Economic Stimulus Letters Reach Mailboxes This Month (March)!
More than 130 million American households will begin receiving Internal Revenue
Service letters next week reminding them to file a 2007 tax return in order to receive
a 2008 economic stimulus payment. The mailings by the IRS will begin the first week
in March and continue throughout the month. The informational notice, titled Economic
Stimulus Payment Notice, will alert taxpayers that they may be eligible for a one-time
stimulus payment of up to $600 ($1,200 married filing jointly) starting in May of
2008. There also is an additional $300 per child payment, for qualifying children
younger than 17. The notice is informational only, and does not seek any financial
information.
Please contact us to determine your eligibility. Clients should not mistake this
payment for 2007 income-tax refunds owed by the federal government. Income tax refunds
for 2007 will be made separately from this one-time payment. However, please take
an extra step this year to receive the stimulus payment. In late March, the IRS
will send a special mailing to certain recipients of Social Security and Veterans
Affairs benefits. Generally, those benefits are nontaxable and recipients do not
file tax returns. In order to receive the stimulus payment, you must file a tax
return if you have at least $3,000 from a combination of certain Social Security
benefits, Veterans benefits and earned income. The minimum stimulus payment for
those falling into this group is $300 ($600 for married filing jointly).
For more information about how this will impact you and to determine how much of
the stimulus package your qualify for, please contact us!
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Benefits to Businesses from the 2008 Economic Stimulus Act
The Economic Stimulus Act of 2008 not only offers benefits to individuals but also
provides incentives to businesses. These incentives include a special 50-percent
depreciation allowance for 2008 purchases and an increase in the small business
expensing limitation for tax years beginning in 2008. 50-Percent Special Depreciation
Allowance Depreciation is an income tax deduction that allows a taxpayer to recover
the cost or other basis of certain property over several years. It is an annual
allowance for the wear and tear, deterioration or obsolescence of the property.
Under the new law, a taxpayer is entitled to depreciate 50 percent of the adjusted
basis of certain qualified property during the year that the property is placed
in service. This is similar to the special depreciation allowance was previously
available for certain property placed in service generally before Jan. 1, 2005,
often referred to as “bonus depreciation.
Please contact us to determine eligibility and how this will impact your business.
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Mortgage Workouts
Homeowners whose mortgage debt was partly or entirely forgiven during 2007 may be
able to claim special tax relief. Please contact us to determine your eligibility
and file a claim. Normally, debt forgiveness results in taxable income. But under
the Mortgage Forgiveness Debt Relief Act of 2007, enacted Dec. 20, taxpayers may
exclude debt forgiven on their principal residence if the balance of their loan
was less than $2 million. The limit is $1 million for a married person filing a
separate return. The new law contains important provisions for struggling homeowners.
We urge our client with mortgage problems to take full advantage of this valuable
tax relief.
The new law applies to debt forgiven in 2007, 2008 or 2009. Debt reduced through
mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure,
may qualify for this relief. The debt must have been used to buy, build or substantially
improve the taxpayer's principal residence and must have been secured by that residence.
Debt used to refinance qualifying debt is also eligible for the exclusion, but only
up to the amount of the old mortgage principal, just before the refinancing. Debt
forgiven on second homes, rental property, business property, credit cards or car
loans does not qualify for the new tax-relief provision. In some cases, however,
other kinds of tax relief, based on insolvency, for example, may be available. Borrowers
whose debt is reduced or eliminated receive a year-end statement (Form 1099-C) from
their lender. For debt cancelled in 2007, the lender was required to provide this
form to the borrower by Jan. 31, 2008. By law, this form must show the amount of
debt forgiven and the fair market value of any property given up through foreclosure.
The IRS urges borrowers to check the Form 1099-C carefully. Notify the lender immediately
if any of the information shown is incorrect. Borrowers should pay particular attention
to the amount of debt forgiven (Box 2) and the value listed for their home ( Box
7).
Please contact us to determine eligibility and how this will impact your business.
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