American Opportunity Tax Credit

American Opportunity Tax Credit


Many Parents and college students will be able to offset the cost of college over the next two years under the new American Opportunity Tax Credit.  This tax credit is part of the American Recovery and Reinvestment Act of 2009.


1. The credit, which expands and renames the Hope Credit, can be claimed for qualified tuition and related expenses that you pay for higher education in 2009 & 2010.  Qualified tuition and related expenses included tuition, related fees, books, and other required course materials.


2. The credit is equal to 100% of the first $2000 spent and 25% of the next $2000 per student each year.  Basically, the full $2500 credit will be available for taxpayers who paid $4000 or more in qualifying expenses for an eligible student.


3. The full credit is subject to income phase outs (AGI limitations) of $80,000 for single taxpayers and $160,000 for married couples.


4. 40% of the credit is refundable, so even those who owe no tax can get up to $1000 of the credit for each eligible student as cash back.


5. The credit can be claimed for qualified expenses paid for any of the first four years of post-secondary education.


6.  You cannot claim the tuition and fess tax deduction in the same year that you claim the American Opportunity Tax Credit or the Lifetime Learning Credit.  You must choose to either take the credit or the deduction, which ever is more beneficial for you.

IRS Extends Offshore Account Disclosure Deadline

IRS Extends Offshore Account Disclosure Deadline for the Last Time....Seriously no more extensions

The Internal Revenue Service has again extended the deadline for taxpayers to make voluntary disclosures of the unreported income they have stashed in hidden offshore accounts, but warned this would be the final extension.
The deadline was originally supposed to be Sept. 23, 2009  but has been extended to a new deadline of Oct. 15, 2009 “Those taxpayers who do not voluntarily disclose their hidden accounts by the new deadline face much harsher civil penalties, where applicable, and possible criminal prosecution,” said the IRS.  We are talking big fines here in excess of $10,000 per year (Consult with your CPA or Tax attorney for account specific penalties)

IRS officials decided to extend the deadline after receiving repeated requests from tax practitioners and attorneys around the country following an influx of taxpayer requests. By extending the deadline for a short period of time, the IRS said it is providing relief for those taxpayers who had intended to come forward prior to the deadline, but faced logistical and administrative challenges in meeting it. The extension will allow tax preparers and attorneys the necessary time to interview and advise their backlog of taxpayers with these hidden accounts, and prepare the necessary paperwork to qualify for the special penalty provisions.

This is all a component of the IRS Voluntary Disclosure as seen Here: http://www.irs.gov/newsroom/article/0,,id=104361,00.html

The September 23, 2009, deadline for certain FBAR (Foreign Bank and Financial Accounts) filers and certain offshore-related information returns (Federal Form 5471, etc..) who have no unreported income is also extended to October 15, 2009.

Here is the IRS Q&A with regards to both Voluntary Disclosures and FBARs, it has been updated 4 times so make sure if you use it as a guide you read it more than once, http://www.irs.gov/newsroom/article/0,,id=210027,00.html

Sales Tax on Shipping & Handling in NYS

New York State Sales Tax

From time to time I get asked very specific questions regarding the collection and remittance of sales tax in New York State.  A question that recently came up by my client was one regarding the partial refund of a transaction that involved shipping and handling. 

The client's transaction was as follows:
Sale of $100
Shipping & Handling of $25
Subtotal $125
Sales Tax (NYC) $11.09
Total $136.09

Now what happens if the client refund the sale but retians the shipping and handling as part of their terms and conditions.

Refund of Sale $(100)
Refund of sales tax on Sale $8.84
Total refund $108.84

As you can see, the client retianed the sales tax on the shipping and handling and will be liable to remit that sales tax collected to NYS with their next sales tax return (Either Annualy, Quarterly, or Monthly depending on their sales figures).

Staten Island CPA