Plan.

Of these plans, you can contribute to the Traditional IRA, SEP IRA, SIMPLE Plan or Solo 401k after January 1st. So you should focus your contributions toward maxing out your retirement plans that must be funded by the end of the year, such as your 401k, 403b, Thrift Savings Plan (TSP), or similar retirement plans. Then focus your retirement contributions on any retirement plans that allow you to max out your retirement contributions in the following calendar year. Here are more year end retirement plan tips.

First Time Home Buyer Credit.

Earlier this year Congress passed a credit for first time home buyers good for up to $8,000. To be eligible for the credit in 2009 you must not have purchased a home within the previous three years and you must meet income requirements (the credit phases out for some high income earners). The credit does not have to be paid back, but the home must be your principal residence and you must close on the purchase before December 1, 2009. There have been talks in Congress regarding extending the first time home buyer credit, but nothing is official at the time of this publication.

New-car sales tax deduction.

New car buyers may be eligible to write off state and local sales tax from a new car purchased in 2009. Single tax filers who earn less than $125,000 and joint filers who earn less than $250,000 are eligible. This is an above the line tax deduction which means you don’t even need to itemize your taxes to take advantage of this tax deduction. Eligible vehicles include new cars, motorcycles, light vehicles, and RV’s.

Buy an energy star appliance.

This year there are special rebates for Energy Star rated appliances. These programs are federally funded, but the money and rebates are being handled by the states, so the details may vary. Eligible appliances include heat pumps, furnaces, central and window air conditioners, refrigerators, freezers, dishwashers, washing Machines, and water heaters. The amount of the rebates varies between $50 – $200 per item and you do not have to turn in an old appliance like one had to turn in an old car with the Cash for Clunkers program.

Business deductions

If you own a business, you may be able to deduct eligible expenses.  If you haven’t been categorizing your expenses, now is a good time to go through your receipts and categorize them based on type of expenditure. You can also look at your expense forecast to see if there are any purchases you can make before the year end to  increase the amount of deductions you can take. You should also look at depreciation schedules, some of which have changed for this tax year. This is an area where hiring an accountant can really pay off.

Other year end tax deductions and tips

• Harvest tax losses. You can write off investment losses
• Donations. You can make tax deductible donations to eligible charities and non-profit organizations. Be sure to avoid charity scams and determine which charities are legitimate before giving your hard earned money.
• Avoid capital gains taxes. Wait until after the New Year to sell investments for gains – postponing your taxes for a full calendar year.

Every tax situation is unique

The focus of this article is to share a few ways you can prepare for your taxes before December 31st rolls around. This article isn’t designed to be a full blueprint for tax planning as it only covers a small percentage of the available tax deductions. Most tax software programs, such as TurboTax and TaxCut should include these deductions when you file next year, but it also doesn’t hurt to start now. You may also consider meeting with a tax professional for more advanced tax planning.

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Related Articles:

1. Year End Tax Moves
2. Year End Retirement Plan Moves
3. 2009 Traditional and Roth IRA Contribution Limits

Federal taxes are due on April 15th each year, but you can actually wait until October 15th to file your tax return if you requested and received a federal tax extension. But filing taxes and paying taxes are two different things. Even though you can file our return in October, federal taxes are due on April 15th, so if you owed money, hopefully you paid it in April!

How to file a federal tax extension

Filing a federal tax extension is easy – just fill out Tax Form 4868 and mail it in to the IRS. You can download it from the IRS website. Then mail in the form and you are good to go. Alternatively, you can efile your extension paperwork by using tax preparation software like TurboTax or TaxCut, or by using IRS Free File Fillable Forms. If you pay state taxes, this may be all you need to do. Many states will automatically extend your state tax deadline if you receive a federal tax deadline extension.

Tax payments due by April 15th, but you can file later

If you owe money on your federal taxes you are required to pay it by April 15th, regardless of whether or not you received an extension on your taxes. The deadline only allows you to file your taxes in October (sending in the paperwork, vs. sending in the money). You don’t have anything to worry about if you are due to receive a refund.

