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December 2009 Newsletter

Feature Articles
 Tax Tips 

This newsletter is intended to provide generalized information that is appropriate in certain situations. It is not intended or written to be used, and it cannot be used by the recipient, for the purpose of avoiding federal tax penalties that may be imposed on any taxpayer. The contents of this newsletter should not be acted upon without specific professional guidance. Please call us if you have questions.

Lower Your Taxes and Heating Bills

You can weatherize your home and be rewarded for the effort. Homeowners making energy-saving improvements can cut their winter heating bills and lower their 2009 tax bill as well.

The American Recovery and Reinvestment Act (Recovery Act), enacted earlier this year, expanded two home energy tax credits: the nonbusiness energy property credit and the residential energy efficient property credit.
Nonbusiness Energy Property Credit
This credit equals 30 percent of what a homeowner spends on eligible energy-saving improvements, up to a maximum tax credit of $1,500 for the combined 2009 and 2010 tax years. The cost of certain high-efficiency heating and air conditioning systems, water heaters and stoves that burn biomass all qualify, along with labor costs for installing these items. In addition, the cost of energy-efficient windows and skylights, energy-efficient doors, qualifying insulation and certain roofs also qualify for the credit, though the cost of installing these items does not count. 
By spending as little as $5,000 before the end of the year on eligible energy-saving improvements, a homeowner can save as much as $1,500 on his or her 2009 federal income tax return. Due to limits based on tax liability, other credits claimed by a particular taxpayer and other factors, actual tax savings will vary. These tax savings are on top of any energy savings that may result.
Residential Energy Efficient Property Credit
Homeowners going green should also check out a second tax credit designed to spur investment in alternative energy equipment. The residential energy efficient property credit, equals 30 percent of what a homeowner spends on qualifying property such as solar electric systems, solar hot water heaters, geothermal heat pumps, wind turbines, and fuel cell property. Generally, labor costs are included when calculating this credit. Also, no cap exists on the amount of credit available except in the case of fuel cell property. 
Not all energy-efficient improvements qualify for these tax credits. For that reason, homeowners should check the manufacturer's tax credit certification statement before purchasing or installing any of these improvements. The certification statement can usually be found on the manufacturer's website or with the product packaging. Normally, a homeowner can rely on this certification. The IRS cautions that the manufacturer's certification is different from the Department of Energy's Energy Star label, and not all Energy Star labeled products qualify for the tax credits.
Eligible homeowners can claim both of these credits when they file their 2009 federal income tax return. Because these are credits, not deductions, they increase a taxpayer's refund or reduce the tax he or she owes. An eligible taxpayer can claim these credits, regardless of whether he or she itemizes deductions on Schedule A. Use Form 5695, Residential Energy Credits, to figure and claim these credits. A draft version of this form is available now on

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Financial Planning Dos & Don'ts

During these uncertain economic times, financial planning has become a challenge. Here are a few financial planning suggestions that can add to your peace of mind about financial matters and simplifying your life:

  • At least once a year, write down your investment goals and what strategy you will use to reach them. This will keep you focused.
  • Instead of giving money to many different charities, pick a few that are important to you, and give them a larger amount. This type of directed giving not only makes more sense, but will make it easier to track your donations at tax time.
  • Inventory your household possessions, with a camera or camcorder if you desire. Keep the inventory at work or in a safe-deposit box. This inventory will help should you need to submit a homeowner's insurance claim.;
  • Use one insurance agent and one financial adviser for your transactions.
  • If you have doubts about entering into a transaction, don't do it. You will probably save yourself money, time, and aggravation.

