H&R Block: Tax Tips for Consultants

2009 Stimulus: American Recovery & Reinvestment Act

With more than 500 tax law changes in 2008 alone, and now with the

new $787 billion stimulus package, it’s hard to know if you’re

taking advantage of all the deductions or credits that would lower your

tax liability.

As a result, you can miss out on potentially significant savings.

How you generate income does matterSelf-employed - freelancers, independent contractors, etc. are generally

more likely to be audited as opposed to employees who receive a W-2.

Have a separate checking account and credit card for your business If you use an area of your home regularly and ‘exclusively’ for your

business - and that doesn’t mean one that doubles as the family den – you are able to deduct a portion of mortgage interest, real estate taxes, utilities, insurance and depreciation as a business expense.

Job searches can be tax rewardingJob search expenses can be deducted as miscellaneous itemized

deductions if you look for a job in the same field at essentially the same

level as the one you left. AND, the expenses are deductible even if you

don’t get the job.

So what are some examples of job-search deductions you can claim?

Employment fees Resume’ preparation Travel

2009 Stimulus: What’s In It For You Fatter Paychecks First-time Homebuyer Breaks New Auto Deals Unemployed

First $2,400 in benefits tax-free COBRA Subsidy

H&R Block Community, Digits: www.digits.hrblock.com

The recent $787 billion stimulus package, designed to kick-start the sagging economy and get millions of Americans back to work, has at least one tax break for about 95% of America’s taxpayers. Though there won’t be a stimulus rebate payment like last year for the majority of Americans, there is some relief in site. Let’s look at a few of the provisions:

Tax credit for workers: for 2009 and 2010 there is a “making work pay” tax credit of up to $400 for working individuals and up to $800 for couples through a reduction of income tax withholdings – in other words, an increased paycheck. The reduced withholding is scheduled to start no later than April 1 of this year.

First-time home buyer credit: increased to $8,000 for qualified first-time homebuyers purchasing homes after Dec. 31, 2008 and before Dec. 1, 2009; repayment requirement is waived unless sold or no longer principal residence within 36 months. And, you can take the credit on your 2008 return.

Yes, that’s right – no repayment required for qualified first-time homebuyers!

Vehicle purchase: you are now allowed to deduct state and local sales taxes paid for purchases of qualified new motor vehicles made on or after February 17, 2009 and before January 1, 2010. “New” vehicles include cars, light trucks, recreational vehicles and motorcycles. The deduction is limited to the lower of (1) the sales tax paid, or (2) the sales tax that would have been paid on a vehicle costing $49,500. And, it applies to both domestic and foreign makes and models.

For the nearly 5 million unemployed, there is some good news:

Temporary suspension of taxation on unemployment benefits: the jobless get a little more help with a $25 increase in weekly benefit checks through 2009 and suspension of federal tax on the first $2,400 of unemployment benefits received in 2009

More good news: As most of you know, COBRA coverage allows you to keep insurance coverage provided by your former employer, but often at a much greater cost to you.

Now, for workers laid off between Sept. 1, 2008 and Dec. 31, 2009, the government will subsidize 65% of your premiums under COBRA for up to 9 months. And, for those who were laid off between Sept. 1, 2008 and Feb. 16, 2009 who did not sign up for COBRA, you receive an additional 60 days to do so and receive the 65% subsidy.

Most provisions are subject to phase out for higher-income individuals.

You can visit our online community, Digits at www.digits.hrblock.com,

which is loaded with stimulus FAQs, videos, blogs, the W-4 calculator,

and more or contact a local H&R Block professional for assistance.