Whats New This Tax Season

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Whats New This Tax Season?

• Important information
• on TY 2008 tax law changes
• for Virginias free tax preparation sites

December 18, 2008
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Welcome!

• Internet meeting link
• Teleconference link
• For technical assistance, contact
• the Webinar host, Monica Adams
• Email adams_at_systemsandsoftware.org
• Chat QA pod (sent to host and presenters)

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Purpose of this training series

• To improve the capacity of Virginias Community
  Action Agencies, Departments of Social Services,
  and EITC coalitions to help Virginias low-income
  working families and individuals build their
  assets

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Training series sponsors
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Purpose of this Webinar

• To provide information on key tax law changes for
  TY 2008 to EITC coalitions and other agencies and
  volunteers offering free tax preparation services
• To respond to participants questions on TY 2008
  tax law changes

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Todays agenda

• Benefits of electronic filing
• Commonwealth of Virginia Whats New for 2008
• Federal Taxes Whats New For 2008
• Audience QA

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Todays speakers

• Pam Inge
• Tax Analyst
• Virginia Department of Taxation

John P. Trevillian Senior Tax Specialist
Internal Revenue Service
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QA

1. During the QA session, dial 71 on your
phone to ask a question. Lines will be opened in
the order received. 2. At any time, submit a
question online via Chat QA. Presenters will
respond to these questions during the QA session.
Chat QA
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Poll 1 Whos with us today?

• Virginia Department of Social Services (state and
  local DSS offices)
• Community Action Agencies (CAA)
• EITC coalition site coordinators and volunteers
• IRS/VITA site coordinators and volunteers
• Other

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Speaker - Pam Inge, Virginia Department of
Taxation
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File Electronically

• Electronic filing is
• Faster, therefore refunds are received faster
• More efficient with less errors
• The filing trend is moving to electronic
• 3.4 Million Returns Filed (as of 10/30)
• 55 electronic filed
• 45 paper filed

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File Electronically, cont.

• Beginning next year, all preparers having 100 or
  more clients MUST file all returns using Virginia
  e-file
• Electronic filing is faster and more efficient

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Common Filing Errors

• Rejected direct deposits
• Returned refund checks
• Changes in Name, Address or Filing Status not
  correctly indicated or changed on the return

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Common Filing Errors, cont.

• Switching spouse name and SSN order from year to
  year
• This results in name and SSN mismatches
• Always use the same spouse as the primary
• Provided an incorrect or no Social Security
  Number on the tax return
• Putting estimated payments and withholding on
  wrong lines

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Common Filing Errors, cont.

• Not claiming the correct amount of estimated
  payments or not claiming any of the estimated
  payments made
• Made withholding errors, such as
• The withholding is summed incorrectly
• Adding another states withholding to the
  Virginia withholding

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Common Filing Errors, cont.

• Did not provide required documents such as
  Schedule ADJ, NPY, Schedule CR or Out-of-State
  return
• Filed duplicate returns (original return is filed
  electronically and then a paper return is filed)
• Claimed the age deduction and did not include the
  birth date

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Common Filing Errors, cont.

• Did not include total itemized deduction and
  state/local income taxes
• Did not provide codes for subtractions and
  contributions claimed
• Did not attach W-2s or include the Schedule INC

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Most Common e-File Errors

• Not sending other states return when claiming
  Out of State Credits (NC MD)
• Withholding amounts are not equal to or less than
  the State Income Tax withheld from W-2 fields
• On Form 760PY the itemized deduction in columns A
  B do not equal Virginia Itemized Deductions

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How Can You Help Us

• Do not forget that direct debit tax due payments
  can be warehoused until their due date
• Attach Schedule ADJ with the 760 return or NPY
  with the 760PY or 763 return when any deduction
  is taken

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How Can You Help Us, cont.

• Always use the most recent version of a form
  whether from coupon booklet, website or software
• Encourage electronic banking
• Direct Deposit
• Direct Debit

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2008 Individual Form Changes

• Individual Income Tax
• Individual forms have minor changes to allow for
  the PTE Withholding and Bio-Diesel Credit
• A major change in Individual is for amended
  returns

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2008 Individual Form Changes, cont.

• Individual Income Amended Return Changes
• The Schedule ADJ will no longer be used for
  amended Individual returns
• The entire Individual return must be completed
  for an amended return and the Amended Return
  bubble filled

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Legislative Changes

• Personal Exemptions
• 930
• Filing Threshold Increase for Filing Status
• Single Individuals - 11,250.
• Married Couples - 22,500.

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Legislative Changes, cont.

