Tax breaks may be extended to some, local accountants say
Accountants in Grand Junction are starting to hash out the bailout legislation going into the next tax year, and they’re seeing some breaks coming to certain taxpayers.
“This new legislation extends a lot of tax breaks that expired in 2007,” said Chris West, associate principal certified public accountant with Dalby, Wendland & Co. in Grand Junction. “A lot of these tax breaks will benefit people that are probably in the lower- to middle-income range and not so much in the higher-income range. There are some that will benefit the higher income, but it’s all very complicated still.”
CPAs with Dalby will join hundreds of other accounting professionals throughout the state at a
two-day seminar in Denver at the end of the year to glean the full impact of the bailout plan.
“I imagine we’ll be talking a lot about this new bill and what’s in it,” West said. “Our tax software providers, I’m sure, will be extremely busy, so it includes all the latest updated information on this bill.”
West said his firm plans to send out letters to clients before the end of the year to highlight key components of the new bill.
The prominent things West has seen so far among many different tax provisions include:
• The Alternative Minimum Tax (AMT) Patch.
“It doesn’t eliminate the alternative minimum tax,” West said. “This bill patches it for a year or two. It, in effect, raises some of the income limits so less people fall into paying alternative minimum tax.”
• Research and Development Credits.
These credits have been extended through 2009, West said.
“For businesses innovating, developing new products, improving existing products, they will get a credit against their income taxes,” West said.
“For example, if a credit is about $5,000, they’re able to reduce their tax bill by that much. It’s kind of a coupon, in a sense.”
• Tuition Deduction.
“Families paying tuition for themselves or their children can continue to deduct between $2,000 and $4,000 for their children or themselves,” West said.
• Sales Tax Deduction.
“This new law allows individuals to deduct the sales tax that they pay,” West said. “It’s on the books, but it expired in 2007.”
“There’s still a lot we’re learning,” he said. “There are regulations and new guidance that will come out from the IRS and the (U.S.) Treasury,” West said.
Where the $700 billion of taxpayer money will come from is still an uncertainty.
That’s something Bonnie Beckstein, an accountant for Cucchetti Baldwin & Co. in Grand Junction, said was her first concern.
“Is what is adjusted going to become a taxable event?” Beckstein asked.
“You have a $700 billion correction. If you look at what they did in the ’80s with debt forgiveness, some of those people who foreclosed got hit with the forgiveness of debt ending up as taxable items on their tax returns. I don’t know how many people that truly impacted.”
Beckstein said its still too early to gauge the full effect of the bailout.
“We’re reserving our opinion until we get a better understanding of how they want to administer this bailout,” she said, adding there’s one thing she’s certain of: “It’s going to be paid by the taxpayer.”