The IRS has instituted new documentation requirements to deter fraud in the reporting of the first time homebuyers credit. Taxpayers claiming the credit must now paper file their tax returns due to these new documentation requirements. They will not be able to e-file their tax returns. Additionally, the IRS has announced that those taxpayers who will be getting refunds will have to wait an extra 2 -3 weeks for processing of the refund. (Refunds normally take 4-8 weeks.)

All taxpayers must include one of the following documents with their 2009 tax return in order to claim the first time homebuyer credit:

1. A copy of their settlement statement or Hud-1. Both parties names and addresses must be completed as well as the sales price and the date of purchase.

2. A copy of the executed retail sales contract for mobile home purchases. The contract must show both parties names and addresses as well as the purchase price and the date of the contract.

3. A copy of the certificate of occupancy for newly built homes, when a settlement statement is not available.

The IRS encourages using direct deposit of your refund in order to speed up the process a bit.

Tax season is officially underway! The IRS will begin to accept e-filed tax returns on Friday, January 15th. Tax preparers across the county will begin electronically transmitting tax returns for individuals as well as businesses on this day.

If you are looking for a low cost way to e-file your 2009 tax returns, why not consider online tax preparation?

You will be able to prepare your tax returns and electronically file them online for a very nominal fee. Check out the “File Your Taxes Online” page.

If you have any questions about this service - contact us.

On November 6th, Congress passed the “Worker, Homeownership, and Business Assistance Act of 2009.”

Some of the provisions of the law primarily affect individuals.

Information for Individuals:

* Making Work Pay Tax Credit. This tax credit means more take-home pay for many Americans. To make sure enough tax is withheld from their pay, taxpayers can use the IRS withholding calculator.

* First-Time Homebuyer Credit Expands. Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement. New legislation extends and expands this credit.

* Money Back for New Vehicle Purchases. Taxpayers who buy certain new vehicles in 2009 can deduct the state and local sales taxes they paid or other taxes and fees they paid in states with no sales tax.

* Education benefits. The new American opportunity credit and enhanced benefits for 529 college savings plans help families and students find ways to pay higher education expenses.

* Enhanced Credits for Tax Years 2009, 2010. Find details on the earned income tax credit and the additional child tax credit.

* Increased Transportation Subsidy. Employer-provided benefits for transit and parking are up in 2009.

* Up to $2,400 in Unemployment Benefits Tax Free in 2009. Individuals should check their tax withholding.

* $250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board.

* Energy Efficiency and Renewable Energy Incentives.

* Health Coverage Tax Credit. The credit increases from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.

Information for Businesses

Some of the provisions of the law primarily affect businesses.

* Making Work Pay Tax Credit. Businesses should use the new withholding rates for their employees. For pension plan administrators, new optional withholding procedures are available to supplement the February withholding tables.

* Work Opportunity tax credit. This newly-expanded credit adds returning veterans and “disconnected youth” to the list of new hires covered by the credit that businesses may claim. Businesses have until Oct. 17 to request certification for the tax credit for some new hires.

* COBRA: Health Insurance Continuation Subsidy. The IRS has extensive guidance for employers, including an updated Form 941, as well as information for qualifying individuals.

* Energy Efficiency and Renewable Energy Incentives.

* Net Operating Loss Carryback. Small businesses can offset losses by getting refunds on taxes paid up to five years ago. Information on the carryback, an expanded section 179 deduction and other business-related provisions, is now available.

* Municipal Bond Programs. There are new ways to finance school construction, energy and other public projects.
(IRS.gov)

IRS: First $2,400 of Unemployment Benefits Tax Free for 2009

IR-2009-29, March 26, 2009

WASHINGTON — All or part of unemployment benefits received in 2009 will be tax free for many unemployed workers, according to the Internal Revenue Service.

“This morning we learned that a record 5.6 million people were receiving unemployment benefits in the middle of March. This underscores the need for the relief provided by the American Recovery and Reinvestment Act, which includes making the first $2,400 of unemployment insurance exempt from tax,” said IRS Commissioner Doug Shulman. “I urge all unemployed workers to take this special tax break into account as they plan their tax withholding and quarterly estimated tax payments for the year. This change offers a helping hand to millions of Americans who are out of work and struggling to make ends meet.”

