THE TAX ATTIC with Jerry Coon

February 3, 2011 // 0 Comments

Rules must be met to claim EITC  16,000,000—that’s a large figure. It’s the initial estimate of the number of taxpayers who could have their tax return processing delayed this season. When Congress passed the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 on December 17, it may have caused a few of the software people to go apoplectic. My technician friends tell me that adjusting tax return processing software on the fly is not conducive to low blood pressure. The direct result of these late changes has caused this tax season to get off to a slow start. Fortunately, the estimate of affected tax returns has now been revised downward to 9,000,000. However, the actual number of returns that we have been able to submit to the IRS has been very small. It seems that most returns that Action Tax Service prepares either itemize to claim mortgage interest and property taxes or have the tuition deduction for children in college or are able to claim the educator deduction for classroom supplies. These returns are all in the hold pattern and can’t be submitted until February 14. About the only returns that can be finished and submitted for a refund before February 14 are of the W-2 only variety. Since the IRS isn’t processing those extra 9,000,000 returns this year until February 14, as expected, they have had no trouble in processing the ones that are submitted in a very timely matter. Let’s discuss some of the returns that can be submitted quickly and do qualify, in many instances, for a large refund. That would include returns with the Earned Income Tax Credit (EITC) on them. Since our Michigan economy has gone downhill and seems to want to remain in the tank, there are now more people who qualify for the EITC. Taxpayers filing a joint tax return with three children can have income up to $48,362 and receive some EITC. Single taxpayers with three children can have income up to $43,352 and receive some EITC. There are many taxpayers today who earned well over that figure three or four years ago, but now make well under these maximum figures and therefore qualify for the EITC. This is a large credit that is […]

Credits, Deductions of the American Recovery & Reinvestment Act

March 5, 2009 // 0 Comments

by JERRY COON The picture is becoming clearer where it concerns some of the credits and deductions that were adjusted when President Obama recently signed the American Recovery & Reinvestment Act of 2009 (AR&R). There are so many provisions in this bill that were changed, thus affecting so many people, that it has guaranteed that tax professionals will spend many hours in the months ahead becoming familiar with those changes. Lower-income taxpayers, especially, will potentially get a tremendous amount of tax relief under this bill. First, those receiving Earned Income Tax Credit (EITC) will get the benefit of an increased EITC. In 2009 and 2010, taxpayers with three or more qualifying children can receive up to a maximum EITC of $5,656. That is an increase of $832 over the 2008 maximum credit of $4,824. It’s important to note that EITC is fully refundable, so the term “tax relief” isn’t technically totally accurate. Tax relief would imply there would be some tax to get some relief from. For reference purposes, under pre-American Recovery & Reinvestment Act law, two taxpayers filing a joint return with earnings of $29,000 and three children would already pay zero tax, would get a full refund of their withholding, and would get $2,669 in refundable EITC. That is how our current tax system works. The new EITC tables have not been released as yet, but it looks like these same taxpayers would get a refund of about $3,203 in 2009. The American Recovery & Reinvestment Act practically guarantees our tax system will continue to work in the same old way far into the future. The second provision affecting these same taxpayers allows more taxpayers to participate in the refundable portion of the Child Tax Credit (CTC). For each dependent under the age of 17, $1,000 of CTC is allowed. However, for 2008, basically only taxpayers with earnings in excess of $12,550 would qualify for a refundable CTC. The new law allows this refundable portion to start with earnings in excess of $3,000. The previously noted joint taxpayers with $29,000 and three children would receive an additional $3,000 of refundable CTC in addition to the $3,203 of refundable EITC for a total minimum refund of $6,203. I think it’s fair to say that […]