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Archive for September, 2009

Rebates, Deductions, and Credits- Oh, My!!

Sep 28

Posted by Christopher in TAX CREDITS, TAXES

Confusion!Tax deductions, rebates, and credits are all important terms when it comes to filling out a tax return.  As accountants these words are used often and are common to us.  We understand that clients may not be familiar or understand what these words really mean, so here is some information to help our clients understand the differences between these terms:

Tax Deductions are subtractions from a taxpayers adjusted gross income (AGI), which reduces the amount of income that will be taxed.  There are two types of deductions a taxpayer can have: itemized or standard deductions.  Itemized deductions subtract amounts paid for state and local income taxes, real estate taxes, personal property taxes, and mortgage interest.  Also, the tax return form 1040 and form schedule A needs to be used, these are the only tax forms that are accepted for itemized deductions.  Standard deductions subtract amounts based on filing status and based on if the tax payer is 65 or older or blind and the tax payers dependency.   For standard deductions any of the tax return forms can be used (1040EZ, 1040, 1040A).

Tax Rebates, or “refunds,” is simply a partial sum of money that is refunded to people from paid taxes.  Basically, it is the concept that the government sends back some money that is left over from taxes being paid.

Tax Credits simply reduce the amount of taxes a person owes.  There are a lot of different tax credits people can take here are a few; child tax credit, earned income credit, and credit for the elderly or the disabled.  Each different credit requires certain qualifications in order for the tax payer to be able to take the credit. The newest one is the First Time Homebuyer Credit!

Rebates have been incorporated in 2009 by this administration to allow for direct price reductions of an item (an example is the Cash for Clunkers Program). These are items that do not affect your tax return or your income directly.

Still confused…..? Feel free to contact us any time!!!

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IRS to Target Small Business Employee Tax Compliance on Audits

Sep 25

Posted by Teri in AUDIT, SMALL BUSINESS, TAXES

I know I nag tons about this….constantly reminding you to properly classify individuals as employees and not subcontractors. The IRS has announced they will be targeting 6000 companies to test Employee Test Compliance

According to Bloomberg,

The Internal Revenue Service will audit 6,000 U.S. companies to determine whether they pay all their required employment taxes to fund Social Security and Medicare benefits.

The IRS said the audits will provide data for its first statistical analysis since 1984 of how often companies misclassify workers to duck tax obligations, fail to pay taxes on fringe benefits such as personal use of company cars, and improperly pay taxes for company executives. The audits will begin in February, and the companies will be randomly chosen.

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Credit Card Holders Bill of Rights—-Unintended Consequences!

Sep 18

Posted by Christopher in CREDIT, ECONOMY, SMALL BUSINESS

Bill of RightsBill of Rights

August 20, 2009 should have been a wonderful day for credit card holders! This was the day the Credit Card Act of 2009 or “Credit Card Accountability Responsibility and Disclosure Act of 2009″ went into effect!

So, why are so many credit card holders unhappy?  Because throughout the month of August, many people with pristine credit and high credit limits received letters from credit card issuers cutting credit limits, raising interest rates, and adding fees in innocuous looking envelopes. Why? So the credit card companies could avoid the Credit Card Holders Bill of Rights, highlights which are listed below.

Dr. Joseph Horton of Grove City College does a remarkable job of summarizing the unintended consequences in his article “Credit Cards and Predictable Unintended Consequences“:

Imagine being a contractor and regularly using your credit card to purchase building materials for your job. Without warning you receive a notice that effective immediately your credit limit has been cut in half. You face potential embarrassment with your clients as your ability to purchase needed materials has suddenly changed. How will your business function? You always paid your bill on time. Who is to blame for this mess?
There have been several stories in the news media recently about people facing unexpected and dramatic reductions in their credit limits. Other people are finding that their interest rates have climbed for no apparent reason. These sudden changes in credit-card terms are causing real inconveniences for thousands of people.

Congress recently passed the Credit Card Holder Bill of Rights, which takes full effect in February. In a promotional piece from my congresswoman, she explained that she voted for this bill to protect consumers by making sure they knew the terms of the credit-card agreements.

So- what is this Bill of Rights?