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Pre-Retirement Checklist

As you approach retirement, there are various matters that you should take care of. Here are some of the items you should check:

Health Insurance. Are you among the lucky few who will continue to be covered after retirement? If not, you'll need to replace the coverage. If you will be eligible for Medicare, you may want to start checking up on "Medigap" coverage.
Tip: Before you retire, take care of any non-emergency medical, dental, or optical needs (if your employee plan coverage is broader than Medicare).
Other Types of Insurance. Once you retire, you may need to replace employer-provided life insurance by buying added life coverage. You should also consider purchasing long-term health care insurance to cover the risk that you'll need a lengthy nursing home stay in the future.
Social Security. Decide whether you want to take early Social Security benefits if you're retiring before your full retirement age. You can get 80% of your benefits at age 62.
Tip: For most people, taking Social Security benefits at their full retirement age makes the most financial sense. Be sure to discuss this with a financial advisor if you think you might need to take early benefits.
Company Plan Payout. It's important to plan well in advance how you'll take the payout from your pension plan or 401(k) plan. Will you transfer the funds to an IRA? How will the funds be invested?
Relocation. If you're planning on moving to another state, check out various states to see what the financial ramifications of living there will be.
Tip: If you'll be relocating, it might be a good idea to buy the new home before retirement.  

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Events Requiring An Estate Plan Update

Generally speaking, your estate plan should be reviewed every two years to determine whether it needs to be changed or updated.

Additionally, if any of the following events occur, you'll probably need to update your estate plan (i.e., your will, health care documents, powers of attorney, life insurance coverage, and post-mortem letters).
Marriage or remarriage
Birth/adoption of child
Death of spouse or child
Sale of residence or purchase of new residence
Enactment of new tax laws
Tip: We suggest that you consult with the professional who prepared your estate plan should any of these events occur.
Here are some of the steps you may need to take:
Change an executor,
Revise a will to account for an increase in assets,
Reassess your life insurance needs,
Add or change a power of attorney,
Change legal documents to comport with state laws if you move to a different state,
Change wills or trust instruments to account for changes in beneficiaries, or
Change your post-mortem letter to reflect new assets, changes in executors, or other changes.
Tip: Because of the recent changes to the estate tax laws, many estate plans may need to be revised.  

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10 Facts About the New First Time Homebuyer Credit

If you are in the market for a new home, you may still be able to claim the First-Time Homebuyer Credit. Congress recently passed The Worker, Homeownership and Business Assistance Act Of 2009, extending the First-Time Homebuyer Credit and expanding who qualifies.

Here are the top 10 things the IRS wants you to know about the expanded credit and the qualifications you must meet in order to qualify for it.
  1. You must buy, or enter into a binding contract to buy a principal residence, on or before April 30, 2010.
  2. If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.
  3. For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.
  4. A long time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you've lived in the same principal residence for any five consecutive year period during the eight year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.
  5. The maximum credit for long time residents is $6,500. However, married individuals filing separately are limited to $3,250.
  6. People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.
  7. The IRS will issue a December 2009 revision of Form 5405 to claim this credit. The December 2009 form must be used for homes purchased after November 6, 2009, whether the credit is claimed for 2008 or for 2009, and for all home purchases that are claimed on 2009 returns.
  8. No credit is available if the purchase price of the home exceeds $800,000.
  9. The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.
  10. A dependent is not eligible to claim the credit.
For more information about the expanded First-Time Homebuyer Credit, visit 

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Should You File a Tax Return?

You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age and the type of income you receive.