Penalties for filing late

If you missed the payment deadline, you can expect to pay penalties on top of your regular tax bill. The monthly penalty for late payments is 5% of the unpaid taxes, up to a max of 25%. If you go over 60 days past due, the minimum late filing penalty is $100 or the balance of the taxes you owe, whichever is less. You may also be subjected to late payment penalties and interest if you did not pay your tax obligation by the April 15th tax deadline.

Important tax dates

• Tax Return Filing Deadline – April 15
• Tax Return Extended Filing Deadline – October 15
• Estimated Taxes Due Dates – April 15, June 15, Sept 15, Jan 15

Note: If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended until the following business day.

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Related Articles:

1. Tax Extension Filing Deadline – October 15
2. What Happens if You Miss the Tax Deadline?
3. How to File a Tax Extension

Just a friendly reminder for those of you who may owe estimated taxes – the deadline for filing is Tuesday, September 15th. Estimated taxes are due four times per year on the dates listed below, or the following business day if the due date falls on a weekend or holiday.

• April 15th
• June 15th
• September 15th
• January 15th

Who owes estimated taxes? If your employer withholds taxes from your paycheck and you don’t have any other forms of income, you probably don’t need to worry about estimated taxes. If you are self employed, or receive income that does not have taxes withheld, then you may need to pay estimated taxes (and possibly self-employment tax). If you are not sure if you owe estimated taxes, then I recommend checking out this estimated taxes guide, or contacting an accountant for more information.

Recommended Financial and Career articles:

• The Article Cash4Gold Doesn’t Want You To Read. This is an excellent article that I highly recommend. It’s long, but well worth the read.
• The Importance of Paying Your Dues. I often see the attitude of “wanting it all” without he willingness to work for it. Delayed gratification is a lost art.
• Do a Background Check Before Hiring Your Financial Advisor. I don’t recommend blindly handing over your money to someone without knowing a little about them first.
• Should Founders Be Allowed to Take Money off the Table?. This is an interesting article about venture capitalists and entrepreneurship.
• What is a Security Freeze and Other Related Questions. Great tips for anyone who is concerned about having their identity stolen.
• Lawyers, insurance firms cash in on fantasy football Fantasy sports is not only a fun hobby for millions of people, but a booming business opportunity for lawyers, mediators, and insurers. It’s amazing. And understandable.
• The Woman With the Well – How Nellie Survived the Great Depression. My grandmother has shared stories about growing up in the Depression era. I’m sure some of her thriftiness and frugal ways found their way to me!
• How To Hitchhike. I’ve never hitchhiked, but I’ve picked up a rider or two a few years back.
• Why you need renters insurance. Renter’s insurance is inexpensive and easy to obtain… and something everyone should have (or homeowner’s insurance).

This week’s carnivals:

• Best of Money Carnival @ Studenomics.
• Carnival Of Twenty Something Finances: Sep 7th @ One Advice.
• Carnival of Money Stories #18 – Labour Day Edition @ The Canadian Finance Blog.
• Tax Carnival #57: Labor Day 2009 @ Don’t Mess With Taxes.
• Carnival of Financial Planning #106 – September 12, 2009 @ My Wealth Builder.
• Economy and your Finances Carnival – September 13, 2009 @ One Mint.

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Related Articles:

1. Estimated Taxes – Who, When, and How Much
2. Federal Tax Return Deadline Reminder
3. Self Employment Tax

Most people who work for an employer have their taxes automatically withheld from their paycheck. This makes life much easier when it comes time to file taxes because you don’t need to worry about filing estimated taxes or sending in any paperwork. You just wait for your W-2 to arrive in January, then you file your taxes with the IRS.

The taxes your employer withholds from your paycheck cover your income taxes and your FICA (Federal Insurance Contributions Act) taxes: Social Security tax and Medicare tax. Your employer is also nice enough to pick up half the bill for those two programs (OK, they are required to, otherwise they probably wouldn’t!).

However, if you have self employment income, you are subject to SECA tax (Self-Employment Contributions Act), which is similar to FICA taxes. That means your are on the hook for the entire Social Security and Medicare tax bill. Why? Because when you are self employed, you are basically the employer and the employee and you don’t have someone paying your half of the tax bill.

Who has to pay self employment tax?

