Western New Yorkers are full of questions about the new tax credits for 2009, and they peppered a group of accountants during The Buffalo News-sponsored panel discussion on tax help Thursday night.
The federal "Making Work Pay" credit, economic-recovery payments, education credits and energy credits topped the list of topics that 10 accountants fielded during the four-hour discussion. The phones were ringing even before it began at 5 p.m.
"It's a good mix of questions tonight," said Timothy Hoelscher, senior tax manager for Tronconi, Segarra & Associates, who coordinated the panel for the Western New York chapter of the New York State Society of Certified Public Accountants. "It's a lot busier than last year."
In particular, Hoelscher said, "I'm getting a lot of questions on the Making Work Pay credit," and how it's affected by other stimulus payments or credits.
Making Work Pay is a new, temporary credit for the 2009 and 2010 tax years, offering up to $400 for individuals or $800 for couples on a joint return.
The credit is equal to 6.2 percent of a taxpayer's wages, but you must have earnings to qualify, and unemployment income, interest or dividends don't count. The credit can offset a person's tax liability, dollar-for-dollar, and is even refundable.
However, it can be reduced if the taxpayer gets Social Security and received a one-time "economic recovery payment" of $250 for an individual or $500 for a couple last May. That payment would be subtracted from the value of the Making Work Pay credit. The same is true for a one-time government pension credit, also $250.
The accountants also took questions on the standard deduction found in Schedule L. For the 2009 tax season, under last year's Recovery Act, taxpayers can record a deduction for the state and local sales or excise tax on a new car purchased between Feb. 17 and Dec. 31, 2009. It can be taken as an additional itemized deduction or added to the standard deduction.
The recovery law also provided for an additional standard deduction of $500 for an individual or $1,000 for a joint return for real estate taxes if the taxpayers don't itemize.
Another topic of query concerned the American Opportunity Credit, an education credit that replaced the Hope Credit. Where Hope was limited to $1,800, the American Opportunity Credit is up to $2,500, and 40 percent of it is refundable.
Peter Bellanti, senior tax manager at Amato, Fox & Co., had one caller who was calculating that credit using computer software. The software showed an additional $1,000 on the caller's refund, so he thought it was an error. "But he was right," Bellanti said.
And callers learned just how good the residential energy credit can be. That's worth 30 percent of the purchase price of energy-efficient windows, doors, furnaces, or hot water tanks, and it's also a dollar-for-dollar offset against the final tax liability. The improvement must meet certain efficiency standards to qualify.
One woman spent $4,000 on a tankless hot water heater, while a man learned that even his $1,300 purchase of an insulated garage door qualified, giving him about $400 back.
"Some people don't realize that an insulated garage door can qualify," Bellanti said. "You get people's attention when you talk 30 percent."
Accountants said they got a lot of technical, software questions and problems with people incorrectly entering information. Some questions dealt with stock options and even an oil-and-gas investment. "We're getting a lot more complex questions this year," said Jane Jewell of Noonan & Jewell CPAs.
Among other questions:
*A caller received stock when a policyholder-owned life insurance company "de-mutualized" and wanted to know what to record as the cost-basis ("zero").
*Independent accountant Christine Learman found herself in the midst of a couple's marital dispute. The couple, who are unofficially separated, were arguing over their returns, as one filed before the other and one itemized deductions, while the other took the standard deduction. That's not allowed since they're still legally married. The state is challenging his return.