With difficulties in the economy emerging every new day, people are having to look for a variety of ways to save what little money they are earning. It seems that everyone is having to cut back in one way or another just to make it through everyday life. Spending money seems to be out of the question. But where does that leave first time homebuyers who are seeking to invest in a principal property to start their lives in? What are they supposed to do in this tight money situation? Well, all they need to do is fill out a tax credit form… 

            Many readers may be aware of the tax credit established for home buyers in 2008, but the government has decided to give out a modified version for the 2009 tax year. In 2008, all the money that a home buyer received was required to eventually be paid back. The 2009 first time home buyers tax credit is no longer a loan, but rather a true credit of up to $8000 that a first time home buyer can receive based on the value of his house. This is a dollar for dollar reduction of an individual’s overall taxes that can significantly impact the results of their tax returns. 

            Of course, there are some stipulations that need to be abided by for a person to qualify for the stimulus plan tax credit. The credit only goes to a first time principal home buyer, with “first time” meaning that the individual has not owned a home in three years prior to the new purchase and “principal” meaning that the purchased home is the individual’s primary residence. When it comes to married couples, both of the individuals need to be categorized as first time home buyers to receive the tax credit. Individuals buying a house together though can use the status of whatever individual may qualify.

             Income is also a determining factor for recipients of the stimulus plan tax credit. An individual filing for the credit must make less than $75,000 and married applicants must make less than $150,000 combined a year. Those individuals who make above these levels in modified adjusted gross income could qualify for part of the stimulus tax credit with their levels of credit decreasing proportionally to the amount of money that their income exceeds. No individual can apply if he or she makes more than $20,000 above the capping amount.

             In spite of the complications of who qualifies, the process of filing for the potential $8000 tax credit is relatively simple. A home buyer needs to fill out an IRS Form 5405 and then claim the amount from the form on the 1040 form they normally fill out. The rest is a matter of income and time. Perspective applicants should note that they have to reside in their new home for three years after they receive the credit or they will be required to pay it back. Most people don’t purchase a home with the thought of moving out that quickly, but it is something to be aware of. Overall, the 2009 first time home buyers tax credit is a great solution for victims of this falling economy, and it may be one of the first steps toward recovery.

The recently enacted “American Recovery and Reinvestment Act of 2009″ (2009 Economic Stimulus Act) includes a wide-range of tax incentives, many of which are retroactive to the beginning of the year. This week I’ll share the changes impacting individuals. Then, be sure to look for email next week when I share the changes impacting businesses. Here’s What Individual Taxpayers Need to Know about the New Tax Law: Expanded First-Time Credit for First-Time Home Buyers Last year, Congress provided taxpayers with a refundable tax credit that was equivalent to an interest-free loan equal to 10% of the purchase of a home (up to $75,000) by first-time home buyers. It applied to homes purchased on or after April 9, 2008 and before July 1, 2009. Taxpayers receiving this tax credit were required to repay any amount received under this law back to the government over 15 years in equal installments or earlier if the home was sold. The credit phases out for taxpayers with adjusted gross income in excess of $75,000 ($150,000 in the case of a joint return). The new tax law enhances the credit by eliminating the repayment obligation for taxpayers that purchase homes on or after January 1, 2009. It also extends the credit through the end of November 2009, and bumps up the maximum value of the credit from $7,500 to $8,000. Expanded and Revised Higher Education Tax Credit The new law creates a $2,500 higher education tax credit that is available for the first four years of college. The credit is based on 100% of the first $2,000 of tuition and related expenses, including books, paid during the tax year and 25% of the next $2,000 of tuition and related expenses paid during the tax year. The credit is subject to a phase-out for AGI in excess of $80,000 ($160,000 for married couples filing jointly). Forty percent of the credit is refundable. This new credit temporarily replaces the Hope credit. Computers as an Education Expense The new law permits computers and computer technology, including internet access, to qualify as qualified education expenses in 529 education plans for tax years beginning in 2009 and 2010. Tax Break for New Car Purchasers The new law allows taxpayers to deduct state and local sales taxes paid on the purchase of a new automobile, including light trucks, SUVs, motorcycles, and motor homes. The tax break phases out starting with taxpayers earning $125,000 per year ($250,000 for joint returns). The deduction is allowed to both those who itemize their deductions as well as to those who do not. The deduction cannot be taken by a taxpayer who elects to deduct state and local sales taxes in lieu of state and local income taxes. Alternative Minimum Tax(AMT)Patch To hold the number of taxpayers subject to the AMT at bay, the new law increases the AMT exemption amounts for 2009 to $46,700 for individuals and $70,950 for joint returns, and allows the personal credits against the AMT. Making Work Pay Credit The new law provides an individual tax credit in the amount of 6.2 percent of earned income not to exceed $400 for single returns and $800 for joint returns in 2009 and 2010. The credit is phased out at adjusted gross income (AGI) in excess of $75,000 ($150,000 for married couples filing jointly). The credit can be claimed as a reduction in the amount of income tax that is withheld from a paycheck, or through a credit on a tax return. Under the credit, workers can expect to see perhaps $13 a week less withheld from their paychecks starting around June. Next year, the extra take-home pay will go down to around $9 per week Economic Recovery Payment The new law provides for a one-time payment of $250 to retirees, disabled individuals and Social Security beneficiaries and SSI recipients receiving benefits from the Social Security Administration and Railroad Retirement beneficiaries, and to veterans receiving disability compensation and pension benefits from the U.S. Department of Veterans’ Affairs. The one-time payment is a reduction to any allowable Making Work Pay credit. Refundable Credit for Certain Federal and State Pensioners The new law provides a one-time refundable tax credit of $250 in 2009 to certain government retirees who are not eligible for Social Security benefits. This one-time credit is a reduction to any allowable Making Work Pay credit. Unemployment Compensation Exclusion The new tax law temporarily suspends federal income tax on the first $2,400 of unemployment benefits received by a recipient in 2009. Expanded Earned Income Tax Credit The new law provides tax relief to families with three or more children and increases marriage penalty relief. The changes apply for 2009 and 2010. Expanded Child Tax Credit The new tax law increases the refundable portion of the child tax credit for 2009 and 2010 by lowering the income threshold to $3,000 (from $8,500 in 2008). Qualified Transportation Fringe Benefits Qualified transportation fringe benefits, such as transit passes, qualified parking and van pooling are not included in an employee’s income up to a specified dollar amount. The new tax law increases the monthly amount to $230 per month from $120 per month starting in March 2009 and continuing through 2010. Energy Incentives The new tax law enhances several energy tax incentives that reward taxpayers for installing energy-efficient property and alternative sources of energy in their homes.

