Get Smart and Save Money This Tax Season

The Illinois CPA Society Shares What's New for Filing Your 2009 Return

CHICAGO, Feb. 12 /PRNewswire-USNewswire/ -- A little knowledge could save you money on your 2009 taxes. Filing a tax return is more complicated than usual this year because of the large number of new and expanded deductions and credits; they can work to your advantage if you understand and use them correctly.

Here are issues new to the 2009 tax filing season that the Illinois CPA Society recommends looking into before you complete your return:

First-Time Homebuyer Credit - Although a lot of attention has been given to this credit and its extension, the details can be a bit confusing. For starters, you need to submit Form 5405 to document purchase details; also keep in mind this credit can be used on either your 2009 or 2010 return. The price of the home can be no more than $800,000, there are income limits, the amount of the tax credit varies, and all home purchases must be made before May 1, 2010. If you bought your first home, the tax credit is up to $8,000; if you're a longtime homebuyer buying a new home, it's up to $6,500.

Energy Credits - Homeowners can also benefit from a number of different credits for energy-saving home improvements including insulation, roofing, water heaters, windows and doors. Credit amounts vary and products may be eligible in 2009 and 2010. Visit the U.S. Department of Energy site - www.energysavers.gov - for details.

Mortgage Debt Cancellation - For any debt forgiven by the mortgage holder on or after January 1, 2007 and before January 1, 2013, the debt forgiveness is treated as tax free if the property is your primary residence; this also applies if mortgage debt is forgiven on a primary residence as part of refinancing or other loan modification.

Unemployment - Taxes do not have to be paid on unemployment compensation up to $2,400 per recipient, but amounts over $2,400 are still taxable. You can request withholding on your benefits payments if you expect to owe tax on benefits at year end.

Roth IRAs Conversion Opportunity - For tax year 2010 there is no longer an income limit that prevents people from converting traditional IRAs to Roth IRAs. Tax on the rollover can be paid over two years.

Earned Income Credit - The Earned Income Credit has increased for people with three or more children and the rules have changed for determining who is a qualifying child.  The maximum credit ranges from $5,657 for workers with three or more qualifying children to $457 with no qualifying children; see IRS guidelines for the earned income and adjusted income levels that make you eligible for this credit.

Divorced or Separated Parents - For divorce decrees issued prior to 2008, old rules apply and decrees can be attached to your return. However, if a divorce decree or separation decree went into effect after 2008, a noncustodial parent claiming a child exemption must attach Form 8332 or a similar statement signed by the custodial parent.

Cash for Clunkers - This popular credit allows taxpayers to deduct some or all of the state, local or excise taxes paid on new cars, motorcycles, light trucks and motor homes that were purchased for under $49,500 between February 16, 2009 and December 31, 2009. No additional forms are needed, but depending on whether or not you itemize deductions, different schedules are used. Also under this program, $3,500 or $4,500 vouchers, or payments made for such a voucher, are not taxable for federal income tax purposes.

Education - The maximum Hope Education credit - now renamed the American Opportunity Credit - has increased to $2,400 for most taxpayers. There's also a Lifetime Learning Credit which provides up to $2,000 per year for undergraduate, graduate and professional degree courses and a higher education tuition deduction.

Making Work Pay Credit - In 2009 individual workers received up to a $400 credit and married couples up to $800. Some people enjoyed lower tax withholding due to this credit. To claim it you will need to use Schedule M which can be found at www.irs.gov.

Charitable Donations to Haiti - Taxpayers can claim these charitable donations made after January 11, 2010 but before March 1, 2010 on their 2009 or 2010 returns (but not both). Donations must be monetary, made specifically to a charity that is assisting Haiti, and documented with a receipt and a record such as a cancelled check. Written acknowledgement is needed for donations over $250, and telephone bills can serve as proof of donations made on cell phones via text messages.

If you have questions or concerns about these tax season issues - or you're finding filing your taxes to be a little confusing and overwhelming - consult a CPA.  To locate a CPA in your area, use the "Find a CPA" Directory on the Illinois CPA Society's site, www.icpas.org. The consumer section of the site also provides more information about credits, deduction and other filing season facts, including direct links to IRS topics.

About the Illinois CPA Society

The Illinois CPA Society, founded in 1903, is the fifth largest state CPA society in the nation, with more than 24,000 members. It is the premier professional organization that represents CPAs in Illinois. During its over 100 years of existence, the Society has advanced the highest ethical and financial standards of the profession, and has been a leader in educating the public on financial issues.

SOURCE Illinois CPA Society

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