The IRS considers you self employed if you are a sole proprietor, an independent contractor, a partner in a partnership, a member of a single-member LLC or are otherwise in business for yourself. You generally have to pay self employment tax if you earn more than $400 of self-employment income, or earn more than $108.28 as a church employee. Basically, you are required to pay self employment tax if you work for yourself and someone else does not pay your tax Social Security or Medicare tax.

How much is self employment tax?

The self employment tax rate is 15.3%, and consists of two parts: 12.4% for Social Security and 2.9% for Medicare.

• Social Security Tax. Only your first $106,800 of combined wages, tips, and net earnings is subjected to the 12.4% Social Security tax.
• Medicare Tax. All income is subjected to the 2.9% Medicare tax.

You can calculate your self-employment tax on Schedule SE (Form 1040), or with a commercial tax software program such as TurboTax or TaxCut.

Easy self employment tax formula. Social Security taxes are only assessed on incomes of $106,800 and less, so if you fall under that threshold, simply multiply your income by 15.3% (12.4% + 2.9%). If your income is greater than $106,800, multiply your income by 2.9% (to cover your Medicare tax), and add $13,243.20 (max Social Security tax).

How to pay self employment taxes

You will report your self employment taxes in the “Other Taxes” section of Form 1040 when you file your tax return at the end of the year. However, depending on how much you earn, you may need to pay estimated taxes to make sure you are within IRS rules – or you may be subject to underpayment penalties.

Additional self employment tax tips

Self-employment tax deduction. You can deduct half of your self employment tax before applying the tax rate when calculating the amount of self employment tax you owe. For example, if you earn $100,000 from self-employment, you report that amount as income on Form 1040. However, you can deduct 7.65% from that number when figuring how much self employment tax to pay. Thus, you will only pay self employment taxes on $92,350, saving you $1,170 on self employment tax ($7,650 x 15.3%). This deduction is available whether or not you itemize.

Self employment tax is in addition to regular income taxes. When you are doing your tax planning, don’t forget to consider your normal tax rates. You will be required to pay your normal state and federal income tax in addition to self employment tax.

Consider hiring a professional

I’m a big believer in doing things myself. However, taxes are one time when I am not afraid to spend some money for the peace of mind to know that everything was done correctly and I have maximized my return or minimized my tax bill. This information is intended as a resource only and I recommend consulting with an account or IRS documentation for information specific to your needs.

Additional IRS Resources:

• Self-employment tax.
• Topic 554 – Self-Employment Tax.
• IRS Form 1040-ES.
• Tax Calendar for Small Businesses and Self-Employed.

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Related Articles:

1. Estimated Taxes – Who, When, and How Much
2. How I Plan on Reducing My 2008 Taxes
3. Tax Freedom Day

The US tax system is a pay as you go system, which means you are supposed to pay taxes as you earn income. This isn’t a problem for many people because their employers withhold their taxes from their paycheck. But if you do not have enough money withheld from your paycheck or if you have additional income from self-employment, investments, real estate, or other means, you may need to pay self employment tax or make estimated tax payments.

Who Needs to Pay Estimated Taxes?

The money employers automatically withhold from your paycheck is sent in to the IRS and your state if you live in a state that assesses income tax. Ideally, the exact amount of money would be withheld and you won’t end up owing any money or receiving a tax return. However, it’s not always easy to predict your year end income or which deductions you will have throughout the year, particularly if you have unsteady income. Because of this, many entrepreneurs have to deal with self-employment and estimated taxes.

You must pay estimated tax if both of the following apply:

1. You expect to owe at least $1,000 in taxes after subtracting your withholding and credits.
2. You expect your withholding and credits to be less than the smaller of;
   • 90% of your current year tax liability, or
   • 100% of the tax shown on your previous year’s tax return.

In other words, the amount of estimated taxes you need to pay to avoid penalties is the smaller of 90% of what you will owe this year, or at least 100% of what you owed last year (110% for high income earners).

Who Does Not Have To Pay Estimated Tax

You should not have to pay estimated taxes if you will owe less than $1,000 in taxes this year, or if your employer withholds enough money through your paychecks. You can adjust your W-4 to withhold more or less money depending on your personal situation. Use the IRS Withholding Calculator to determine how many dependents you should claim, which will affect the amount of taxes withheld from your paycheck.