Under the American Recovery and Reinvestment Act, enacted last month, every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits when they file their tax return next year. For a married couple, the exclusion applies to each spouse, separately. Thus, if both spouses receive unemployment benefits during 2009, each may exclude from income the first $2,400 of benefits they receive.

The new law doesn’t affect the return taxpayers are filling out now. Unemployment benefits received in 2008 and prior years remain fully taxable.

Unemployed workers can choose to have income tax withheld from their unemployment benefit payments. Withholding on these payments is voluntary. However, choosing this option may help avoid a surprise year-end tax bill or a possible penalty for having paid too little tax during the year. Those who choose this option will have a flat 10 percent tax withheld from their benefits.

Unemployed workers who expect to receive more than $2,400 in benefits this year should consider having tax withheld from their benefit payments in excess of that amount. Those unemployed workers who have already chosen to have tax taken out of their benefits, should consider the $2,400 exclusion in determining whether to continue to have tax withheld.

Use Form W-4V, Voluntary Withholding Request, or the equivalent form provided by the payer to request withholding to begin or end. Form W-4V is also available on IRS.gov or by calling the IRS toll-free at 1-800-TAX-FORM (829-3676)

In the American Recovery and Reinvestment Act of 2009 - taxpayers received a tax credit - but it is not going to be in the form of a separate, special check mailed to them - like last years economic stimulus payment. This tax credit will be incorporated into their payroll checks. The credit will be in the $400 - $800 range per taxpayer.

For the majority of folks, this tax credit will mostly be handled through payroll tax withholdings. The IRS has revised the federal tax withholding tables to incorporate new lower tax rates. So - if you receive a regular weekly/biweekly/monthly paycheck - you will notice that your check contains a little something extra each pay period. For other folks, the credit can be claimed when they file their 2009 tax returns next year.

For more information about the “Making Work Pay” tax credit, see the newly revised IRS Publication 15 (Circular E) Employers Tax Guide.

HIGHLIGHTS OF THE FIRST TIME HOME BUYER TAX CREDIT

WHEN: Qualified “First Time Home Buyers” Who buy a House After April 8, 2008 and Before July 1, 2009

AMOUNT: Lesser of A) $7,500 ($3,750 if you are Married Filing Separately), or B) 10% of the Homes Purchase Price.

AGI LIMIT: $75,000 to $95,000 If Single, $150,000 to $170,000 if Married Filed Jointly.

WHO QUALIFIES:Taxpayer or Spouse Cannot Have Owned a Principal Residence in the U.S. during 3-Year Period Ending on the Date of the Purchase.

HOW DOES THE 15 YEAR PAY BACK WORK?: Taxpayer Must Pay Back the Credit Ratably over 15 Years by Extra Tax on Subsequent Tax Returns. Recapture Accelerated if Property is Sold or No Longer a Principal Residence.

NO ADDITIONAL RECAPTURE AFTER DEATH: There is No Additional Recapture Following Death of Taxpayer.

WHAT IF QUALIFIED HOME IS UNDER CONSTRUCTION?: The Home will Still Qualify for the Tax Credit if the Move In date is After April 8, 2008 and Before July 1, 2009.

The upcoming tax filing season is expected to start on time for everyone - except those folks affected by late enactment of the IRS Alternative Minimum Tax Patch. The IRS has targeted February 11, 2008 as the potential starting date for taxpayers to begin submitting the five-related returns affected by the legislation. This delay will allow the IRS to update and test its systems.

The tax returns that include the following forms are affected by this filing delay:

• Form 8863, Education Credits
• Form 5695, Residential Energy Credits
• Schedule 2, Form 1040A, Child and Dependent Care Expenses for Form 1040A Filers
• Form 8396, Mortgage Interest Credit
• Form 8859, District of Columbia First-Time Homebuyer Credit

Tax Planning is a much too often overlooked strategy for reducing an individuals tax liability. For some folks - tax planning is not really needed due to their particular income situation. Those in lower income brackets that receive a W-2 at year end with no investments and no itemized deductions - don’t really have much to work with. But for others, especially high net worth individuals - effective tax planning is a must. Whether it is deferring income or accelerating expenses, it is always good to sit down with your tax accountant or financial advisor prior to the end of the year. If it is determined that taxes will be due - then the appropriate estimated tax payments can be made on time. This can avoid having penalties and interest tacked on to your tax bill after the fact. However, waiting until year end to do this is not a good idea. Tax Planning should be done much earlier in the year for maximum benefit.