This website is for informational purposes only. EFiledTaxes.com is not liable for any tax owed or penalties and/or interest assessed due to the information contained on this site. Tax law is complicated, and in many cases may be open to interpretation. Each individual return is unique, and the application of the law may apply differently to your situation. Contact a tax professional if you are unsure of how this information applies to your specific situation.

Any tax advice contained in this website, including attachments and enclosures, is not intended or written to be used,and may not be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Is your personal information secure?

As we get closer to that April 15th deadline, more and more of our personal information is out in the open. Whether we use a professional tax preparer, or do it ourselves, there are some basic precautions we should take to protect our identities.

Our number one priority should be the protection of our social security number. It has become our de facto national ID number. Credit card numbers can easily be replaced, not so with your SSN. Although companies are starting to recognize the importance of our SSN, and using it for their own record keeping less and less, they will sometimes ask for it in cases when it's not really required. Before giving it out, evaluate how it will be used. If you don't know, ask. Keep in mind that it will be required by the IRS and your tax preparer to file your return.

Most people don't know that email is not secure. The text and attachments of email can be stolen and read at various points in the process. The one advantage we have is the volume of email flowing through the system. It's unlikely that the message containing your personal information will be stolen, however this is protection through obscurity, not security. Consider using email encryption like PGP, S/MIME, or GNUPG. All great technologies, but some are expensive, and difficult to install. The other option is to encrypt just the documents being passed back and forth. Encryption is not the same as password protecting the document. Adobe professional and Microsoft office both offer this option. True encryption is a little more complicated, but can be done for free. A great resource for a solid encryption solution is the open source program True Crypt. It will require both the sender and receiver to use it, but it works on all platforms.

Finally, be careful with your documentation. When you are done with something that contains personal information, shred it before throwing it out. Don't leave paperwork laying around. Pay attention to whose looking and listening. A little protection now will save hours of headaches and thousands of dollars later.

Does it affect you?

The IRS has issued updated withholding tables to help implement the withholding adjustments required by the American Recovery and Reinvestment Act of 2009. The new withholding tables should be implemented by the employer as soon as possible, but no later than April 1, 2009.

For more information, go to:

http://www.irs.gov/pub/irs-pdf/n1036.pdf

Business Mileage Rate:

January - June 50.5 cents per mile

July - December 58.5 cents per mile

Medical & Moving Mileage Rates:

January - June 19 cents per mile

July - December 27 cents per mile

Charitable Mileage Rate is 14 cents per mile. As a side note, it takes an Act of Congress to change the charitable mileage rate because it is statutory. However, the IRS can change the other mileage rates and they often do so.

Married Filing Joint or Qualifying Widow(er)

$0 to $16,050 = 10% of the taxable income

$16,051 to $65,100 = $1,605 plus 15% of the excess over $16,050

$65,101 to $131,450 = $8,962.50 plus 25% of the excess over $65,100

$131,451 to $200,300 = $25,550 plus 28% of the excess over $131,450

$200,301 to $357,700 = $44,828 plus 33% of the excess over $200,300

$357,701 and above = $96,770 plus 35% of the excess over $357,700

Single

$0 to $8,025 = 10% of the taxable income

$8,026 to $32,550 = $802.50 plus 15% of the excess over $8,025

$32,551 to $78,850 = $4,481.25 plus 25% of the excess over $32,550

$78,851 to $164,550 = $16,056.25 plus 28% of the excess over $78,850

$164,551 to $357,700 = $40,052.25 plus 33% of the excess over $164,550

$357,701 and above = $103,791.75 plus 35% of the excess over $357,700

Head of Households

$0 to $11,450 = 10% of the taxable income

$11,451 to $43,650 = $1,145 plus 15% of the excess over $11,450

$43,651 to $112,650 = $5,975 plus 25% of the excess over $43,650

$112,651 to $182,400 = $23,225 plus 28% of the excess over $112,650

$182,400 to $357,700 = $42,755 plus 33% of the excess over $182,400

$357,701 and above = $100,604 plus 35% of the excess over $357,700

Married Filing Separately

$0 to $8,025 = 10% of the taxable income

$8,026 to $32,550 = $802.50 plus 15% of the excess over $8,025

$32,551 to $65,725 = $4,481.25 plus 25% of the excess over $32,550

$65,726 to $100,150 = $12,775 plus 28% of the excess over $65,725

$100,151 to $178,850 = $22,414 plus 33% of the excess over $100,150

$178,851 and above = $48,385 plus 35% of the excess over $178,850

Thrift Savings Plan (TSP) Contribution Limits for 2009:

