"Weekly Tax Tip" is a feature of the OOIDA Web site, designed to help you make decisions critical to the survival of your trucking business. Through April 15, we'll post frequently asked questions and up-to-date answers, provided by PBS Tax & Bookkeeping Service. If you need additional information, please contact Howard at 1-800-697-5153 or visit the Web site at www.pbstax.com

Get a jump on your taxes

Follow the checklist:

1. Gather your records in advance. Make sure you have all the records you need, including W-2’s and 1099’s. Don’t forget to save a copy for your files.

2. Compare amounts on 1099’s and W-2’s with your records to make sure they agree.

3. If the amounts don’t agree call the payor or use the amount you think it is by doing an adjustment on your tax return

4. You must have receipts and back up information for everything that appears on your tax return. Using an income tax organizer that outlines everything you need will be very helpful.

5. E-filing is easy. E-filing catches math errors and provides confirmation your return has been received and gives a faster refund.

6. Get the fastest refund. When you e-file early, you receive your refund faster. When you choose direct deposit, you receive your refund sooner than waiting for a check.

SUSPICIOUS E-MAILS

You will never receive an unsolicited e-mail from the IRS asking for any personal information of any kind including financial, pin, social security numbers, or any information from your credit cards.

If you receive unsolicited e-mails from the IRS do not open it. Just hit the DELETE button.

THE TAX PREPARER

We are receiving a lot of phone calls from truckers who have used two different tax preparers, who do not return phone calls, have different representatives and have found errors in their returns. Be careful. You should be using people who are responsive to your phone calls and who provide the service you need.

PER DIEM

Remember – you can claim Per Diem for your meals of $52 per day but, in order to claim lodging, you must have the receipts.

RECOVERY REBATE CREDIT

The Internal Revenue Service reports that there are errors occurring in filings so far involving the Recovery Rebate Credit. If you received your entire stimulus checks last year, the credit does not pertain to you unless:

1. Your family gained an additional qualifying child in 2008

2. You did not file a 2007 tax return

3. You were claimed as a dependent on someone else’s return in 2007 but cannot be claimed by someone else in 2008.

Otherwise, the IRS will figure the credit for you.

RETIREMENT PLANS CASH WITHDRAWALS

Before you withdraw funds from your retirement plan be certain you must do so. By withdrawing the money, you will incur taxes and penalties and you will lose the tax deferred return that would have been earned in the future.

EARNED INCOME TAX CREDIT

If you are in a low tax bracket (i.e.- did not earn a lot of money) you may qualify for the credit. There are many factors that determine whether you qualify but primarily your total income must be below $15,880 if you have no children, less than $36,995 if you have one qualifying child and not more than $41,464 if you have two or more qualifying children.

RETIREMENT SAVERS CREDIT

If you are able to make a contribution to your IRA or 401K Plans (including elective deferral) you may be eligible for a non-refundable credit (Retirement Savers Credit) on your income tax return.

There are adjusted gross income limitations. You are eligible for a portion of the credit if you are married filing jointly and your AGI is $53,000 or less. If single, your AGI needs to be $26,500 or less.

HOME MORTGAGE HELP

Housing Rescue plan begins TODAY! You should call your lender to see if you qualify to refinance your mortgage. The new Housing Rescue plan can help people who are having trouble making their mortgage payments by refinancing
their loans.

FIRST-TIME HOMEBUYER TAX CREDIT

Effective for home purchases (principal residence) January 1, 2009 through November 30, 2009, a credit up to $8,000 is available for first time buyers or buyers who have not owned a home for the previous 3 years.

The taxpayer has the option of claiming the credit either on their 2008 tax returns due April 15 or on their 2009 returns.

Unlike the $7,500 credit for residences purchased April 9, 2008 through December 31, 2008, the new $8,000 credit does not have top be paid back unless the home is sold within 3 years of purchase. The $7,500 credit is paid back over 15 years and is subject to repayment of the outstanding balance if the home is sold before 15 years.

Qualifying residences include manufactured homes as well as houseboats.

Both of the credits mentioned above are computed as the lesser of 10% of the cost of the home up to the maximum of $7,500 or $8,000, are refundable and are subject to income limitations.

SOME RELIEF FOR PEOPLE WITH TAX DEBT

If you have been rejected for an “Offer in Compromise” because you had home equity, the IRS will review those rejected applications since the equity may now be gone. Contact the IRS.

If you are on an installment payment plan with the IRS, previously, all the debt is due if a payment was missed. Now you may stay on the payment program even if you skip a payment or send a reduced amount. Each case is different.

If you have suffered financial hardship, such as loss of work, the IRS may postpone collection action temporarily. Contact the IRS.

NET OPERATING LOSS CARRY BACK

NEW RULE – In this horrible period, many of you will have losses (operating losses) that appear on your 1040 schedule C where your net income usually is. Prior law allowed net operating losses (NOL’S) to be carried back 2 years and carried forward 20 years. For 2008, a new law allows you to carry back up to 5 years. This allows you to possibly realize much needed cash. An election must be made on your 2008 tax return or if already filed, submit a new election prior to April 18, 2009.

