Tips for Preparing Income Taxes

in Tax Information


One of the most daunting aspects of the American tax system is just the simple fact that it changes each year. Some of these changes are built into the legislation that enacted the measure, which is why many limits and income restrictions change every year. Other changes stem from the fact that the progressive tax system used by the United States is specifically designed to perform more functions than merely raising revenue for the federal government. Instead, it is used to promote activity that the political leadership views as desirable, discourage activity that it does not like and to mitigate the effects of various economic problems and trends in society. This last purpose means that in times of economic distress or turmoil, there are often a lot more changes than happen when things are running smoothly and that has certainly been the case over the last few years.

In an effort to stimulate the overall economy, as well help particular sectors that have been hard hit in the recent downturn, there are a lot of tax changes that have been implemented for 2009 and 2010 that taxpayers should be familiar with. If the taxpayer is using a professional tax preparation service, the service should be aware of all of the new changes, but otherwise it is up to the taxpayer to find out about them. Though some of the new measures are relatively minor and not worth the trouble for many taxpayers, other measures can result in real savings for many average people and should be used.

For example, the American Recovery and Reinvestment Act of 2009 (ARRA) is part of the overall stimulus program being implemented by the federal government to help mitigate the effects of the ongoing recession. This act provides a number of tax breaks that apply to people who are buying homes, people that have purchased new cars, people that have made their homes more energy efficient, people paying for higher education as well as people that have recently become unemployed and used unemployment compensation. The exact details of these various programs can be found on the website of the Internal Revenue Service ( and elsewhere online.

Another example of recent changes that many common people can benefit from are the increased amounts being offered for standard deductions. This is a real plus for people that do not regularly itemize their deductions, but do claim standard ones as appropriate. The basic deduction amounts have increased for married couples filing jointly, singles, and heads of household. Similarly, a new standard deduction has been introduced for state and local sales taxes and excise taxes paid during the purchase of a new vehicle after February 16, 2009. The standard deduction for state and local real estate taxes has also been increased in 2009.

The ARRA also included the Making Work Pay tax credit which is likely to have a profound effect on many people’s taxes because it lowered the amount of withholding held by employers. The basic idea was to permit workers to receive more of their wages immediately as opposed to waiting for their refunds. However, this also means that some people that usually receive refunds may not for 2009, or people that usually owe may owe more than normal this year.

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