The Library of Congress summarized it as follows:

Creditors cannot increase the annual percentage rate (APR) during the first 12 months of opening up an account.
• Creditors are required to provide consumers with a 45-day advance notice of changes in rates and significant contract changes. Rates that change due to a change in the index that the rate is based on are excluded from this 45-day notice requirement.
• Promotional rates need to be in effect for at least six months from the beginning date of that promotion.
• Creditors need to provide a 30-day advance notice of an account closure.
• With certain exceptions, credit card issuers are prohibited from charging a finance charge based on the double billing cycle method.
• Creditors are prohibited from charging a fee on an outstanding credit card balance at the end of the billing period if the fee is attributed to the interest accrued on an outstanding balance that was fully repaid during that preceding billing period.
• Consumers have the right to reject a new credit card after the creditor notifies a consumer reporting agency of its corresponding account.
• Creditors are required to remove information provided to a consumer reporting agency about newly established credit card accounts if the consumer has not used or activated the account and and if the consumer contacts the creditor within 45 days of its establishment to close it.
• If two or more different APRs apply to different portions of an outstanding balance, the amount of any payment above the required minimum payment needs to be applied to the balance with the highest APR first and then to lower APR balances.
• Creditors are required to provide a grace period for payments even if the cardholder takes advantage of a promotional rate balance or deferred interest rate balance.
• Creditors are required to send credit card statements at least 21 days before the due date of the outstanding balance.
• Creditors are prohibited from providing credit to consumers under age 18 (unless they are emancipated under state law, or the consumer’s parent or legal guardian is designated as the primary account holder).
• For college students who do not have a co-signer, the maximum amount of credit extended will be limited to the greater of 20 percent of the student’s annual gross income or $500 dollars. The aggregate amount of credit extended from all of their credit cards will be limited to 30 percent of the student’s annual gross income (for the recently completed calendar year).
• Creditors are prohibited from opening a credit card account for any college student who does not have any verifiable annual gross income or already maintains a credit card account with that creditor, or any of its affiliates.
• Creditors are prohibited from charging a fee to make telephone and web-based payments. However, a fee may be charged for expedited telephone payments made on the due date or the day before the due date.
• Creditors are required to post their written credit card agreements on the internet.

February 20, 2010 is the date all of the provisions go into effect, so look for more letters from creditors in the next few months. For further information on this important bill, see the White House Blog

Or you may contact any of us at Maco & Associates with questions anytime!

Originally posted September 11, 2009

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Making Work Pay- Five facts for you to know!

Sep 17

Posted by Teri in TAXES


Five Facts about the Making Work Pay Tax Credit (from ATX, Inc.)

Working taxpayers may be eligible for the Making Work Pay tax credit, a significant tax provision of the American Recovery and Reinvestment Act of 2009. This tax credit means more take-home pay for millions of American workers. Here are five things the IRS wants every taxpayer to know about the Making Work Pay tax credit:

1. This credit — available for tax years 2009 and 2010 — equals 6.2 percent of a taxpayer’s earned income. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers. Most wage earners have been enjoying a boost in their paychecks from this credit since April.
2. Eligible self-employed taxpayers can also benefit from the credit by evaluating their expected income tax liability. If eligible, self-employed taxpayers can make the appropriate adjustments to the amounts of their upcoming estimated tax payments in September and January.
3. Taxpayers who fall into any of the following groups should review their tax withholding to ensure enough tax is being withheld. Those who should pay particular attention to their withholding include:

• Married couples with two incomes
• Individuals with multiple jobs
• Dependents
• Pensioners
• Social Security recipients who also work
• Workers without valid Social Security numbers

Having too little tax withheld could result in potentially smaller refunds or – in limited instances –small balance due rather than an expected refund.
4. The Making Work Pay tax credit is either phased out or unavailable for higher-income taxpayers. The phase out begins at $75,000 for single taxpayers and $150,000 for couples filing a joint return.
5. For those who believe their current withholding is not right for their personal situation, a quick withholding check using the IRS withholding calculator on IRS.gov may be helpful. Taxpayers can also do this by using the worksheets in IRS Publication 919, How Do I Adjust My Withholding? Adjustments can be made by filing a revised Form W-4, Employee’s Withholding Allowance Certificate. Pensioners can adjust their withholding by filing Form W-4P, Withholding Certificate for Pension or Annuity Payments.

