Monday, February 1, 2010

Some helpful tax tips as we head into the heart of tax filing season

By now almost everyone has received their W-2's, 1099's and other tax documents and are ready (or getting ready) to file.  TaxSmarty would like to take this opportunity to review a few items that you may have missed or had questions about:

1)  Required minimum distributions from IRA's and other qualified retirement plans resume this year - if you turned 70 1/2 during 2009 you must take a required minimum distribution (RMD) by 12/31/2010.  If you turn 70 1/2 this year, you have until 4/15/2011 to take your RMD.

2)  Remember that if you were laid off after Aug. 31, 2008 but before Jan. 1, 2010, you were entitled to a COBRA subsidy from your former employer of 65% of your COBRA health insurance premiums.  The original subsidy was scheduled to last nine months, but congress extended this for those workers terminated before March 1, 2010 and provides for six months of additional aid.  (Note:  Your former employer receives a tax credit from the federal government for the cost of this subsidy).

3)  The IRS is stepping up documentation requirements in order for taxpayers to claim the home buyer credit.  A signed copy of your settlement statement (or certificate of occupancy for new homes just built) must be attached to your Form 5405 in order to claim the credit.  Further, those who are claiming the $6,500 repeat buyer credit must attach proof of prior home ownership such as a 1098 or records showing property taxes paid or insurance coverage in place on a prior home.  Please note that due to the documentation requirements for this credit, you will NOT be able to e-file your return.  Because of the time the IRS needs to program their computer system to process this credit and factoring in extra processing time for paper returns, don't expect to see your refund, if you're owed one, until late March.

4)  If you have donated or would like to donate to Haiti earthquake relief efforts in Jan. or Feb. of 2010, you have the option of deducting those contributions on your 2009 return.  Remember that you still need some sort of documentation to substantiate your contribution and you have to itemize deductions to be able to receive a tax benefit from your contribution.

Please check back with us as tax season moves forward for additional helpful tax tips and updates.  Please go to TaxSmarty to access additional free tax resources such as our online tax guide, financial calculators and a tax calendar.  You can also prepare your 1040-EZ return absolutely FREE and your more complicated federal return for a very reasonable price.  Additionally, all state income tax returns are available.

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