Form 1040 “New for 2009, Filing”
Well the IRS has released its “draft” of the 2009 Form 1040. Clicking the photo on the right will take you in a new window so you can see it if you like.
The only change in the “Income” section is line 19. It is still for “Unemployment compensation”, but they added the phrase “. . . in excess of $2,400 per recipient (see page 27)” This is done so that those who are not aware (and prepare their own returns) that this is something new. If you need clarification, please visit Unemployment Compensation at the IRS site for Tax Changes for Individuals.
In the section for “Adjusted Gross Income”, line 23 now reads, “Educator expenses (see page 29)”. So, what used to be there is “Archer MSA deduction. Attach Form 8853” is no more. For more information on Archer MSA deduction please see Publication 696.
Line 34 now reads “Tuition and fees deduction. Attach Form 8917”, it used to be, “Jury duty pay you gave to your employer” This is not something new, just reworded from last years form.
Those are the only notable first glance changes to page one. Now . . .
Page two. (I did that in my best Paul Harvey voice I could muster.)
In the “Tax and Credits” area, line 39c from last year is gone (if you’ll remember this was a “check box” if you increased your standard deduction using your real estate taxes).
Line 40 is now “a” and “b”. “A” is the standard “Itemized deductions (from Schedule A) or tour standard deduction” which, as normal is listed on the left side of the form. Now part “b”. This reads “If you are increasing your standard deduction by certain real estate taxes, new motor vehicle taxes, or a net disaster loss, attach Schedule L (a new Form) and check here (see page 35)” and has a corresponding check box.
(I’ll talk more about the new schedules in other upcoming post)
Line 42 is the same ol thing but now reads “Exemptions. If line 38 is $125,100 or less and you did not provide housing to a Midwestern displaced individual, multiply $3,650 by the number on line 6d. Otherwise, see page 37”
Lines 47 through 55 are the same with two notable differences. This is the credit section of this part. They are rearranged (what was line 47 is now down on line 50 and such). The credit for the elderly or disabled is no longer listed there. Schedule R Although that line has been omitted altogether, the credit has not, it is still a viable credit. You’ll just enter it on line 53 and put a check in the box for other credit forms (this is “c”).
Okay now for “Other Taxes”, well nothing new in that section.
In the “Payments” section line 63 reads “Making work pay and government retiree credits. Attach Schedule M”. Again, I’ll talk more about the new schedules in other upcoming post.
Line 66 “Refundable education credit from Form 8863, line 16” this is new for the American Opportunity Credit.
So there are the basics of the new form and what is new and so forth. To further prepare yourself for the upcoming filing season please view the instructions for the new 2009 return.
American Recovery and Reinvestment Act Provisions that Could Affect 2009 Tax Returns
{One more time taken from the IRS website. Wednesday my post is going to be what to do if you come into a huge amount of money (like winning the lottery). Does one take the yearly payouts, or lump sum? Should a person incorporate… form a foundation… create a trust?}
The bulk of tax provisions in the American Recovery and Reinvestment Act affect tax year 2009 — individual tax returns due April 15, 2010 — and tax year 2010 — individual tax returns due April 15, 2011.
Deduction for taxes paid on new vehicle purchase.
Taxpayers who buy a car, light truck, motor home or motorcycle in 2009 may be able to deduct the state and local sales and excise taxes they paid on their 2009 income tax returns. This deduction is limited to taxes paid on the first $49,500 of the purchase price.
Credit for higher education expenses.
The new American Opportunity Credit modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses. Many of those eligible will qualify for the maximum annual credit of $2,500 per student –– $500 more than the previous maximum credit.
Section 529 plans cover computers.
Funds from section 529 college savings plans can be used to pay for a computer bought in 2009 or 2010, if the computer is used for college work.
Some unemployment benefits tax exempt in 2009.
Normally, unemployment compensation is taxable. But up to $2,400 in unemployment compensation received in 2009 will be exempt from taxes.
Health insurance continuation (COBRA) subsidy.
Workers who have lost their jobs may qualify for a 65 percent subsidy from their former employers for COBRA continuation premiums for themselves and their families for up to nine months. Eligible workers will have to pay the remaining 35 percent of the premium to their former employers. To qualify, a worker must have been involuntarily terminated between Sept. 1, 2008, and Dec. 31, 2009, and the former employer must still be in business and offer health benefit coverage.
Workers who lost their jobs between Sept. 1, 2008, and Feb. 16, 2009, but did not initially choose COBRA coverage or initially chose COBRA coverage and dropped it before Feb. 17, 2009, get an additional 60 days to elect COBRA and receive the subsidy.
The subsidy starts to phase out for individual taxpayers with adjusted gross income in excess of $125,000 for individuals or $250,000 for married couples filing jointly.
Reduced Income Tax Withholding.
For 2009 and 2010, the Making Work Pay provision of ARRA provides a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns.
For people who receive a paycheck and are subject to income tax withholding, the credit will typically be received through an automated reduction of income tax withholding by the employer beginning in early spring 2009. These changes may result in an increase in take-home pay.
This tax credit starts to phase out for individual taxpayers with adjusted gross income in excess of $75,000, or $150,000 in the case of married couples filing jointly.
A taxpayer who does not have taxes withheld by an employer during the year can claim the credit on his or her tax return.
It is not necessary to submit Form W-4 to get the automatic withholding change. However, an employee with multiple jobs or married couples whose combined incomes place them in a higher tax bracket may decide to submit a revised W-4 to ensure enough withholding is held to cover tax on the combined incomes. Publication 919 provides additional guidance for adjusting your tax withholding. IRS also has a withholding calculator that could be helpful.
Additional Child Tax Credit.
The child tax credit has been amended to increase eligibility for the refundable portion of the child tax credit for 2009 and 2010. For both years, the refundable portion of the child tax credit is calculated based on 15 percent of the taxpayer’s earned income in excess of $3,000. In contrast, for 2008, the refundable portion of the child tax credit is calculated based on 15 percent of the taxpayer’s earned income in excess of $8,500.
Earned Income Tax Credit.
ARRA provides a temporary increase in the Earned Income Credit for a taxpayer with three or more qualifying children, and provides additional marriage penalty relief for 2009 and 2010 tax returns.
Economic Recovery Payment.
A one-time payment of $250 will be made in 2009 to:
• Retirees, disabled individuals and Supplemental Security Income (SSI) recipients receiving benefits from the Social Security Administration
• Disabled veterans receiving benefits from the U.S. Department of Veterans Affairs
• Railroad Retirement beneficiaries
Unlike last year under the economic stimulus program, recipients of the economic recovery payment will not receive it from the IRS. Individuals who may qualify for this year’s economic recovery payment do not need to file a return to receive the payment and should contact their respective agency for more information.
The Social Security Administration Web site has a special section on the Economic Recovery Payment.
The Economic Recovery Payment will reduce any Making Work Pay credit for which the recipient qualifies.
Qualified Transportation Fringe Benefits.
The monthly tax exclusion for employer-provided commuter highway vehicle transportation and transit pass benefits increased to $230, effective from March through December 2009.
Employees may exclude from income $230 per month in transit benefits and $230 per month in parking benefits –– up to a maximum of $460 per month. Employees may receive benefits for commuter transportation and transit passes and benefits for parking during the same month; they are not mutually exclusive.
These qualified transportation fringe benefits are excluded from an employee’s gross income for income tax purposes and from an employee’s wages for payroll tax purposes.
For more information IRS Information Related to the American Recovery and Reinvestment Act
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