• HB 849 Land Preservation Credit Procedures
• Specifies when a taxpayer is deemed to consent to
  disclosure of certain tax information
• Addresses procedural issues affecting
  pass-through entities
• Appeal rights are expanded and made more efficient

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Legislative Changes, cont.

• HB 1261 Additional Withholding Exemptions
• Repeals the 1989 law that would have allowed
  individuals to claim additional personal
  exemptions to approximate the impact of itemized
  deductions on their tax liability

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Legislative Changes, cont.

• HB 662 Land Preservation Credit Confidentiality
• Ensures the confidentiality of the copy of an
  application for land preservation tax credits
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Legislative Changes, cont.

• HB 238 and SB 286 Exemption for Launch Services
• Exempt gain from the sale of launch services to
  space flight participants or the launch in some
  cases
• Also exempts gain on some re-supply services
  contracts
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Legislative Changes, cont.

• HB 139 Biodiesel and Green Diesel Fuels Credit
• Grants a credit of 1 per gallon (up to 5,000)
  to some taxpayers
• Taxpayers are eligible for the credit for the
  first three years of production
• This credit is transferable

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Legislative Changes, cont.
HB 1024 - Filing Extensions for Military
Personnel Income tax The due date for Virginia
income tax is extended until 90 days after the
completion of the members deployment outside the
United States
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Legislative Changes, cont.
HB1023 - Collection of debts Expands the
reciprocal agreement with the Federal government
to include the offset of non-tax payments owed to
the Commonwealth.  
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Legislative Changes, cont.
Neighborhood Assistance Act HB 680 - Automobile
Donations SB 700 - Credit Provisions Expanded to
include marketable securities
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Legislative Changes, cont.

• Domestic Employers
• Effective January 1, 2009
• First Payment will be due in 2010
• Guidelines, forms and instructions under
  development
• Check website for updates
• www.tax.virginia.gov

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Legislative Changes, cont.

• PTE Withholding
• PTEs are required to withhold tax on behalf of
  all nonresident owners, not just individuals
• There are Entity and Owner Exceptions
• See our website www.tax.virginia.gov for detailed
  information on all the above Legislative Changes

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Virginia Contact Information

• Tax Professional page
• http//www.tax.virginia.gov
• Be sure to join our e-mail list
• Tax Professional Hot Line
• [phone]

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Speaker John P. Trevillian
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FEDERAL TAXES WHATS NEW FOR 2008

• Emergency Economic Stabilization Act of 2008
• Passed and signed into law on October 3, 2008.
• Over 290 changes to the tax code, including
• AMT Patch (again!)
• Child Tax Credit enhancement
• Tax provisions due to expire at end of 2007
  extended
• State and local sales tax deduction
• Higher education tuition deduction
• Educator expense deduction
• Additional standard deduction for real property
  taxes
• Other changes affecting typical VITA returns

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ALTERNATIVE MINIMUM TAX

• Exemption amounts
• 69,950 for MFJ
• 46,200 for Single and HOH
• 34,975 for MFS
• Patch is only for 2008, another fix, either
  temporary or permanent, will be needed in 2009.

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CHILD TAX CREDIT ENHANCEMENT

• Credit was currently refundable to the extent of
  15 of taxpayers earned income in excess of
  12,050.
• Under new law, the earned income floor is dropped
  to 8,500.
• Use Child Tax Credit Worksheet (included in 1040
  instruction booklets or TaxWise) to see if
  taxpayer is eligible, and if so, use Form 8812
  Additional Child Tax Credit to determine the
  amount.
• Amount goes on Form 1040 Line 66.

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STATE LOCAL SALES TAX DEDUCTION

• Allows taxpayers who itemize to deduct state and
  local general sales taxes in lieu of state and
  local income taxes.
• Taxpayers can calculate their deduction amount
  either by saving receipts (actual expenses) or
  using the Optional State Sales Tax Tables (found
  in the instructions for Form 1040 Schedule A).
• This provision expired at the end of 2007, but
  was made retroactive for 2008 and extended
  through 2009.

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HIGHER EDUCATION TUITION FEES DEDUCTION

• Allows deduction of qualified tuition and fees
  paid during the year by a taxpayer for
  themselves, spouse, or dependent.
• Maximum deductible amount is 4000 for taxpayers
  with AGI not exceeding 65,000 (130,000 MFJ),
  2000 for taxpayers with AGI between 65,001 and
  160,000.
• Cannot be used in conjunction with HOPE Credit or
  Lifetime Learning Credit, or if taxpayer is MFS.
• Taxpayer does not have to itemize this is
  actually an adjustment to income which goes on
  Form 1040 Line 34.
• Use Form 8917 to determine amount.
• IRS Pub 970 has additional information as well.

