TAX DEDUCTIONS FOR POST SECONDARY EDUCATION

I was wondering if you could get me some information. My son will be going to school this fall. Are here some credits that will give us a tax break for education?

Rene

Rene, President Bush was not called the "Education President" for nothing. Under his watch there were several tax insentives put in the books the help defray the cost of education. Unfortunately everybody in Congress jumped on the bandwagon so we have several laws that we can select from. This makes it a little confusing. In addition the the credits below there may be some deductions.

You are right in that education tax credits can help offset the costs of higher education for yourself or a dependent. The Hope Credit and the Lifetime Learning Credit are two education credits available which may benefit you. Because they are credits rather than deductions, you may be able to subtract them in full, dollar for dollar, from your federal income tax.

The Hope Credit
The credit applies for the first two years of post-secondary education, such as college or vocational school. It does not apply to the third, fourth, or higher years of undergraduate programs, to graduate programs, or to professional-level programs.

• 
  It can be worth up to $1,800 ($3,600 if a student in a Midwestern disaster area) per eligible student, per year.
• 
  You're allowed a credit of 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified tuition and related fees paid during the tax year, plus 50% of the next $1,200 ($2,400 if a student in a Midwestern disaster area).
• 
  Each student must be enrolled at least half-time for at least one academic period which began during the year.
• 
  The student must be free of any federal or state felony conviction for possessing or distributing a controlled substance as of the end of the tax year.

The Lifetime Learning Credit
The credit applies to undergraduate, graduate and professional degree courses, including instruction to acquire or improve job skills, regardless of the number of years in the program.

• 
  If you qualify, your credit equals 20% (40% if a student in a Midwestern disaster area) of the first $10,000 of post-secondary tuition and fees you pay during the year, for a maximum credit of $2,000 ($4,000 if a student in a Midwestern disaster area) per tax return.
• 
  You cannot claim both the Hope and Lifetime Learning Credits for the same student in the same year. You also cannot claim either credit if you claim a tuition and fees deduction for the same student in the same year. To qualify for either credit, you must pay post-secondary tuition and certain related expenses for yourself, your spouse or your dependent. The credit may be claimed by the parent or the student, but not by both. Students who are claimed as a dependent cannot claim the credit.
  

These credits are phased out for Modified Adjusted Gross Income over $48,000 ($96,000 for married filing jointly) and eliminated completely for Modified Adjusted Gross Income of $58,000 or more ($116,000 for married filing jointly).

If the taxpayer is married, the credit may be claimed only on a joint return.

For more information, see Publication 970, Tax Benefits for Education, which can be obtained online at IRS.gov

LEARN MORE ABOUT THE CARD CHECK BILL ON A MARCH 4TH WEBCAST

As I have reported in prior blogs the so-called Employee Free Choice Act (EFCA) — also known as the "card check" bill — is federal legislation that would strip employees of their right to a secret ballot vote in union organizing elections. The bill would also give the federal government the power to set wages, benefits, and work rules, regardless of business size or type of industry. Here is another opportunity to learn more from an expert panel of labor lawyers, labor relations specialists and public relations professionals on how the card check legislation would negatively impact business and employees.

To participate in this Webcast, go to

http://www.infiniteconferencing.com/Events/mcafeetaft/register.php.

You may view the event live at 12 p.m. CT on Wednesday, March 4. Or you can view the recorded Webcast anytime after 3 p.m. CST March 4 simply by clicking on the link .

WARREN BUFFETT LETTER TO SHAREHOLDERS

If you want to get a very interesting view on not only the economy, but business practices you need to read Warren Buffett's letter to his shareholders. Unlike most CFO's he takes responsibility for errors in judgement. The report came out Saturday February 28, 2009. He reported that 2008 was the legendary investor's worst year ever. It also reported a grim fourth quarter, though it eked out a slight gain. (Berkshire's annual letter to shareholders.)

I think that Warren Buffett, called the Oracle of Omaha, is the only person the can write a report to the shareholders that is interesting to read. In one statement on a acquisition he quoted a country and western song lyric that went "I liked you better before I got to know you."

It is worth the time to read. Check it out.

CAN I PUT GOLD COINS IN MY IRA?

Because of the economic downturn over the last few months my IRA has taken a big hit. I was thinking about moving from mutual funds to gold coins. One of the guys at coffee said that IRAs could not be invested in gold coins. Is he correct?Justin

Justin, you aren't the only one that took a hit. Before I answer your question I want to make sure you realize that I am not a investment advisor. I am not making any type of judgement for or opposed to investing in gold. If I knew exactly how to invest I would not be sitting in my office but rather on the beach.

Okay, so much for the disclaimer.

It is possible for your IRA account to hold gold coins. Realize that you cannot actually hold them, they must be held by your IRA trustee. For example if you have $30,000 left in your IRA that is held by the Forth National Bank, the bank trust department that administers your IRA would have to purchase and keep the coins in the name of your IRA account. I presume that you could occasionally go to the bank and touch and fondle the coins but they could not be in your possession.

What is probably confusing the "expert" at the coffee shop (there seem to be a lot of experts at the coffee shop) is that the law states:

The acquisition of an IRA of any collectible is considered a distribution and therefore taxable. The law goes on to list precious metals as a collectible. But... to make things confusing the law later states that gold and silver coins are not considered collectibles. Go figure.

HEADS UP - IRS TO START INDEPENDENT CONTRACTOR EXAMS

The IRS just announced that they will start random exams of employment tax returns next year. The goal is to get a better idea of how much misclassification of workers and other employment tax errors contribute to the tax gap. The current estimate that payroll tax mistakes cost the Service $15 billion is more than 20 years old.

IRS is still in the early planning stages, so look for exams to start around April 2010.

EMPLOYEE FRAUD ON THE RISE

According to this ariticle in the Wall Street Journal fraud has increased because of the recession, and small businesses, which often lack internal controls, are particularly vulnerable. Experts say employees often are driven to steal cash or forge checks under pressure from family and friends to maintain their lifestyles or because they resent the owners. The Wall Street Journal

Listen to this... 100% of the clients that I work with that experienced embezzelment have said "I never expected that person to steal from me." 100%! Make sure that you have controls in place.

HERE IS WHERE THE $819 BILLION OF STIMULUS IS GOING

The WashingtonPost has great visuals of how the $819,000,000,000 where and when the stimulus money will be spent. Check it out.

http://www.washingtonpost.com/wp-dyn/content/graphic/2009/02/01/GR2009020100154.html?referrer=emaillink