ABC Taxes, Tips & Tools

After much debate and congressional gnashing of teeth, the long awaited unemployment extension act, entitled, the Worker, Homeownership, and Business Assistance Act of 2009, has been passed and signed into law as of November 6, 2009. It is happening none too soon for some unemployed workers – DOL statistics list more than a third of unemployed workers have been unemployed for 27 weeks or more. This legislation contains benefits for homebuyers, businesses experiencing losses too.   This blog is not to discuss the rightness or wrongness of the legislation; it merely to express what has been signed into law and what it is supposed to do.

Unemployment Benefits Provisions: These benefits are supposed to help workers.

• provides an additional 14 weeks of extended unemployment benefits (EB) in all States
• an six additional weeks of EB for workers in states with unemployment levels over 8.5 percent. High unemployment states currently include the District of Columbia, Puerto Rico, Alabama, Arizona, California, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Maine, Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, North Carolina, New York, Ohio, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Carolina, Tennessee, Washington, West Virginia and Wisconsin. More states could soon qualify because of rising unemployment rates.
• These benefits are in addition to the Emergency Unemployment Compensation (EUC) which may provide up to 33 weeks of additional benefits beyond regular unemployment compensation.
• Check with your state’s unemployment agency for eligibility details and information on how to apply for benefits as unemployment varies from state to state.

Note: In my research there is a question as to whether workers who run out of regular and EUC benefits after December 26, 2009, will eligible for this 14-20 weeks of extended benefits.  I have been to the AZ unemployment benefit extensions website and they are researching how this legislation affect Arisona workers.  AZ DES states that they will publish updates on the website; AZ DES requests that you do not call them as nobody you might talk to will have any more information than what is contained on their website.

Homebuyer Credit: These benefits are supposed to kick start the housing market again.

• extends the $8,000 First-Time Homebuyer Tax Credit through April 30, 2010 and
• provides a $6,500 credit to certain other homebuyers, people who have lived in their current home for at least 5 years and want to step up to a new home, through April 30, 2010
• for purchases after the Act’s enactment date, the credit cannot be claimed for buying a residence with a purchase price in excess of $800,000
• in addition, the Act includes new anti-abuse provisions: To curb fraud, taxpayers must now attach a copy of the settlement agreement to the tax return.  The credit must be repaid if, within three years of purchase, the home ceases to be the taxpayer’s principal residence.
• the credit phases out for individual taxpayers with modified adjusted gross income between $125,000 and $145,000 ($225,000 and $245,000 for joint filers) for the year of purchase.
• the bill will also eliminate the first-time homebuyers recapture requirement for military personnel, including members of the Foreign Service and intelligence community, who are forced to sell as a result of an official extended duty of service and will allow military personnel serving outside the United States at least 90 days in 2009 or 2010, one additional year to qualify for the credit.

NOL carry-back for 5 years for businesses: These benefits are supposed to get companies hiring workers again.

• increases from two to five preceding years the period for which businesses can offset net operation losses in 2008 OR 2009 against income.
• the only companies not eligible for the 5-year NOL carry-back are Fannie Mae, Freddie Mac and companies that took money under the Troubled Asset Relief Program (TARP)
• the taxpayer can choose to carry-back the losses in either 2008 OR 2009 for this treatment, but once the year is elected it cannot be changed.
• small businesses that qualified for the 5-year carry-back under American Recovery and Reinvestment Act of 2009 (ARRA), may be eligible for 5 year carry back in both 2008 and 2009.
• under this act, the 5th year carry-back cannot exceed 50% of the taxable income for that year.
• the Act suspends the 90% limitation on the use of net operating losses for AMT purposes.

It also helps military families by clarifying that military base realignment and closure payments – added as part of the recovery act – are tax exempt.

The Act gives broad authority to the Treasury to issue anti-abuse regulations including anti-churning rules (including sale/leaseback), anti-stuffing rules, and rules similar to the wash sale rules.

How are they paying for it?

The legislation pays for these new steps, principally by postponing tax provisions benefiting U.S.  multinational corporations.  The legislation delays for seven years (through 2017) a  tax break enacted in 2004 that would let U.S. multinational companies that have shipped jobs overseas reduce their U.S. taxes by deducting more of their worldwide interest income against their U.S. income.

The Act extends the Federal Unemployment Tax Act surtax through June 30, 2011: FUTA was set to drop to 6%, but this extends the 6.2% level-by the way this surtax was enacted about 30 years ago as a temporary measure that keeps getting extended.

The Act increased the penalty from $89 to $195 per partner/shareholder for failure to file an S-corporation or partnership tax return.

The Act increases estimated tax payments for large corporations in 2014

And that is everything I have been able to find out about this new legislation, I hope you find it informative.  As always, small business services and taxation are our business. If you need help Please give Art & Business Consulting a call. We would love to engage you as a client.

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