Tax planning is essentially tracking your income tax deductible items as they come up, and keeping records organized and handy in case they are needed. The most important tool for tax planning is a small filing cabinet. You can use this filing cabinet to file your tax planning documents and receipts, as well as keep track of previous tax returns filed and other important documents such as birth certificates and social security cards. The file cabinet you get to use for your tax planning should be fire proof and have a lock. That way your tax planning documents are safe in almost any disaster, and other people cannot easily gain access to your tax planning and other important documents.

 

Part of tax planning is making sure that you are aware of what expenses are tax deductible. You cannot engage in tax planning and track tax deductible expenses if you don’t know what you should be tracking! The Internal Revenue Service offers many publications on this subject. However, if you have any questions about income tax deductible items you should contact a qualified, certified, and licensed tax professional.

 

Once you know what tax deductible expenses you will need to track for the coming tax year, you need to set up tax planning record keeping system. This can be a simple receipt book, expanding file, index cards, envelopes, or any other method that makes sense to you. Keep in mind, however, as you engage in tax planning, that your tax planning record keeping system should not only make sense to you, but also make sense to your income tax preparer and the Internal Revenue Service if necessary.

 

At the end of each month, you can add up the totals for the different types of income tax deductible expenses you recorded in your tax planning records for that month. This way, all you have to do to discover your tax deductible amount is add up the totals for each month. The other records you collect and track through your tax planning are simply for proof that you can claim these income tax deductions, and are not really needed for preparing your income tax return if you have all of your totals in order.

 

On the surface, income tax planning may seem complicated and difficult. But with proper organization, tax planning is really quite easy. Not only that, but when you engage in income tax planning, you better your chances for that larger income tax refund that you need and deserve. If you have any questions about tax planning, you should contact a tax planning professional tax accountant today!

Although regular sellers on eBay are only required to fill up a registration form to legally put items up for auction or sale, there are a few other things to consider. You will be able to survive longer in the business if you follow rules and regulations. Knowing the right items to pay for to begin is essential so that you avoid possible scams and unknown invisible fees.

What to Do

If you intend to set up a retailing business on eBay, you are required to register or get a license depending on your location. There are laws already formulated to cater to online business owners. These are created by the state, city or country which primarily intends to protect the best interests of both the buyer and seller, as well as prevent any unscrupulous activity. Go to your local commerce authority to register your business. Not doing so will put you at risk for unlawful issues.

There are local commerce and zoning laws as well that cover your business on eBay. Since you will be maintaining inventories for your business, you will be required to get a permit, depending on the type of industry that you are currently in.