How To Determine How Much Estimated Tax to Pay

If you have steady income that is not subjected to automatic tax withholdings, or if you have a fairly good idea how much money you will earn in a given year, you can determine how much estimated taxes to pay with estimated tax worksheets or software. IRS Form 1040-ES includes a worksheet to calculate how much you should pay for your estimated taxes. You can also find calculators in most commercial tax software programs like TurboTax and TaxCut.

Irregular income? It can be difficult for individuals with irregular income to predict how much they will earn in a given year. Thankfully there is a safe harbor rule, which states that as long as you pay 100% of your previous year’s total tax liability in withholding and/or estimated taxes, you’ll be exempt from underpayment penalty regardless of your final tax amount (remember the 90% of current year or 100% of last year rule from above?).

A simple way to qualify for the safe harbor rule. To qualify for the Safe Harbor Tax Rule and avoid penalties, take your previous year’s tax obligation, divide by four, and make four equal payments by the estimated tax deadlines. Add 10% to last year’s tax total if you are a high income filer.

How much per installment? The IRS wants estimated taxes to be paid in equal installments, regardless of when you earn your income. This can be tricky when you don’t know how much you will earn, or if you typically have lean months in the beginning of the year, and earn more money in the latter part of the year. The easy way to avoid this is to follow the safe harbor method mentioned above. But if you want to do it a different way, then I recommend this article about calculating your estimated tax payments.

When To Pay Estimated Taxes

Estimated taxes are due four times per year on the dates listed below, or the following business day if the due date falls on a weekend or holiday. (Note the due dates are not spaced exactly 3 months apart):

• April 15th
• June 15th
• September 15th
• January 15th

How to File and Pay Your Estimated Taxes

There are two ways you can file and pay your estimated taxes: by paper or electronically.

• Pay by mail. Use IRS Form 1040-ES (download pdf here) to calculate your estimated taxes. Then fill out a voucher on the form to send along with your estimated tax payment.
• Pay Electronically. If you prefer to pay your taxes electronically, you can sign up for the Electronic Federal Tax Payment System (EFTPS) to pay your estimated taxes online. It can take up to 2 weeks to receive your PIN in the mail, so plan accordingly.

Consult a professional for more details. This information covers many (but not all) people and situations. Your specific tax situation may be different; please consult an account or IRS documentation for information specific to your needs.

Additional IRS Resources:

• Publication 505, Tax Withholding and Estimated Tax.
• Estimated Taxes.
• Form 1040-ES.

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Related Articles:

1. How I Plan on Reducing My 2008 Taxes
2. Estimated Taxes Reminder
3. Self Employment Tax

Yesterday was Tax Day, and for most of us, that means we can take a few days off and relax – tax season is over until next year! But if you didn’t file your taxes or didn’t file a tax extension, then this article is for you!

What happens if you missed the tax deadline?

If you missed the tax filing deadline, your first action should be to file as quickly as possible. If you can’t file right away because you don’t not have everything you need or for other reasons, then you should file for an extension.

How to file for a tax deadline extension. Everyone is eligible for an automatic tax deadline extension and the first thing you should do if you missed the tax filing deadline is file for an extension with the IRS. This gives you until October 15th to file your tax paperwork. However, you should also know that if you owe the IRS money, it is due on April 15th. So even if you file for a tax deadline extension, you need to send in an estimate of the taxes you owe. Failure to do so can result in fines or penalties.

You can file for a free tax deadline extension through these means:

• TaxAct.
• TurboTax Online.
• IRS Free File Fillable Forms.
• Download Tax Form 4868 from the IRS website and mail it in.

Since the tax filing deadline has already passed, time is of the essence here, and I would recommend filing electronically if possible.

What Happens If You Don’t File Your Tax Return?

OK, so you missed the deadline and you haven’t filed for an extension. What happens if you let it slide? Penalties and interest, my friend. And they aren’t pretty!

Failure to pay and failure to file penalties. These two types of penalties are automatically assessed by the IRS. Here is a rough outline of the penalties you may owe for failure to file or pay your federal taxes.

• Failure to file or (FTF) penalty assessed at 5% per month or partial month up to a 25% maximum.
• Failure to pay (FTP) penalty assessed at 0.5% per month or partial month up to a 25% maximum.
• If both the FTF and FTP penalties are assessed, the FTF penalty is reduced by the FTP penalty.

