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New Tax Provisions Make Filing More Complicated This Year

By Humberto Cruz, Tribune Media Services, Source: Cruz, Humberto - Savings Game

If you haven't started your 2009 tax return, get going -- and be ready to pay for help even if you haven't before.

"Most people will need all the help they can get" this year, said Mildred Carter, senior federal tax analyst with tax publisher CCH, a Wolters Kluwer business. One big reason: The American Recovery and Reinvestment Act enacted by Congress in February 2009 contained more than 50 provisions affecting 2009 and 2010 tax returns, and some were changed again in November by the Worker, Homeownership and Business Assistance Act.

The result is a bunch of new deductions and credits (and tax forms and worksheets) that can lower your tax bill but make things more complicated. "The one certainty," Carter said, "is that whatever route you take, it's best to start early."

If you hire a professional, go with know-how and experience. For referrals, ask your friends, business associates and your local or state certified public accountant and/or enrolled agent organizations.

If you opt for do-it-yourself software, go with a reputable name. TurboTax (www.turbotax.com), H&R Block at Home (www.hrblockathome.com) and TaxAct (www.TaxAct.com) offer quality products for returns of different levels of complexity. Many are free, particularly for simpler returns.

I've used TurboTax's Home & Business for years and like it for its thorough yet plain-English interview questions. I also appreciate the "help" features -- such as a free "Live Community" where other users and tax experts can answer questions -- and the navigation options, including being able to see interview questions and related tax forms at the same time. Your choice of software may come down to individual preferences and the program that best fits your needs.

Even if you get help, it pays to be aware of significant tax law changes for 2009 returns. "Tax-return preparation is a chore, and the desire to take shortcuts is common," said Bob Scharin, senior tax analyst for the Tax & Accounting business of Thomson Reuters. "But make sure you take the time to check for tax breaks, and if you are using the services of a professional, ask questions and gather the information they will need to calculate the tax deductions and credits to which you are entitled."

Potential tax breaks are plentiful -- for buying a car, a house, going to college, making your home energy-efficient or even holding a job (the latter is the new "Making Work Pay" credit).

But the devil is in the details, with many complex eligibility requirements and "phase-outs" that reduce or eliminate tax savings based on income.

One example: First-time homebuyers may be entitled to a refundable tax credit of 10 percent of the purchase price, with a maximum credit of $8,000. In addition, for home purchases after Nov. 6, 2009, those who owned and lived in a home for at least five consecutive years out of the eight-year period preceding the purchase may be entitled to a credit of up to $6,500. The homebuyer credit phases out for modified adjusted gross income of $75,000 to $95,000 for singles ($150,000 to $170,000 for joint filers) for purchases before Nov. 7, 2009, and $125,000 to $145,000 ($225,000 to $245,000 for joint filers) for purchases made after Nov. 6.

Get it?

But don't despair. With a qualified professional or tax-preparation software -- you can bet the pro will be using software -- you don't have to memorize all these details.

"Just know there are credits available," said Bob Meighan, vice president of TurboTax. "Don't worry about the details; just put your numbers in."

(Send questions or comments to Humberto Cruz at AskHumberto@aol.com or c/o Tribune Media Services, 2225 Kenmore Ave., Buffalo, NY. 14207. Personal replies are not possible.)


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