Tax and Insurance

You also have tax responsibilities as an eBay business owner. Personal income or self employment tax and sales tax will be required on retail sales. Plenty of eBay sellers are required to pay for a certain percentage of their current income to the United States government, considered as income tax. Sales tax may also be asked from eBay retailers who live in particular cities and localities. Check the laws in your area, so that you can reserve a portion of your current profit for income tax payment or sales tax.

Your business and inventory should be insured too. The value associated in your business will increase over time, which is why you have to get insured to stay free from huge financial losses should there be any accident or sudden change.

Very big and valuable inventories will need insurance. Search for a number of reliable options online and determine the inclusions of their policies. Meticulous records should be kept accurately. You will have to be very careful about every entry to have no problems during tax preparation and insurance processing.

The IRS

Even if you are running a business on the internet, you will have to stay transparent to keep looking credible should the IRS start asking questions about your industry. Social Security numbers need to be collected from customers, especially your regular and biggest clients. There should be a database of social security numbers, addresses, contact numbers and names. The IRS requires SSNs for the purposes of tax. It is only one way of helping others online stay protected against unscrupulous and dishonest individuals.

The IRS wants eBay and other online companies to give out more information regarding high-volume and high-value sellers to narrow the tax gap between the amount that Americans owe and pay for actually. Ebay brokers will have to give some information regarding both the buyer and seller to the government. The data will most likely include gross and net proceeds, size of inventory and contact numbers and addresses. You will find that legally doing business online is the way to go to boost credibility and last for several years.

The recently enacted “American Recovery and Reinvestment Act of 2009″ (2009 Economic Stimulus Act) includes a wide-range of tax incentives. Extension of Bonus Depreciation Last year, Congress temporarily allowed businesses to recover the costs of capital expenditures made in 2008 faster than the ordinary depreciation schedule would allow by permitting these businesses to immediately write off 50% of the cost of depreciable property acquired in 2008 for use in the United States. The new law extends this temporary benefit for qualifying property purchased and placed into service in 2009. Extension of Section 179 In order to help small businesses quickly recover the cost of certain capital expenses, small business taxpayers may elect to write off the cost of these expenses in the year of acquisition in lieu of recovering these costs over time through depreciation. Last year, Congress temporarily increased the amount that small businesses could write off for capital expenditures incurred in 2008 to $250,000 and increased the phase-out threshold for 2008 to $800,000. The new law extends these temporary increases for capital expenditures incurred in 2009. Expanded Carryback of Net Operating Losses Prior to the new law, net operating losses (NOLs) could be carried back to the two years before the year of the loss and carried forward for the succeeding twenty years. For 2008, the new law extends the maximum NOL carryback period from two years to five years for small businesses with gross receipts of $15 million or less. Incentives to Hire Unemployed Veterans and Disconnected Youth Businesses are allowed to claim a work opportunity tax credit equal to 40% of the first $6,000 of wages paid to employees of one of nine targeted groups. The new law expands the work opportunity tax credit to include two new targeted groups: (1) unemployed veterans; and (2) disconnected youth. Individuals qualify as unemployed veterans if they were discharged or released from active duty from the Armed Forces during 2008, 2009 or 2010 and received unemployment compensation for more than four weeks during the year before being hired. Individuals qualify as disconnected youths if they are between the ages of 16 and 25 and have not been regularly employed or attended school in the past 6 months. Accumulated AMT and R&D Credits The new law extends the provision contained in the Foreclosure Prevention Act of 2008 and allows AMT and loss taxpayers in 2009 to receive 20% of the value of their old AMT or research and development (R&D) credits to the extent such taxpayers invest in assets that qualify for bonus depreciation. Delayed Recognition of Cancellation of Debt Income To benefit certain businesses that buy their own debt at a discount, the new law lets the businesses recognize cancellation of debt income over 10 years for specified types of business debt repurchased by the business in 2009 or 2010. Qualified Small Business Stock The new law increases the exclusion for gain from the sale of certain small business stock held for more than five years from 50% to 75% for stock issued after the enactment date and before 2011. S Corporation Holding Period The new law temporarily shortens the holding period of assets subject to the built-in gains tax from 10 years to 7 years. Estimated Taxes The new law decreases required estimated tax payments for individuals whose incomes primarily come from a small business in 2009. Rather than being required to make quarterly estimated tax payments based on 100% of their 2008 returns, the new law allows computation based on 90%. To qualify, the individual’s adjusted gross income must be less than $500,000 and he or she must certify that more than 50% of the gross income shown on his or her return for the prior tax year was income from a small business. Income from a small business generally means income from a trade or business with an average number of employees of 500 or fewer.