2008 Tax Law Changes (Part 6)

2008 Tax Law Changes, continued

Increase in Limit on Long-Term Care and Accelerated Death Benefits Exclusion. The limit on the exclusion for payments made on a per diem, or other periodic basis, under a long-term care insurance contract increases for 2008 to $270 per day. The limit applies to the total of these payments and any accelerated death benefits made on a per diem, or other periodic basis, under a life insurance contract because the insured is chronically ill.

Under this limit, the excludable amount for any period is figured by subtracting any reimbursement received (through insurance or otherwise) for the cost of qualified long-term care services during the period from the larger of the following amounts: The cost of qualified long-term care services during the period or the dollar amount for the period ($270 per day for any period in 2008).

Itemized Deductions. If your adjusted gross income is above a certain amount, you may lose part of your itemized deductions. In 2008, this amount is increased to $159,950 ($79,975 if married filing separately).

Penalty for Failure to File Income Tax Return Increased. If you do not file your return by the due date (including extensions) you may have to pay a failure-to-file penalty. For income tax returns required to be filed after 2008, the failure-to-file penalty for returns filed more than 60 days after the due date (including extensions) is increased. In this situation, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

Penalty for Frivolous Tax Submissions Increased. The IRS has published a list of positions that are identified as frivolous. The penalty for filing a frivolous tax return is $5,000. A frivolous return is one that does not include enough information to figure the correct tax or that contains information clearly showing that the tax you reported is substantially incorrect. You will have to pay the penalty if you filed this kind of return because of a frivolous position on your part or a desire to delay or interfere with the administration of federal income tax laws. Also, the $5,000 penalty applies to other specified frivolous submissions.

Continued next week

If you have a specific question regarding this article, as a public service, and at no cost to you, I invite you to call me with your question. Since I am in the middle of tax season, I will have to limit our conversation. I will be happy to schedule an appointment for you if you would like further consultation regarding this, or any other matter. Thank you for your interest in reading my tax column.

This column is offered as a public service with the understanding that each person's tax situation is different; that you should consult your CPA before taking any action based upon comments made in this article. Call me and I will be happy to explain my “CPA Quality Tax Preparation at H&R Block Rates” and how you can decrease your tax preparation fees, or go to www.danghazel.com for more information. I can be reached at 540-825-2771.