Mother Lode Tax Tips

President Obama signed into law on November 6^th the Worker, Homeownership and Business Assistance Act of 2009.

The major thrust of the new bill was to extend Unemployment Compensation by up to an additional 14 weeks for jobless workers but the new law also includes tax provisions for businesses and individuals, including new Net Operating Loss (NOL) provisions, increased penalties for S-Corporations and Partnerships for late filing of tax returns, the extension of the FUTA tax surcharge, plus a number of other changes.  The law also extends the first-time homebuyer tax credit and makes modifications to allow existing homeowners to take advantage of the credit for the first time under certain circumstances.

Homebuyer Credit Modification (starting December 1^st 2009)
The Homebuyer refundable tax credit which is equal to 10% of the purchase price up to the maximum limit of $8,000 ($4,000 for filing Married Separate) has been extended to apply to a principal residence purchased before May 1, 2010, or has entered into a contract to purchase before May 1, 2010 and closes before July 1, 2010. Note: For certain service personnel the deadline is extended even further.

The credit has also been modified further to allow more taxpayers to qualify by raising the eligibility Adjusted Gross Income (AGI) phase-out from  a high of $95,000 for single taxpayers to $145,000, and for married taxpayers from $170,000 to $245,000. However, there is now a limit on the purchase price of a home that can qualify for the extended credit.  The purchase price of the home must not exceed $800,000 or the credit does not apply.

The credit has also been extended to “long time residents,” for any taxpayer that has maintained the same principle residence for any 5-consecutive year period during the 8-year period ending on the date of the purchase of a new principal residence can also qualify for a refundable credit of up to $6,500 ($3,250 for married filing separately).

Another note on the Homebuyer credit; a taxpayer may elect to treat a qualifying home purchase as made on December 31^st of the calendar year preceding the purchase for purposes of claiming the credit on the prior year’s tax return.  For example, a home purchased in January of 2010 can be claimed as made on December 31, 2009 thus giving the taxpayer the option to receive the credit with the filing of the 2009 tax return.

There have also been some new anti-abuse provisions enacted for the homebuyer credit which started on November 6^th 2009 and include:

• The taxpayer must be 18 years for age as of the date of purchase.
• The taxpayer cannot be claimed as a dependent by another taxpayer in the year of purchase
• The taxpayer must attach to the tax return claiming the credit a properly executed copy of the settlement statement used to purchase the property
• The property purchased must not be purchased from a relative

Five Year Carryback of Net Operating Losses (NOL)
The election to carryback losses from the normal 2 year period to 3, 4, or 5 years has been extended for 2009.  Most small businesses and individuals that meet the gross receipts test (15 million or less in average annual gross receipts for the three tax periods ending in the tax year in which the loss arose) will qualify.  However, for losses incurred in 2009 any amounts carried back to the 5^th year may not be more than 50% of the taxable income for that 5^th year.

Increased Penalty for Failure to File S-Corporation and Partnership Returns
The current penalty for failure to file s-corporation and partnership returns on time is $89 per shareholder or partner for each month (or fraction of a month) up to a maximum of 12 months.  The new law increases the base amount of the penalty from $89 to $195 per shareholder or partner for returns filed after the December 31, 2008 tax year.

FUTA Surtax Extended
The additional .2% FUTA surtax has been extended through June of 2011, resuming its normal 6% rate for the remaining calendar year of 2011 and later.

For more details on the Worker, Homeownership and Business Assistance Act of 2009 visit this link.

Tags: Credits, Homebuying, IRS, NOL, Penalty, Tax

This entry was posted by Richard Rogers, EA on Monday, November 9th, 2009 at 8:49 am and is filed under Credits, For Businesses, For Individuals, NOL, NOL. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.