If you are going on extension, you have until the extended due date of your tax return to make the election. (October 15, 2009)

MINIMUM RETIREMENT PLAN WITHDRAWALS

The recession has greatly decreased your stock portfolios; the government has provided tempory relief for 2009 in that you do not have to take your required minimum distribution for 2009 from your retirement accounts. This applies for individuals who are 70 ½ or who turned 70 ½ in 2009. You will have to take your regular distributions in 2010.

The above rule also applies to beneficiaries taking life expectancy distributions from inherited accounts.

WHAT IF I CAN’T FILE ON TIME?

If you are not going to be able to gather your information in time to have your taxes filed by April 15, 2009, you may choose to file an Application for Automatic Extension of Time, Form 4868, which will extend the time you have to file your return until October 15, 2009. By filing the extension, you will eliminate a late filing penalty. However, an extension is not an extension of time to pay taxes due. So if you are going to owe taxes, you should send in the money along with your extension so you can avoid or reduce underpayment penalties.

If your return is completed, file it even if you are unable to pay the tax due. The IRS will bill you or set up your own payment plan by filing Form 9465.

TAX DEADLINE TIPS

If you owe the IRS you may pay online or by phone. Call 1-877-754-4413 or visit www.officialpayments.com/debit ($3.95 fee), for credit card payments visit www.officialpayments.com (2.49% fee)or call the above number (2.49% fee).

April 15th is the last day to contribute to your Traditional or Roth IRA regardless of extension.

RETIREMENT PLANS CASH WITHDRAWALS

Before you withdraw funds from your retirement plan be certain you must do so. By withdrawing the money, you will incur taxes and penalties and you will lose the tax-deferred return that would have been earned in the future.

LASER EYE SURGERY and WEIGHT LOSS PROGRAM

To answer our many inquiries, yes, laser eye surgery does qualify as a deductible medical expense. Also a weight loss program is a deductible medical expense as long as a physician has made a diagnosis of obesity (but the food is not deductible).

CONVERT TRADITIONAL IRA TO A NON-TAXABLE ROTH IRA

With Stock and Mutual Fund values down this might be a good time to consider converting your taxable IRA to a Roth IRA (non taxable upon distribution). Consult with your tax advisor.

TAX TIP: TIME TO REFINANCE

Now is a great time to refinance your home mortgage to capture these low rates, especially if you are paying over 6 per cent. Call your bank, loan broker or check the following websites:

www.HSH.com or www.bankrate.com

Also check with your bank to see if you can refinance any equipment loans at a lower interest rate.

TAX TIP: NEW VEHICLES

New vehicles such as light trucks, cars and vans weighing 6000 pounds or less of gross vehicle weight that are put into service in 2009 and used more than 50% for business can qualify for up to $8000 bonus depreciation.

HOME IMPROVEMENTS

Q. Can I deduct Improvements made to my home?

A. No, you cannot. You should keep track of all monies spent for improvements and add it to the cost of the house upon sale for computation of gain or loss purposes.

OFFERS IN COMPROMISE (OIC)

Many truckers have called to express dismay that they were duped into believing that if they paid fees from $3000 up to $8000 to firms claiming to reduce the amount owed the Internal Revenue Service to pennies on the dollar, have found that was not true. The firms took their money and did nothing or they just were not able to succeed.

Important – Do not give all your money up front. Pay it in stages as your case progresses. Check out the firm you pick. They should not be that high. It’s possible you may not qualify for the OIC Program but that a reasonable collection program was put into place. If that’s the case, your fee should be much lower.

INJURED SPOUSE

When newly married, and one spouse owes back taxes, the spouse not required to pay the past-due amount may keep all or a portion of the couple’s refund by filing Form 8379 “Injured Spouse Claim”. To be eligible for the refund, the injured spouse must have income (wages, interest) and made tax payments (withholding, estimated taxes) reported on a joint return.

WHAT IF I CAN’T PAY MY ESTIMATED TAXES (1040ES)?

We have never said this before, but if you can’t pay them don’t. The interest and penalties are relatively cheap compared with credit card interest rates and you would be better off paying down higher interest loans.

NEW CAR PURCHASES TAX BREAK

Taxpayers who buy a new car this year may qualify, depending on income levels, to deduct state and local sales as well as excise taxes if you purchased or will purchase between February 16, 2009 and January 1, 2010. It does not matter whether you itemize or take the standard deduction. The deduction is limited to taxes paid up to $49,500 of the purchase price.

INHERITANCE GIFTS

In response to many inquiries, people who receive inheritance gifts such as cash and property, will not owe income taxes. If the gifts received were from IRA distributions received from decedent prior to death, they could be taxed.

CHECK YOUR WITHHOLDING TAX

In 2009 federal income tax withholding rates were lowered due to the “Making Work Pay” tax credit. If you are married and both spouses work and/or you have withholding from pension plans, or are working multiple jobs you should make sure you are on track to have enough taxes withheld so there are no surprises at the end of the year.