Did you know that the Internal Revenue Service (IRS) has raised the limits on Thrift Savings Plan (TSP) contributions for calendar year 2009? For more information on service member TSP contributions go to http://www.dfas.mil/mil-news/december2008/tsp.html

1. Your cost basis in mutual fund shares includes reinvested dividends.

2. Don’t forget to provide your tax preparer with a log of your business, medical, and charitable miles. Following are the 2008 standard mileage rates:

• 50.5 cents per mile for business (January 1 – June 30, 2008)

• 58.5 cents per mile for business

(July 1 – December 31, 2008)

• 19 cents per mile for medical

• 14 cents per mile for charitable

3. If you receive a notice from the IRS, don’t assume that it’s correct and automatically pay the amount shown on the notice. Many IRS notices just require you to give the IRS additional information to show why you do not owe the additional taxes or penalties. Always consult with your tax preparer when you receive notices from the IRS.

4. The costs for weight-loss programs can be deducted as a medical expense if the taxpayer is diagnosed by a physician as obese or suffers from some other ailments, such as hypertension, where weight loss would relieve the medical condition. However, the cost of any food is not deductible.

5. Go to your tax appointment well organized. Have all your income statements such as W-2s and 1099s separate from your expenses. Make sure you have all the proper social security numbers for dependents, as well as their names as they appear on their social security cards. Careful organization will save you time come tax season.

Have you expanded your family?

If you are thinking about, or have already adopted a child under the age of 18, there are deductions and credits available for the expenses you have incurred. A recent change to the law has increased the amount of credit that is available. In 2008, you may be entitled to a tax credit of up to $11,650.

Expenses that qualify for this credit include any reasonable and necessary adoption fee, court costs, attorney fees, travel expenses (including meals and lodging), and any other expenses you paid that were required by the state as a condition of the adoption.

Generally, the credit is allowed in the year the adoption becomes final. If you paid adoption expenses in 2007, and the adoption is not final until 2008, the credit will be allowed on your 2008 income tax return. If you adopt a special needs child from the U.S., you are eligible for the full $11,650 credit regardless of your actual expenses.

The credit will reduce your tax liability dollar for dollar. If you are unable to use the entire amount, the remainder can be carried over to claim for the next five years. Any carryover existing after the five-year period is lost.

Chances are you do

No one likes to think of their own death, and the thought of paying for life insurance doesn’t make the thought any more palatable. The truth is, life insurance is protection for those you leave behind—your family.

If you are young and in good health, life insurance premiums are generally less expensive than they will be later in life. For this reason, your insurance agent or financial planner may encourage you to invest in life insurance early.

There are two basic types of life insurance: term life insurance, where you choose the coverage amount and length of the policy, and whole or permanent life insurance, which combines an investment product with life insurance.

Term life insurance is good for short-term needs. Two good examples of this are to cover your children’s college education and to cover your mortgage. Parents could buy a policy that expires after their children graduate from college to ensure that the full education is paid for in the event that something happens to the parents. Or, the main breadwinner in a house could buy a term policy that matches the length of his or her home’s mortgage.

Under a whole life policy, of which there are many variations, you agree to pay regular premiums in exchange for a guarantee of a specified benefit payable to your spouse or other beneficiaries upon your death. Earnings on a whole life policy are set by the insurance company based on the overall return on its investments. Earnings above and beyond those required to cover the death benefit will go to the policy’s cash reserve, which you can borrow against, withdraw, use to pay premiums, or accumulate for long-term goals such as retirement. Premiums for whole life or permanent insurance are generally higher than a term policy.

If you do not currently have a life insurance policy, don’t wait. Even though life insurance premiums are not tax deductible, the long-term benefits are significant.

Unless they’re a result of injury or sickness

Settlements resulting from a lawsuit can arise for a number of reasons. Since August 21, 1996, all damage awards, including punitive damages, are included in taxable income unless the award was due to personal physical injury or physical sickness. Damage awards can also be paid as a result of injury to a capital asset. For example, a car careens into your home and causes damage to the structure. You sue the driver and are awarded a settlement. The amount you receive is only taxable if it exceeds the basis in your home. If that’s the case, the excess is reported as a capital gain. In any event, the amount you receive will reduce the basis of your home.

If you receive a lawsuit settlement, be sure to bring the details of the settlement to your tax preparer so he or she can determine how much, if any, of the proceeds are taxable.