The secret to a smooth tax season.
With so many significant tax bills this year and last, and major changes scheduled by prior tax bills, you can expect numerous changes in the IRS instructions for the upcoming tax season. But Tax Preparer gives you a handle on the changes with its smooth automation and produces order out of confusing IRS instructions. So… to make next tax season run smoothly, order your update for Tax Preparer now. Order securely over the internet at
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Hundreds of changes … but the IRS
has a handle on it this time!
In spite of a popular feeling that Congress can’t get things
done, several significant tax bills were passed this year.
However, most of them were overshadowed in the popular
press by the larger non-tax bills to which they were attached. Among those with an impact on the coming filing
- Recovery Rebate Bill. Technically the Economic Stimulus Act of 2008, this bill was passed in February and is
popularly known for the rebate checks mailed to millions this summer. It also included a temporary increase
in loan limits for FHA, Fannie Mae, and Freddie Mac.
But the press gave little mention to the most significant
tax benefit for small businesses -- huge increases in
- Farm Bill. Technically the Food, Conservation and Energy Act of 2008, this bill was passed in May after
Congress overrode the President’s veto. It includes a
tax section with benefits for farmers, ranchers, and
timber producers, many of which are conservation and
- Military Tax Relief Bill. Technically the Heroes Earnings
Assistance and Relief Tax Act, this bill benefits military
personnel who receive combat pay, purchase a home,
or have transactions involving their retirement plans.
- Housing and Economic Recovery Act. Although the
main focus of this bill, passed in July, was to help the
housing market, it includes a significant tax bill titled
the Housing Assistance Tax Act of 2008 that introduces a first-time homebuyer tax credit, a property tax
deduction for non-itemizers, and a number of other incentives.
- The “Bailout Bill.” Technically the Emergency Economic
Stabilization Act of 2008, this bill, passed on October
3rd, includes much more than emergency help for the
financial industry. In fact, it includes nearly 300
changes to the tax code, including another AMT patch
and the extension of several popular expired credits.
Although these bills represent hundreds of changes, and
many more were scheduled for this tax year by prior tax
bills, the IRS is in good shape this year because of the
timely passage of these bills. That means that we shouldn’t
see a repeat of the confusions of the last two tax seasons
when the IRS changed forms and instructions long after
they were printed and mailed to taxpayers.
What it means for the tax formss
The IRS had already released the final versions of Form
1040 and its schedules, along with several other popular
forms, by the time we prepared this newsletter. And it had
issued advance drafts of most of the other forms included
in Tax Preparer. As a result, we can give you an accurate
sneak peek at the new forms. In addition to the usual
changes caused by indexing with inflation, the most evident changes in the final forms include:
- Form 1040. Thanks to the “bailout bill,” page 1 of
Form 1040 is virtually unchanged … quite unlike the
advance draft that the IRS issued before the bill. On
the other hand, page 2 has a number of changes
brought about by the earlier bills:
- a box at line 39 for non-itemizers to indicate that
their standard deduction has been increased by property tax they paid on their home;
- a mention at line 42 of the exemption allowed for
those who provided housing to certain displaced persons;
- a new line for claiming the new first-time homebuyer credit via Form 5405;
- a new line for claiming additional recovery rebate
credit for late filers or those with higher income in
2008 than 2007; and
- several lines combined to make room for the new
- Schedules C and C-EZ. The box at line 1, formerly used
to indicate that you are a statutory employee, is now
also used to indicate that you are reporting rental real
estate income as a joint venture with your spouse.
Checking this box flags to the IRS that the income is
generally not subject to self-employment tax.
- Schedule H. The signature block at the bottom of page
2 has been expanded to include an area for a paid preparer to sign. The taxpayer (and paid preparer, if any)
must sign Schedule H if it is filed alone (when a taxpayer is not otherwise required to file a Form 1040 return).
- Schedule SE. The Optional Methods for low income
businesses have been greatly sweetened. The income
ceiling for eligibility to use the methods has been increased by a factor of 2.625, and will be indexed with
inflation in the future. As a result, more self-employeds with little or no income will be able to contribute to social security to increase their social security
benefits when they retire.
- Forms 2106 and 2106-EZ. The form’s standard mileage rate section is complicated by the return of a 2-tier
mileage rate: 50.5 cents a mile for the first half of the
year, and 58.5 cents a mile thereafter. And first-year
car depreciation is greatly increased by the return of
50% bonus depreciation along with an $8,000 rise in
the first-year limit on car deductions.
- Form 3903. Although the form hasn’t changed significantly, the standard mileage rate is complicated by a 2-tier rate: 19 cents a mile for the first half of the year,
and 27 cents a mile thereafter.
- Form 4136. The final form is deceivingly similar to the
prior-year form because many tax rates that were
scheduled to drop after February 29, 2008 were deferred until March 31, 2009. But there are subtle
changes in the form that reflect the changing laws.
- Form 4562. Although the form is visually similar to last
year’s form, there are major changes in first-year depreciation:
- The section 179 expensing limit has been doubled
to $250,000, and the full amount is allowed as long as
the cost of all section 179 property for the year does
not exceed $800,000 (up from $600,000). Furthermore,
these limits are substantially raised for property
in the newly-defined Kansas disaster area.
- A first-year 50% bonus depreciation is now
available for most property bought in 2008, and available
even longer for many newly favored types of property.
- Form 6251. Although this form was not final when we
prepared this newsletter, the latest draft reflects the
latest law in which exemptions are indexed with
inflation from last year so that millions are not newly hit by
the minimum tax.
- Form 8615. This form was not final when we prepared
this newsletter either, but a major change in the law is
reflected in the title. The “kiddie tax” to which this
form relates no longer applies to a child based solely on
age. It now applies to children under 18, 19, or 24
depending on the circumstances, so the title of the
form no longer states an age.
Beware 64-bit Vista
Tax Preparer is fully compatible with the standard Windows
Vista operating system, which is a 32-bit operating system.
However, Microsoft now offers a 64-bit version of Vista for
optional use on computers with 64-bit processors. Unless
you take the special steps detailed in our Customer Service
Running Tax Preparer under 64-bit Vista,
you will not be able to install nor run Tax Preparer on your
machine. We recommend that you stick with 32-bit Vista
unless you have a special need for the 64-bit version. (For
more information, you can access the cited memo by clicking
the Check for Updates choice on your Tax Preparer
Control Panel and going to the Bulletins page.)