FEDERAL HEAVY VEHICLE HIGHWAY USE TAX -2290

If you own equipment you will be required to pay the annual Highway Use Tax. This tax is reported and paid to the Internal Revenue Service based on the gross vehicle weight. You must pay your Highway Use Tax before you will be allowed to register your vehicle.

You will need your own federal employer ID number. The Form 2290 is for the period July 1 through June 30 each year with the payment due by August 31.

GARNISHMENT OF WAGES

Can the IRS withhold wages from your employer without notice? No. The IRS must send you a final Notice of Levy and then wait 45 days before taking your money. The amount that they can take varies.

AMENDED INCOME TAX RETURNS 1040X

If you filed an amended income tax return, Form 1040x, the IRS has notified us that it could take 12-16 weeks to process. The normal time is 8-12 weeks. This is a temporary delay until they catch up with a large backlog of 1040X’s.

DUE DATE PARTNERSHIP TAX RETURNS

REMINDER – Partnership tax returns (form 1065) for 2008 are due September 15, 2009. In prior years they were due October 15.

SIMPLE IRA

If you are a sole proprietor and want to open a “Simple IRA” retirement plan, you must do so by October 1, 2009 for the 2009 tax year.

Employer contributions are due by the return due date including extensions

HEALTH TIPS

With the spotlight on health, yes, a weight loss program is a deductible medical expense as long as a physician has made a diagnosis of obesity (but the food is not deductible). Laser eye surgery is also a deductible medical expense as well as contact lenses and the solution that goes with them.

MEDICAL REIMBURSEMENT PLANS

Self-employed owner-operators can deduct 100 per cent of out of pocket medical expenses if they employ their spouse. This includes drugs. There are dollar limitations to these plans. This is a tax saving vehicle.

INCOME TAX RETURNS DUE

ALERT - 2008 Personal Income tax returns on extension are due to be filed by October15, 2009. Don’t forget to catch up on your estimated taxes.

REQUIRED MININUM DISTRIBUTION

If anyone received the required minimum distribution from an IRA or other plans in 2009 without realizing that the 2009 RMD had been waived, they can put the money back so that they don’t pay tax on an unnecessary withdrawal.

Individuals have until November 30, 2009 or 60 days after the date the distribution was received (whichever is later) to roll over the distribution.

HOMEBUYERS CREDIT

The home buyer’s credit (for first time home buyers or for those who have not owned a home for the prior three years) is set to expire November 30, 2009. Purchases must be computed by that date. The credit is up to $8000 and may or may not be extended.

PER DIEM RATE CHANGE

Effective October 2009 transportation workers who use the standard per diem rate for meals and incidentals can use, effective October 1, 2009, $59 per day. The old rate was $52 per day. It is still 80% deductible. There are transition rules for some companies.

STOCK MARKET

If you are in the stock market via mutual funds and/or stocks, you should review your holdings with a portfolio manager, stock broker or yourself (if knowledgeable) to make sure what you are invested in is still solid or if your holdings need to be rebalanced. You should also make sure that you are aware of any gains realized or to be realized through mutual fund distributions, so you can be aware of potential taxes on those gains.

NON BUSINESS ENERGY CREDITS

We get lots of questions regarding home improvements energy credits. There are credits available on your income tax returns for qualified improvements to your principal residence. The improvements must be placed into service before January 1, 2011. The credit is 30 percent of what you spend up to a maximum of $1500.

MOVING EXPENSES AND A NEW JOB

If you move more than 50 miles from your old residence because of a job change, you should have deductible moving expenses. You can deduct the cost of moving your household goods, and expenses of traveling to your new home and lodging. Expenses include mileage at 27cents per mile plus parking and tolls but not meals.

NET OPERATING LOSS CARRYBACK

Our tax tip of March 26, 2009 titled “Net Operating Loss Carryback” referred to 2008 tax returns. The law has recently been extended to include 2009 tax returns with the extended due date of October 15, 2010. Below is our prior tax tip.

NEW RULE – In this horrible period, many of you will have losses (operating losses) that appear on your 1040 schedule C where your net income usually is. Prior law allowed net operating losses (NOL’S) to be carried back 2 years and carried forward 20 years. For 2008, a new law allows you to carry back up to 5 years. This allows you to possibly realize much needed cash. An election must be made on your 2008 tax return or if already filed, submit a new election prior to April 18, 2009.

If you are going on extension, you have until the extended due date of your tax return to make the election. (October 15, 2009)

REQUIRED DISTRIBUTION ROLLOVER DEADLINE

Reminder: If you received the required minimum distribution from your IRA, you have until November 30, 2009 to roll the money back into your plan. This will avoid unnecessary taxes providing you have the money to roll back in.

STOCK GAINS OR LOSSES

If you are holding stocks that are below your purchase cost you might consider selling them to offset gains you might have had this year or to establish a loss. You can deduct up to $3000 in capital loss this year.

401k SOLO PLAN

December 31 is the last day to open a 401k solo plan and get a deduction on your 2009 tax returns. You contribution is due at the filing due date of the return including extensions.

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