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image from dtcc.comYou may have heard of the Section 529 college tuition savings program.  This lets you sock away some big bucks for college savings for a child or grandchild.  And it covered most of what you would need for college… except the computer (unless required by the college or program).

But now under the recent stimulus act passed by Congress, you can pull funds out of the 529 plan to pay for computer purchases and the related technology.  No requirements or stipulations imposed by the college or program.  Pretty cool…

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If you just bought a house in 2009 (before December 1, 2009), and you are a first time home buyer, I have good news for you.  Even if you’ve already filed your 2008 tax return, you can amend your 2008 tax return and claim the $8,000 credit and get your money back now; faster than if you waited to claim the credit on your 2009 tax return!  Form 5405 for the tax year 2008 has been updated to reflect the purchase of a home in 2009 which can be claimed in 2008. 

If you’ve never owned a home, at least within the last three years, and haven’t considered buying a house, now is the time to consider it.  Passing up $8,000 is almost out of the question in this economy.  Listen to the IRS talk about it here (… and in spanish!).

Obama is going to use “sin taxes” (as stated by Kay of Don’t Mess With Taxes) to pay for health care reform.  The Senators call these lines of revenue “lifestyle” taxes instead, namely alcohol and soda.

I love Mountain Dew, so I guess I’ll help institute national health care reform.  Good for me (… or not).

The most recent economic stimulus bill seems to have hit small business owners hard.  COBRA, the Act that lets terminated employees continue their health insurance coverage with their former companies, is now easier to afford for those employees let go between September 1, 2008 and December 31, 2009.  Due to the latest tax benefits for the unemployed, and should a “terminated employee” decide to begin paying for COBRA health insurance payments from their former companies, they are only required to pay 35% of those premiums!  But the company has to pick up the remaining 65% of the premium cost.  However, there are some things to remember for the company:

1.  Though the company is required to pick up the other 65% of the premiums the terminated employees are no longer covering, the company can take a credit for those premiums on their quarterly 941 payroll tax returns.

2,  Another cool spin is that you can pay in less of the 941 payroll taxes you are required to pay as a company, as long as it equals 65% of the COBRA payments you are paying on behalf of your terminated employees.  In this way, you will be getting reimbursement for the 65% of the premiums you have to outlay immediately, instead of having to wait on the IRS to refund you those premiums from a timely filed 941 payroll tax return.

So in your sadness to pay these premiums on behalf of your terminated employees, remember that you get immediate relief in the reduction of the payroll taxes you have to send the IRS every week, or every month (depending on your payroll tax deposit requirements).  Yeah, goody.

Let me know of any questions in the comments.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

grandmalee from madisoncomedy.comBACKGROUND:  The recent “Making Work Pay” tax credit will eventually be a credit that you see on your 2009 tax return (to be prepared in early 2010).  It will be based on 6.2% of your EARNED income with a limit up to $800 for married folks.

To get that money now, the guhvment has changed the withholding tables to recalculate what you are receiving in your regular paycheck (it may work out to about $13 or $15 per week).  The ultimate credit will reconcile what you were supposed to get with what you did get due to the withholding changes.

WARNING TO THE RETIRED:  However, for those who receive monthly pension/retirement payouts, beware because your withholding has changed too… but you won’t be eligible for the credit come tax time.

Basically, the money you are getting now in your paycheck is based on the fact that you will receive  a credit when your 2009 taxes are prepared (that’s more background).  But the credit will be based only on “earned” income, so retirement income will not generate this income tax credit when you prepare your taxes early 2010.  Those solely living off of retirement income may need to readjust their withholding to have the same amounts taken out during 2009 as they always have.  Bottom line: retirees are getting the credit through their withholding, but they are NOT eligible for the credit if in fact they only have retirement income.  Fill this form out to increase your withholding on your pension/annuity retirement income.

This is confusing, so feel free to post some questions in the comments and I’ll try to clarify.  And tell your lovely Grandma to check out this post too…

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that (i) any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue Code; (ii) any such tax advice is written in connection with the promotion or marketing of the matters addressed; and (iii) if you are not the original addressee of this communication, you should seek advice based on your particular circumstances from an independent advisor.

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