Wednesday, February 17th, 2010
By Christine Henderson
Many changes this tax season
There were lots of changes in the income tax regulations for 2009, primarily due to the recession, and Grand Lake area taxpayers may see the impact when they file their returns.
Local tax preparers explained some of the new laws local residents should keep in mind.
While most of the changes are federal, the state of Ohio may have thrown a crimp in the refunds of some Mercer and Auglaize taxpayers.
• Ohio lawmakers changed their minds about an income tax reduction scheduled for 2009.
Five years ago, legislators reduced the Ohio income tax by 20 percent over five years. The state sent 2009 withholding tax tables to businesses with this 4 percent reduction. Due to the bad economy, legislators decided to freeze that last 4 percent, but did not send out new tax tables, said Craig Henderson, CPA of Ault Henderson & Lewis Inc., Celina.
Employees may need to pay that slight increase not taken out of their paycheck when they file their return, he explained. This will only be a problem for 2009.
• Celina City School district residents may have a change in their income tax starting this year, said Ruth Franzer of Ruth's Tax and Accounting in Celina.
The school income tax is now only applied to earned income, said Franzer. Therefore, people will not pay Celina school tax on Social Security, pension, interest or dividend incomes.
Federal tax laws have several changes due to the economic stimulus packages.
• Last summer, Social Security recipients were approved to receive $250 each and part of that amount has already been paid in increased monthly payments, Franzer explained. There is about $150 remaining to be refunded, she said.
• Also this year, an additional standard deduction for real estate taxes is available for those not itemizing their tax returns, Franzer said. For a single person, the deduction is up to $500 and for couples it is up to $1,000. This deduction is listed on the return form and local people will only need to mark the box and include it in their figuring. If they go to a tax preparer, the client can report real estate taxes paid, Franzer explained.
• There is another new standard deduction possible for people not itemizing, said Henderson. Sales tax paid for vehicles purchased from Feb. 17 through the end of 2009 can be deducted. This applies to vehicles costing up to $49,500 for a total up to $3,465. It applies to all vehicles, including motor homes. A client should bring the purchase invoice to his tax preparer, but it is not attached to the return.
• Another new federal credit for 2009 and 2010 is the Making Work Pay tax credit, which was part of the American Recovery and Reinvestment Act of 2009.
Workers received up to a $400 tax credit for individuals and $800 for married couples filing jointly. The federal government changed the income tax withholding tables last March to reduce the amount of federal tax individuals had withheld from their paychecks, said Dean Moeller, CPA/PFS of Moeller & Company CPA in St. Marys and St. Henry. The credit should balance out the reduction in withholding when the taxpayer files their tax return. Moeller said the credit adds another form that needs prepared, the Schedule M.
"This year is unique and created a lot more studying by CPAs and the tax preparation business people due to the four stimulus acts," Henderson said.
Some additional 2009 federal income tax changes:
• First-time homebuyers - Buyers can get 10 percent of the purchase price to a maximum of $7,500 to $8,000. This is a refundable credit, so the buyer of an $80,000 house would get $8,000 from the IRS, minus any taxes still due. The client needs to bring his house closing/settlement statement to the tax preparer. The statement signed by homebuyer and seller is attached to the return.
• Personal energy credit - This is for buyers of qualifying, energy-saving items such as insulation, exterior doors, windows, furnaces/air-conditioners and some roofing. For 2009 and 2010, homeowners can get 30 percent of the cost of the purchase to a maximum of $1,500. The buyer needs to bring to the preparer the trade manufacturer's certification that the product qualifies for the credit. The certification should be retained in the taxpayer's records.
• Farm equipment - For equipment purchased in 2009, the depreciation has been decreased from seven to five years. The total amount of equipment to be charged tangible personal property tax was not dropped to $134,000 as scheduled, but retained at $250,000.
• Unemployment benefits - People have not had federal tax withheld from the first $2,400 of unemployment benefits.
• S-corporations/partnerships - There is an increase in the penalty for failing to file a partnership or S-corporation return. If a business forgets to file, there is an $89 fine per partner, per month for up to 12 months.
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