The IRS uses the following income thresholds to determine whether you must file a federal income tax return for 2009.
Single Taxpayers
If you expect to file a single return, the IRS requires you to file a return for 2009 if your gross income for the year is at least: $9,350 if you are under age 65. $10,750 if you are at least age 65. 
Married Filing Jointly
For married persons filing jointly, you are required to file a return if gross income for 2009 is at least: $18,700 if both of you are under age 65. $19,800 if one of you was at least age 65. $20,900 if both of you were at least age 65. 
If you are not living with your spouse at the end of the year or on the date that a spouse should die, the IRS requires you to file a return if your gross income is at least $3,650. Each personal exemption in 2009 is worth $3,650. For married persons filing a separate return, no matter what age, you must file a return if gross income is at least $3,650.
Head of Household
For persons filing as head of household, you must file a return for 2009 if gross income is at least: $12,000 if under age 65. $13,400 if at least age 65. 
Qualifying Widow or Widower
For persons filing as qualifying widow or widower with dependent child, you must file a return for 2009 if gross income is at least: $15,050 if under age 65. $16,150 if at least age 65. 
Even if you don't earn this much income, other situations exist to determine whether you must file a tax return. For example, a dependent has to file a return for 2009 if they received more than $950 in unearned income or more than $5,700 in earned income.
Other situations include:
You Owe Certain Taxes
If you owe FICA or Medicare taxes (also called payroll taxes) on unreported tip or other reported income that were not collected, you must file a return. You must also file a tax return if you are liable for any alternative minimum tax. You must also file a return if you owe taxes on individual retirement accounts, Archer MSA accounts or an employer-sponsored retirement plan. 
Advance Earned Income Tax Credit Payments
The Earned Income Tax Credit is a federal income tax credit for eligible low-income workers. The credit reduces the amount of tax an individual owes, and may be returned in the form of a refund. If your receive advance payments for the earned income credit from your employer, you must file a return. 
Self-Employment Earnings
If your net earnings from self-employment are $400 or more, you must file a return. 
Church Income
If you earn employee income of at least $108.28 from either a church or qualified church-controlled organization that is exempt from employer-paid FICA and Medicare taxes, you must file a return.Call us for more information about filing requirements and your eligibility to receive tax credits. 

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Choose Your Correct Filing Status

Your federal tax filing status is based on your marital and family situation. It is an important factor in determining whether you must file a return, your standard deduction and your correct amount of tax.

Your marital status on the last day of the year determines your status for the entire year. If more than one filing status applies to you, you may choose the one that gives you the lowest tax obligation.
There are five filing status options:
  1. Single. Generally, if you are unmarried, divorced or legally separated according to your state law, and you do not qualify for another filing status, your filing status is Single. 
  2. Married Filing Jointly. If you are married, you and your spouse may file a joint return. If your spouse died during the year and you did not remarry, you may still file a joint return with that spouse for the year of death. This is the last year for which you may file a joint return with that spouse. 
  3. Married Filing Separately. Married taxpayers may elect to file separate returns. 
  4. Head of Household. Generally, you must be unmarried and paid more than half the cost of maintaining a home for you and a qualifying person for more than a half of year. 
  5. Qualifying Widow(er) with Dependent Child. You may be able to file as a qualifying widow or widower for the two years following the year your spouse died. To do this, you must meet all four of the following tests:
    1. You were entitled to file a joint return with your spouse for the year he or she died. It does not matter whether you actually filed a joint return,
    2. You did not remarry in the two years following the year your spouse died,
    3. You have a child, stepchild, or adopted child (a foster child does not meet this requirement) for whom you can claim a dependency exemption, and
    4. You paid more than half the cost of maintaining a household that was the main home for you and that child, for the whole year.
After the two years following the year in which your spouse died, you may qualify for head of household status.
Note: For more information about filing status, call us or see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.  

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Tax Due Dates for December 2009

December 10

Employees who work for tips - If you received $20 or more in tips during November, report them to your employer. You can use Form 4070.

December 15

Corporations - Deposit the fourth installment of estimated income tax for 2009. A worksheet, Form 1120-W, is available to help you estimate your tax for the year.  
Employers Social security, Medicare, and withheld income tax - If the monthly deposit rule applies, deposit the tax for payments in November.
Employers Nonpayroll withholding - If the monthly deposit rule applies, deposit the tax for payments in November.
December 20
Employers – New York State Sales tax due for monthly filers  

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Copyright © 2009 All materials contained in this document are protected by U.S. and international copyright laws. All other trade names, trademarks, registered trademarks and service marks are the property of their respective owners

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