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Donations for Haiti Earthquake Relief Eligible for Immediate Deduction

On January 12, a massive earthquake hit Haiti, causing monstrous damage.  Many large buildings were leveled, including the Presidential Palace, as well as shantytown homes and numerous national landmarks.  Since that time there has been an outpouring of sympathy worldwide for Haiti and its people.  People in the United States have been equally generous in their donations.  In fact, within the US the Haiti Relief fundraising effort has raised record donations through text messages, telethons and government sponsored initiatives.  In an effort to reward the generosity of its residents, the US government has announced that donations will qualify for immediate tax relief.


According to the IRS press release, people who give to charities providing earthquake relief in Haiti can claim donations on the tax return they are completing this season.  Taxpayers who itemize deductions on their 2009 return qualify for this special tax relief provision, enacted Jan. 22. Only cash contributions made to these charities after Jan. 11, 2010, and before March 1, 2010, are eligible. This includes contributions made by text message, check, credit card or debit card. The new law only applies to cash (as opposed to property) contributions. The contributions must be made specifically for the relief of victims in areas affected by the Jan. 12 earthquake in Haiti. Taxpayers have the option of deducting these contributions on either their 2009 or 2010 returns, but not both.


To learn more about how to claim donations made to Haitian relief effort visit www.irs.gov or call 800-829-1040 for individuals or 800-829-4933 for businesses. 


January 25, 2010

Marsha Henry


Tax Quarry ©

Ten Things the IRS Wants You to Know about the Making Work Pay Tax Credit

For many the changing economic environment has meant scaling back on hours, losing a job or simply missing out on a promotion.  At the most basic level, this means there is less cash flow to go around.  The government, fully aware of this trend, decided to introduce a few tax incentives to lighten the financial burden of the crisis.  For the unemployed, EI benefits eligibility was extended and increased.  However, for those remaining gainfully employed, the government introduced through the American Recovery and Reinvestment Act (2009) the Making Work Pay Tax Credit. 


If you are one of the lucky ones who still punches the clock everyday and logs those hours, the IRS has provided 10 tips to help you determine your eligibility for this tax credit and to ensure you receive the entire amount for which you are eligible.


1. In 2009 and 2010, the Making Work Pay provision provides a refundable tax credit of up to $400 for individuals and up to $800 for married taxpayers filing joint returns.


2. For taxpayers who receive a paycheck and are subject to withholding, the credit will typically be handled by their employers through automated withholding changes.


3. Taxpayers receiving less than the full amount of the allowable credit through reduced withholding will be entitled to claim any remaining credit when they file their tax return.


4. The amount of the credit actually received during 2009 in the form of reduced withholding will be reported on your 2009 tax return. Taxpayers who do not have taxes withheld by an employer during the year can claim the credit on their 2009 tax return filed in 2010.


5. Taxpayers who file Form 1040 or 1040A will use Schedule M, Making Work Pay and Government Retiree Credits to figure the Making Work Pay Tax Credit. Completing Schedule M will help taxpayers determine whether they have already received the full credit in their paycheck or are due more money as a result of the credit.


6. Taxpayers who file Form 1040-EZ will use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Tax Credit.


7. In 2010, you may notice that your paychecks are slightly lower than in 2009. The slight decrease may be because of the Making Work Pay Credit. Most of the credit for wage earners is distributed through reduced withholding. The credit – which was spread out over nine months last year – is being spread over 12 months this year.  A little less credit in each paycheck means slightly higher withholding.  But don’t worry, in the end it all adds up.


8. Certain taxpayers should review their tax withholding to ensure enough tax is being withheld in 2010.  Those who should pay particular attention to their withholding include: married couples with two incomes, individuals with multiple jobs, dependents, pensioners, Social Security recipients who also work, and workers without valid Social Security numbers.


Having too little tax withheld could result in potentially smaller refunds or – in limited instances – small balance due rather than an expected refund.


