Prior to preparation of the 2009 tax forms, the self-employed and micro-businesses (fewer than 10 employees) should be aware of a few tax law changes, including alterations to the standard mileage rate and the self-employment tax.
“January is a great time to get a jump on your 2009 tax return,” said Keith Hall, national tax advisor for the NASE. “The earlier a business owner can get organized, the more likely he or she will have the time to investigate eligibility requirements for additional tax benefits.”
The following tax law changes relate to 2009 returns:
- Homebuyer Credits – If you operate a business from an office in your home, you may be eligible for additional tax incentives. Depending on when the home was purchased and how long you lived in a prior residence, you may be eligible for a credit of up to $8,000. The credit is similar to an interest-free loan.
- Making Work Pay Tax Credit – Many taxpayers will qualify for a making work pay credit of $800, if married filing jointly, or $400 for other taxpayers. The credit is equivalent to 6.2 percent of earned income up to the maximum amount. Speak to your tax practioner to find out if you qualify.
- Standard Mileage Rates Adjusted for 2009 – Business owners using their vehicle for company business can deduct 55 cents per mile driven on their 2009 tax return. The rate has also been set for 2010 at 50 cents per mile.
- Contribution Limits for IRAs and Other Retirement Plans - Where an IRA contributor who is not covered by a workplace retirement plan is married to someone who is covered, the deduction is phased out if the couple’s income is between $167,000 and $177,000.
- Self-Employment Tax Changes – The tax rate for self-employed business owners remains at 15.3%, though the income threshold has increased to $106,800. All net earnings from self-employment of at least $400 are subject to the Medicare part of the tax.
- AMT Exemption Increased for 2009 – For tax-year 2009, the exemption for a married couple filing a joint return is $70,950; $35,475 for a married person filing separately, and $46,700 for singles and heads of household. Children who earn less than $6,700 are not subject to the AMT.
Worried you will be unable to meet your tax obligation? It is important that you still file your return even if you are unable to pay the tax. Contact the IRS at 1-800-829-1040 as soon as possible if you foresee tax payment difficulties. The agency will work with you to discuss your options.
In preparation for the filing deadline, self-employed business owners can turn to Hall and other qualified CPAs for help through NASE’s TaxTalk program here. While there, they can submit a tax question and browse the TaxTalk resource library.
Find out more information about these and other tax law changes for the 2009 tax season at www.IRS.gov.