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EDUCATOR EXPENSE DEDUCTION

• Allows taxpayer who was an eligible educator in
  2008 to deduct up to 250 in qualified expenses
  paid during 2008.
• Eligible educator is K-12 teacher, instructor,
  counselor, principal, or aide who worked in a
  school for at least 900 hours during a school
  year.
• Qualified expenses include ordinary and necessary
  expenses paid for books, supplies, equipment, and
  other materials used in the classroom.
• Taxpayer does not have to itemize this is
  actually an adjustment to income which goes on
  Form 1040 Line 23.
• Expenses that exceed 250 may be deducted as an
  employment related miscellaneous itemized
  deduction, subject to the 2 floor.

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ADDITION TO STANDARD DEDUCTION FOR REAL ESTATE
TAXES PAID

• A taxpayers standard deduction can be increased
  by any state and local real estate taxes paid by
  the taxpayer in 2008, up to a maximum of 500
  (1000 if MFJ).
• The taxes must be state or local real estate
  taxes which would be deductible on Form 1040
  Schedule A if the taxpayer was itemizing.
• Check the box on Form 1040 Line 39c if the
  standard deduction claimed is increased due to
  this provision.
• Extended through TY 2009.

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FIRST-TIME HOMEBUYERS TAX CREDIT

• Applies to primary home purchases made by a
  first-time homebuyer between April 9, 2008 and
  June 30, 2009.
• First-time homebuyer is one who did not own any
  main home during the three year period ending on
  the date of purchase (restriction applies to
  spouse as well if married).
• Credit equal to 10 of the purchase price of the
  home, to a maximum of 7500.
• CREDIT MUST BE REPAID OVER A 15 YEAR PERIOD
  BEGINNING TWO YEARS AFTER THE YEAR IN WHICH THE
  CREDIT WAS CLAIMED.
• Complete Form 5405 to claim credit include
  credit amount on Form 1040 Line 69.

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RECOVERY REBATE CREDIT

• Available to taxpayers who did not qualify for an
  Economic Stimulus Payment during 2008, or who did
  not get the maximum amount.
• ESP amounts were determined using 2007 tax data,
  and RRC will use 2008 data, so taxpayers who
  received an ESP may qualify for additional (or
  less) monies under RRC.
• Maximum amounts are the same as for ESP
• 600 (1200 if MFJ)
• 300 per child (who must qualify for CTC to be
  eligible)
• The RRC will be reduced by the amount of ESP
  received by taxpayer negative amounts DO NOT
  HAVE TO BE REPAID.
• To determine credit, complete worksheet found in
  Instructions for Form 1040, and include amount
  (if positive) on Form 1040 Line 70.

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MISCELLANEOUS CHANGES

• Residential Energy Efficient Property Credit
  (pertains to energy generating devices) extended
  through 2016, BUT NOT the Credit for non-Business
  Energy Property (which pertained to storm doors,
  windows, etc.)
• AGI limit for claiming the Retirement Savings
  Credit increased to 26,500 (39, 750 if HoH,
  53,000 if MFJ).
• 5 Capital Gain Tax on lowest brackets reduced to
  zero.
• IRA deduction increased to 5000 (6000 if age 50
  or older).
• Visit www.IRS.gov for additional information on
  these and other tax related issues.

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Speakers Contact Information

• Pam Inge
• [phone]
• Pam.Inge_at_tax.virginia.gov
• Virginia Department of Taxation
• http//www.tax.virginia.gov

• John P. Trevillian
• [phone]
• john.p.trevillian_at_irs.gov
• Internal Revenue Service
• http//www.irs.gov/

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QA

1. During the QA session, dial 71 on your
phone to ask a question. Lines will be opened in
the order received. 2. At any time, submit a
question online via Chat QA. Presenters will
respond to these questions during the QA session.
Chat QA
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Training Series Updates

• Making the Link Virginias Earned Income Tax
  Credit EITC) Initiatives and Virginia Individual
  Development Accounts (VIDA)
• Recorded October, 2008
• http//www.state-itc.org/building_assets.html
• A recorded version of todays Webinar will
  shortly be available online, on demand. You will
  receive an email notice when it is available.

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Save the Date!

• Thursday, January 29, 2009 - 9am-10am EST
• Financial Education Resources for EITC
  Recipients
• Webinar registration information will follow in
  January

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Wrap up and Evaluations

• Thanks to everyone who participated in todays
  Webinar!
• To conclude todays Webinar, a brief online
  evaluation should open in a new Web browser page.
  
• Please complete the online evaluation
• Press Submit
• Note If the browser page is minimized or
  blocked, go directly to the online evaluation at
  http//vovici.com/wsb.dll/s/f4ecg39fc7

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