9. To ensure your current withholding is appropriate for your individual situation, you can review Publication 919, How Do I Adjust My Tax Withholding? You can also perform a quick check of your withholding using the interactive IRS Withholding Calculator on www.IRS.gov


10. If you find you need to adjust your withholding, submit a revised Form W-4, Employee's Withholding Allowance Certificate to your employer.


Visit IRS.gov for more information about the making Work Pay Tax Credit, Schedule M, Form W-4 or Publication 919. You can also call 800-TAX-FORM (800-829-3676) to order forms and publications.


January 22, 2010

Marsha Henry

Happy Tax Season!

Alright!  It’s getting to that time of year again.  Soon you will be receiving a flood of tax forms, tax records and advertisements for tax preparers in your mail box.  You probably have already noticed the increase in the number of television and radio advertisements detailing numerous tax rules that you may benefit from in order to grab your attention and get you thinking about who will be completing your taxes this year.  Well, before you do anything, you should do a little homework yourself so you know the right questions to ask your tax preparer and/or which documents to bring with you. 

In the spirit of the season, Tax Quarry will be bringing you tips on how to prepare yourself and your tax preparer for completing your return so you can optimize your results.  

Please remember to visit the blog regularly for updates or sign up for the RSS feed for automatic delivery of new posts.  Happy Tax Season!!!



Tax Quarry


Are we over taxing our bank?

(Taken from Steptoe & Johnson LLP Daily Tax Update)

Last week, President Obama announced a proposal to levy a new fee on financial services institutions  (including insured depository institutionsbank holding companies, thrift holding companies, insurance or other companies that owned insured depository institutions, or securities broker-dealers) with over $50 billion in assets.   Both domestic firms and U.S. subsidiaries of foreign-based firms would be subject to the fee. The fee will be equal to approximately .15 percent of “covered  liabilities,"  which are determined by subtracting Tier 1 Capital and FDIC-assessed deposits and insurance reserves from assets.   


  • The fee is designed to recover, over a ten-year period, the current estimated Troubled Asset Relief Program (TARP) losses of $117 billion.  The White House statement said, “The fee will be in place at least 10 years, but even longer if needed to pay back every penny of TARP.  This will not be a cost borne by community banks or small firms; only the largest firms with more than $50 billion in assets will be affected. In fact, 60% of the revenue will come from the 10 largest financial firms.”  Covered liabilities would be reported by regulators.    
  • It is unclear whether the "fee" would be tax-deductible.  The "fee" might more accurately be described as a tax--the fee would be collected by the IRS and revenues would be contributed to the general fund to reduce the deficit.
  •  The President said, “My commitment is to recover every single dime the American people are owed.  And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at the very firms who owe their continued existence to the American people – who have not been made whole, and who continue to face real hardship in this recession.  That’s why I’m proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street.”  
  • Finance Committee Chairman Max Baucus issued the following statement, “We look forward to reviewing the details of this proposal and each of the President’s budget proposals.  Our focus in economic recovery must be three-fold: spur job growth at home, while maintaining and improving U.S. competitiveness world-wide; bring our deficits back to a sustainable level, including by passing meaningful health care reform; and recoup taxpayer dollars spent in support of the financial system.  The American taxpayer comes first, and they need to know where their tax dollars are going.  Excessive pay and excessive risk among the same firms that came to Congress a year ago simply will not stand.  I applaud the President for his initiative in working to ensure taxpayers see a return on their investment.  I remain committed to working with the President, and my colleagues across the aisle, to make sure this proposal is right for America and for American taxpayers.”  
  • House Financial Services Committee Chairman Barney Frank (D-MA) stated: “President Obama’s action today complies fully with the taxpayer protection language of the original TARP bill. His decision to do this before 2013 is a good one because there is no need to wait. In fact, the TARP program has been both more successful and less expensive than many critics feared and that allows us to move quickly now to repay the American taxpayer. I strongly support this proposal, and I am confident that the Committee on Ways and Means will be acting on it soon.”