Underpayment penalties. You can also owe penalties for underpaying your taxes. These can be assessed at different levels, from a small fine to criminal charges, depending on whether or not the IRS determines there was criminal intent involved. Some of the possible charges include criminal or civil fraud, negligence, or  frivolous return. Penalties for these can range from stiff fines to jail time.

More information: Here is more about what happens if you don’t file your federal tax return, and more info on penalties for filing your taxes late.

What if you can’t pay your taxes?

Even if you can’t pay your taxes, you still need to file your taxes or at least file for an extension. This lets the IRS know that you are aware of the situation and you are trying to resolve it. After you file your taxes or file for an extension, you need to communicate with the IRS and try to negotiate a payment plan so you can pay the IRS your taxes. You can ask for an extension (a set time frame to pay your tax bill), or enter into a payment plan.

Penalties and fees will continue to be assessed, so you will need to pay your taxes as soon as possible – even if that means taking out a loan to do so. You should avoid payday loans, but you might consider a loan from a peer to peer lending company such as Lending Club or Pertuity Direct. They can have the money to you in a matter of days if you qualify for a loan.

If you don’t pay your tax bill, the IRS can file a Notice of Federal Tax Lien, which can damage your credit score.

More information: Here is more about your options if you can’t pay your taxes.

Failure to file or pay taxes can result in fines, ruined credit, or even jail time

There are stiff penalties for those who fail to pay their taxes, up to an including jail time for the worst offenders. All it takes to avoid these problems is a little bit of time to complete your taxes and file them, or at least file for an extension. So get to it!

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Related Articles:

1. Tax Extension Filing Deadline – October 15
2. Federal Tax Return Deadline Reminder
3. How to File a Tax Extension

I still haven’t filed my taxes. I know, I’m running out of time. I don’t really have an excuse other than trying to do too many things at once. I should have time to finish my taxes this weekend, but for those of you looking to file for a free extension, you can still do that.

The IRS allows tax payers to apply for an automatic 6 month extension to file their taxes. There is one big caveat though – if you owe money on your tax return, at least 90% of the balance is due on April 15th, regardless of whether or not you have filed your taxes or not.

How to File a Tax Extension

Filing a tax extension is easy and FREE. All you need to do is fill out Tax Form 4868, and mail it in to the IRS. You can also send it in to the IRS from a tax software program like TurboTax or Tax Cut.

E-File your tax extension for free:

• TaxAct.
• TurboTax Online.
• IRS Free File Fillable Forms.

File your tax extension manually:

• Download Tax Form 4868 from the IRS website. You can also pick one up at an IRS office or call 1-800-TAX-FORM (1-800-829-3676).
• Fill it out and send it in.
• Send in the amount you owe on your taxes, or at least an estimate. You will need to send in 90% of your actual total to avoid late fees or penalties.

Automatic tax extension deadline. You must file a request for an automatic extension by April 15th. Once you have your extension you have 6 months to file your taxes. After October 15th, your taxes are considered late and you may be subject to penalties.

Longer extension for military members and those living overseas

Some military members may qualify for an extension longer than 6 months, especially if they served in tax free zones in the current or previous year. Here is more information about military member tax deadline extensions. American civilians working overseas may also be able to file for a longer extension. Here is more information from the IRS.

What happens if you don’t file your taxes? If you don’t file your taxes, you may be subject to penalties, fees, or even jail time if it is determined that your intent was to defraud the government. Find out more about what happens if you don’t file your taxes.

An extension can be a good idea if you have a particularly complex tax situation, or if you are a procrastinator like me.

PhotoCredit: Steve Woods.

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Related Articles:

1. Tax Extension Filing Deadline – October 15
2. Federal Tax Return Deadline Reminder
3. What Happens if You Miss the Tax Deadline?

I don’t hate paying taxes. I realize that society would be very different without public money. So I am all about paying my fair share of taxes.

But I hate the act of filling out the tax forms, looking for deductions, learning the new tax rules, sifting through data, visiting the IRS webpage, and trying to determine which write-offs and deductions are allowed or not, etc. (thank goodness for TurboTax!). While I honestly don’t mind paying my share of taxes, I also don’t want to pay more than I legally have to. So I double check and triple check everything to see if there is anything I missed.

