Tax Changes in Response to Recession

As has been the case in most recent years there are changes about which you need to be aware.

Muench:  There are a lot changes this past year.  With the American Recovery Investment Act.

Vonda Muench is a Master Tax Adviser with H& R Block.

Muench:  One of the major things that is causing people difficulty is the making work pay credit that they instituted.  If you recall back in about July they changed the withholding and started taking out less taxes during this year.  And what that was credit in advance beginning now and single people get up to $400 or 6.2% of your income up to $400, and married people get up to $800, but unfortunately people where you have two people working in the family they find that they are underwithheld, so a lot of the refunds have been a little bit lower this year.

There is some help also for people who have lost their jobs.

Muench:  One of the clauses is  they did make this year is the unemployment compensation.  The first $2400 is not subject to income taxes this year.  So that was a big help to a lot of people.  Virginia does not tax any unemployment anyway, so really it’s definitely  just the federal credit there that is helping out.  Other than that, there have been some changes where if your salary has gone done they changed the earned income tax credit this year.  It’s much more lucrative than it was in the  past.  There’s families of three or more children can now receive an additional credit for the third child.

In all, Muench said, there are more than 300 changes to consider this year, many of which take into account the record number of layoffs.

Muench:    We have a lot of little changes, particularly hitting this area like the Qimonda people.  They were offered COBRA and there is a new healthcare tax credit they can get and we thought the government is going to pay back 65% of their premiums from the beginning of the year and they changed it to 80% but that’s one that’s not very well known and it could be a big help for those people who are offered COBRA.  Another thing we had was the judicial child tax credit that has become refundable as well, a little more there, and they changed the amount of income that you could make.

Block has been doing taxes since 1955, in fact they prepare one in seven returns that are filed in this country.

Muench:    With this economy a lot of people, I think, have been trying the online features, which is great if you have the confidence to do that.  And then I’ve had many people come into the office saying they tried to do the online programs and they just weren’t sure how to answer questions and didn’t want to answer it correctly, so we’re finding they come in trying to get the maximum refund that they can possibly get.  It gets kind of confusing when there are so many things to worry about and then the date changes.  Home buyer credit, for example: it used to be that you got $7500 if you bought a house during 2008, but they have to pay it back $500 a year starting next year.  Starting January 1st, it went to $8,000 first time homebuyers credit and it’s for anyone who bought a house January 1st through, if you buy one through a contract through this April 30th they can qualify for that as long as they close by June 30th of the year.  All the little dates so they can get confusing to people.
 
It is important to remember, Muench added, that if your taxes are prepared by someone else, no matter who that is, you remain responsible for what you file.  Most tax preparers can be found online and the IRS also offers a lot of help on its website.

John Ogle, WCVE News