For more information on this and other key tax provisions of the Recovery Act, visit the official IRS website at www.irs.gov/recovery.

Links: Publication 919, How Do I Adjust My Withholding?
IRS withholding calculator
Video: Making Work Pay – General – You Tube video
Making Work Pay – Retirees – You Tube video
Making Work Pay – Married – You Tube video
Audio: Making Work Pay – General Credit

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Household Appliances Energy Rebate- New Cash for Clunkers

Sep 17

Posted by Hannah in CREDIT, ENERGY CREDIT, TAXES

Is the majority of your electric bill spent running old appliances? You would be surprised how much that old appliance is eating of your electric bill!

Is your refrigerator, dishwasher or washer and dryer making electricity cost an arm and leg?  Now might be the time to upgrade to a more energy efficient model.  The Department of  Energy has approved $300 million from the American Recovery & Reinvestment Act to be put toward state run rebates for qualified household appliances.
Enery Efficient Appliances
Appliance Categories

The following Energy Star qualified appliances may be eligible for the rebate:
-Central and Room Conditioners
-Furnaces
-Boilers
-Heat Pumps
-Washing Machines
-Dishwashers
-Freezers
-Refrigerators
-Water Heaters
Each state may vary on what appliances they offer rebates for.
For Pennsylvania

Pennsylvania is expected to receive $12 million out of the nation’s $300 million. The savings for the rebate can range from $50- $250, but this can vary for different appliances.  Also savings of about $75 are expected in reduced energy costs per year.

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The Bill of Rights for Credit Card Holders

Sep 16

Posted by Christopher in CREDIT, ECONOMY

Remember the junk mail you use to get from your credit card companies; you know the ones that did not have your monthly bank statement?  Well now is a time to hold onto that mail because those are the notices that contain information about what regulations are changing for you (www.dallasnews.com).  It is a GREAT time to be a credit card holder, despite the economic troubles almost everyone faces.  In May 2008 the Federal Reserve Board announced it would make new rules to eliminate unfair practices in the credit industry, such as a credit card companies raising interest rates due to a late payment (www.whitehouse.gov/blog).  The new rights for credit card holders are named under the “Credit Card Accountability Responsibility and Disclosure Act of 2009,” or known as the “Credit CARD Act of 2009” (www.whitehouse.gov/blog).

Highlights of the “Credit CARD Act of 2009” include:

  • No interest rate increases during the first 12 months of opening a credit card, unless the rate increase was disclosed when you first opened the credit card.
  • Your interest rate could increase if you don’t make the minimum payment within 30 days of your due date, even during the first 12 months of opening your account. You must receive a 45-day advanced notice of penalty rate increases.
  • No fees to make your credit card payment online, by mail, or over the phone, unless you make a last-minute payment over the phone and your bill is due the same day or next day.
  • Payments are due on the same date each month.
  • No over-the-limit fees unless you request (opt-in) the credit card issuer to process over-the-limit transactions. Otherwise, over-the-limit transactions would be denied and you would not incur a fee.
  • Only one over-the-limit fee is allowed per billing cycle. You cannot receive more than one charge for exceeding your credit limit in any billing cycle.
  • Billing statements must be sent 21 days before the due date, giving you more time to pay your credit card bill and reducing the risk of a late fee and interest rate penalty.
  • Payments are on time when received the next business day after a holiday or weekend (when the credit card company doesn’t accept payment on those days). If your due date falls on a weekend and your card issuer receives your payment on the following Monday, your payment would still be considered on time. The same thing applies to due dates that fall on holidays.

These are only a FEW of the many rules that are in effect (as of August 20, 2009), or will be in effect on February 22, 2010.  To review more of the new rule changes feel free to visit these websites to learn more: http://credit.about.com/od/consumercreditlaws/a/creditbillright.htm

http://www.boston.com/business/personalfinance/managingyourmoney/archives/2009/05/what_the_credit.html

As always if you have any questions please contact one of our representatives at Maco & Associates LLC and we will be more than happy to help you better understand these new rules.

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What a mess!!

Sep 15

Posted by Teri in CHAOS

Our server kept going down and we kept losing emails and system uptime. We changed servers and in the transition we lost all of our blog entries. We will do our best to restore as much as we can.!

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