My tax situation is more complicated than last year…

My small business (this site and a series of other sites) has grown in the past year. This has been a wonderful blessing for my family, but it also makes my taxes much more difficult to handle. In 2008 I had income from about 50 different sources, or more. The companies that paid me over $600 were required to send me a 1099, which makes reporting the income on my taxes easy. However, some of the people or companies I earned money from didn’t send me any tax paperwork because they were not required to. That means I need to find all the receipts and invoices so I can report the income on my taxes.

I spent 2 hours last night sorting through receipts and other paperwork, trying to get to the point that I could finish my taxes. This is after already spending 2 hours inputting information into TurboTax. I currently have most of my information input into TurboTax Premier, but I think I will need to upgrade to the TurboTax Home and Business, which will better meet my needs (I have an LLC for my small business, an ING Business Savings Account, and an EIN for my taxes).

Improving my record keeping system

While doing my taxes, I realized that my record keeping system for my business is woefully inadequate. I keep excellent records of my income and expenses on a spreadsheet andI can tell you exactly how much I earned by month, year, from which advertiser, etc. But I didn’t have my receipts, pay stubs, or other paperwork in order. (An issue with digital vs. physical?).

While going through my papers last night I created a better record keeping system and put all my receipts, invoices, pay stubs, and other important papers in large manila envelopes labeled “income” and “expenses” and the year. I’ve been blogging for 2 years now, so I have envelopes for 2007, 2008, and now 2009.

Being careful not to double count income – or leave anything out!

There are a few ways I earn money from this site that are considered business income, and some that are considered personal income. For example, I place $25 ING referrals on my site so people can sign up whenever they want. People who sign up receive a $25 bonus, and I receive a $10 bonus. The $10 referral bonus I receive is reported to the IRS as interest income by ING. So I need to be careful not to count that income as business income when I do my taxes – even though I earned the money through my website. The same thing goes for the $25 ING Business Savings Referrals, which are also reported as interest income.

I also have to be careful not to leave out any income – the last thing I want is to get audited and have the IRS dig up some records that I missed. Double checking my records to verify my income is what is taking so long. I downloaded all PayPal transactions from 2008 and have been going through it line by line. F-U-N.

I’m going to owe a lot of money this year

I am resigned to the fact that I am going to owe a lot of money to the IRS this year. Much of that is my fault because I didn’t pay estimated taxes throughout the year – I withheld additional income from my day job, which I thought would be enough. But my business income really took off in the second part of the year and I hadn’t prepared for that. It’s a good problem, but a problem nonetheless. Thankfully, I kept all the income in a savings account because I knew I would end up owing the IRS.

I shouldn’t be subjected to underpayment penalties though because I paid more taxes than last year, which means I should be covered by the safe harbor rule. I also took actions to reduce my taxes, including harvesting losses by selling some mutual funds at a loss, increasing retirement fund contributions, increasing charitable contributions, and a few other things. Again, more complications to my taxes! LOL.

It’s a pain, but a necessary one. Hopefully I can finish my taxes this weekend. I’ll probably end up writing about how much I owe and how I plan on reducing that number when I file next year’s taxes. Basically, it will entail paying estimated taxes as I go – so I don’t get slammed with a HUGE tax bill at the end of the year! Hopefully all of you have had an easier time with your taxes than I have!

Here are some related resources about how to organize your taxes:

• Tax Deductions for the Self Employed.
• Taxes for Bloggers.
• Preparing My Income Tax Return: How I Organize My Tax Documents.

photo credit: woodsy.

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Related Articles:

1. TurboTax Giveaway and Impending Price Increase
2. Estimated Taxes – Who, When, and How Much
3. How to File Your 2008 Federal Taxes For Free

The details of the 2009 economic stimulus recovery plan have been released, and even though they aren’t quite official, it looks like the economic stimulus plan should pass in this format, or something very similar. The final tally is roughly $798 billion, a hefty sum by any standard.

