TO: Clients and Friends
FROM: Wayne Krupsky
As the summer gets washed away in what seems like perpetual rain, congress and the Internal Revenue Service continue to change and confuse the tax landscape. The following is a summary of some issues that we will have to deal with in the future as well as a reminder.
First, the reminder. If you have extended your 2007 tax return the due date of October 15, 2008 is closing in fast. To complete your returns on time I will need to have your data in my office no later than September 29, 2008. If you extended to allow time to fund your SEP plan the contribution must be in prior to filing the return.
For those that have S corporation returns on extension, the due date is 9/15/08. Please get your data to me as soon as possible, no later than September 1, 2008 to assure timely filing.
The economic stimulus payments that were supposed to be mailed in May have in many cases arrived late. In almost as many cases checks have not arrived at all. If you did not receive your payment it is not lost. A credit will be allowed on your 2008 tax return equal to the amount you should have received. The Service has indicated that no checks will be issued after October; hence most all extended returns will not receive a check this year but will receive credit on the 2008 tax return. If you did receive a check it is important that you advise me of the amount you actually received to make sure you received the full and proper credit. For those that did not receive a check it is important to let me know as well.
TAX LAW CHANGES
The mileage allowance for business use of automobiles was increased in July from 50.5 cents to 58.5 cents per mile, charitable mileage remains at 14 cents per mile while medical miles increases from 19 cents to 27 cents per mile. The rates change on January 1 and July 1 each year.
The Housing Assistance Tax Act of 2008 was enacted on 07/30/08. The purpose of the act was to place a band aid on the hemorrhaging housing market. To reduce the cost of
benefits provided by the act, the ability to exclude the gain on second homes or rental property by converting them to primary residences prior to sale has been curtailed. Prior law allowed a second residence to be treated as a primary residence for purposes of the gain exclusion after being occupied for more than 2 years as the primary residence. The new law requires an allocation of the exclusion based upon “nonqualified use” v “qualified use”. Nonqualified use is any period after January 1, 2009 during which the property was not used as a primary residence. If you were thinking of employing this strategy it seems you will either need to occupy the property prior to January 1, 2009 or occupy the residence as a primary residence for the entire 5 year period. Until the Service issues regulations we are making assumptions as to the way the law will be applied.
On the positive side the act allows homeowners that do not itemize deductions a meager addition to the standard deduction for property taxes paid.
The act contains numerous other provisions that have limited impact on most taxpayers. I will update additional changes later this year.
I plan to be out of the office starting August 19 until August 26 for vacation. I also plan an extended Labor Day weekend starting on Thursday, 8/28. I can always be reached by email at email@example.com or firstname.lastname@example.org.
Enjoy the remaining days of summer and look forward to getting ready for the 2008 tax season.