INFLATION ADJUSTMENTS WIDEN TAX BRACKETSWashington, D.C. - The Internal Revenue Service said that personal exemptions and standard deductions would rise in 2009 to keep pace with inflation, providing more than three dozen tax benefits.
The inflation adjustments will affect 2009 tax returns, which most taxpayers will file in 2010. The value of each personal and dependency exemption is $3,650, up $150 from 2008. The new standard deduction is $11,400 for married couples filing a joint return (up $500), $5,700 for singles and married individuals filing separately (up $250) and $8,350 for heads of household (up $350). Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, the IRS noted.
Tax bracket thresholds will increase for each filing status. For a married couple filing a joint return, for example, the taxable income threshold separating the 15 percent bracket from the 25 percent bracket will be $67,900, up from $65,100 in 2008.
The maximum Earned Income Tax Credit for low- and moderate-income workers and working families with two or more children will be $5,028 in tax year 2009, up from $4,824 in 2008. The income limit for the credit for joint return filers with two or more children will be $43,415, up from $41,646. The annual gift exclusion is rising to $13,000, up from $12,000 in 2008.
TAX COURT AMENDS WHISTLEBLOWER RULES
Washington, D.C. - The Tax Court has amended its rules of practice and procedure for whistleblower actions, making it easier for informants to keep their identities confidential.
One of the rules was amended to enhance privacy by requiring only an individual taxpayer's state of legal residence for venue purposes on a petition for additional disclosure, a petition to restrain disclosure or a petition to disclose identity. If the taxpayer resides in the District of Columbia or any commonwealth, territory or possession of the United States, or in any foreign country, the taxpayer should provide that information instead.
The court first issued its proposed rules for whistleblower actions on June 2, 2008, according to the Ferraro Law Firm, which represents a number of tax whistleblowers. Those rules did not specifically address the protection of an informant's identity. After public comment, the court has acknowledged the importance of protecting an informant's identity and laid out the method for anonymous filings and filings under seal in its explanation to Rule 340.
Ferraro has filed whistleblower complaints amounting to an additional $3 billion of underpayments in several recent submissions to the IRS Whistleblower Office, bringing the firm's running total to more than $13 billion.
IRS HURRICANE GRANT GUIDELINES NOW AVAILABLE
Washington, D.C. - In Notice 2008-95, the Internal Revenue Service said that eligible homeowners who received federal reimbursement grants stemming from Hurricanes Katrina, Rita or Wilma can take advantage of a new tax provision.
The Housing and Economic Recovery Act, enacted this summer, included the new provision, aimed at helping grant recipients who previously claimed hurricane-related disaster loss deductions on their main home. The new law gives affected homeowners the option of adjusting previously claimed deductions by treating their federal reimbursement grants as reimbursement for the losses they suffered on their main home from Hurricanes Katrina, Rita or Wilma.
Before this change, homeowners who claimed casualty loss deductions and received grants in a later tax year as reimbursement for the loss were required by law to pay tax on part or all of the grant to compensate for the tax benefit of the prior deduction.
The notice explains how eligible taxpayers can amend prior-year returns to reduce the casualty loss deduction by the amount of the grant, and explains that taxpayers have one year to pay back any resulting tax due, penalty-free and interest-free. To qualify for this relief, these amended returns must be filed by July 30, 2009, and the entire resulting tax due paid by July 30, 2010, in most cases. The notice also provides special instructions for those taxpayers who have already filed an amended return.
Taxpayers should write the words "Hurricane Grant Relief" in dark, bold letters at the top of their Form 1040X amended return and mail it to: Internal Revenue Service Center, Austin, Texas 73301-0255. Amended returns cannot be filed electronically.
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