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.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in.   Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice. Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.