Here is a breakdown of how the new stimulus plan may affect your 2009 tax status:

Personal Tax Breaks in the 2009 Economic Stimulus Plan

The stimulus bill may put more money directly into your pocket, depending on your current situation and income level:

Making Work Pay tax credit

$400 – $800 payroll tax credit. The new stimulus bill calls for a payroll tax credit of $400 for low and middle-income workers and $800 for couples. A full credit will be given to individuals making $75,000 or less, or $150,000 or less for couples. Partial credits will be given up to $100,000 for individuals or $200,000 for couples.

No stimulus check this year. It is important to note that this is not a stimulus check like last year – individuals who qualify for the payroll tax credit will have fewer taxes withheld from their paycheck and will receive an additional $15 or so per check (assuming 26 pay periods per year). Update: The tax credit will begin April 1, 2009, so the weekly addition to your paycheck should be around $11. More information about how to make these small tax credits work for you.

Additional personal tax breaks in the 2009 stimulus plan

One-time $250 payment to people who don’t work. This $250 one-time payment will be sent out to retirees, people on disability and others who don’t work.

Alternative Minimum Tax (AMT) relief. The economic recovery bill calls for a higher exemption limit on the AMT. This should equate to an average tax savings of $503 on taxable income levels between $66,354 and $111,645.

Tax provisions for home buyers and car buyers in the 2009 stimulus plan

The government wants you to spend money to keep our economy going. Here are some tax benefits your may be eligible for:

$8000 first time home-buyers credit

There was previously a $7,500 credit which had to be repaid and was set to expire on July 31, 2009. The new stimulus bill changes the $7,500 first time home-buyers credit to an $8,000 tax credit that does not have to be repaid. To qualify for the $8,000 first time home-buyers credit, one needs to purchase their first home between January 1, 2009, and December 1, 2009.

New car buyer’s tax credit

To say the auto industry is hurting would be an understatement. The US government wants to prop up the auto industry and to do that they are offering consumers the opportunity to deduct state and local sales taxes and excise taxes from a new car purchase made in 2009.

Eligible vehicles will include new cars, motorcycles, light vehicles, and RV’s. There are income limitations involved: the deduction will only be available to individuals earning less than $125,000 or $250,000 for joint filers. The added benefit of this deduction is that you don’t have to itemize your taxes to take advantage of this tax write-off.

The new economic stimulus plan is more than just personal tax breaks

The 2009 economic stimulus recovery plan will affect people in may ways, not just their personal taxes. Also included will be provisions for those collecting unemployment and COBRA benefits, people receiving personal support such as food stamps or welfare, increased educational tax credits and Pell Grants, and a host of other benefits for states, companies, and certain industries.

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Related Articles:

1. Unemployment Benefit Provisions in the 2009 Economic Stimulus Plan
2. 2009 Stimulus – Education and Other Benefits
3. No Stimulus Check This Year – Pay Yourself First Instead

I recently ran a giveaway for two copies of TaxCut. Qualifying for the giveaway was easy – all one had to do was leave a comment about how they would change the tax system. There were 15 qualified entries, and the comments were very insightful.

By far, the most common recommendation for improving our tax system was to simplify it. I agree – I think simplification is something that is desperately needed in our tax system. I wish I only knew how to go about doing it!

Announcing the TaxCut Winners!

As promised, I will be giving away two copies of TaxCut Premium Federal edition. I made a list of the qualified entries and visited Random.org where there is a free random number and list generator (along with some other cool toys).

I simply copied the list and hit the randomize button and came up with two winners: Night Runner, and Ashley. Congratulations to both of you! I sent you each an e-mail last night – all you need to do now is send me your mailing address and I will try to get a copy of TaxCut Premium Federal edition to each of you.

Thanks to everyone who entered!

Want more freebies?

If you missed out on this giveaway, there are plenty more ways you can make free money, get freebies and discounts, and otherwise save money.

• $25 ING referrals. I recently updated the referrals on my ING $25 Bonus Referrals page. There should be about 8 fresh referral links available for anyone to grab.
• e-file taxes for free. You can e-file your federal taxes free.
• Free Money page. I keep a current list of bank bonuses, credit card bonuses, and other offers on the free money page.
• Money Saving Deals. You can visit my Money Saving Deals page for more offers.

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Related Articles:

1. TaxCut Giveaway
2. TaxCut Giveaway – How Would You Change the Tax Code?
3. More Money Saving Deals and Free Money