MA Sales Tax Increase Delayed Start Date

The sales tax rate increase will go into effect August 1st, rather than July 1st as previously announced. New rate will be 6.25%. That gives us all of July to shop at the lower 5% rate!

QuickBooks Help

Do you struggle at year-end to get your records in some recognizable order so you can file your tax returns?

Patrick McKrill of Ameritax Waltham will help you organize, reconstruct, or keep your books up-to-date and shovel-ready for your tax accountant. Call him for an appointment: (857) 205-6418 or e-mail pmckrill@ameritaxpros.com.

Hurricane Season 2009 and the IRS

The IRS suggests we get ready for Hurricane Season 2009 by backing up our tax records, and updating our Belongings Inventory. Publication 584 helps with the task!

http://www.irs.gov/pub/irs-pdf/p598.pdf

Cash for Clunkers

Want to know more about the "Cash for Clunkers" program?

Trade-ins can get no more than 18 mpg, built in 1984 or later, owned and insured by the buyer for a year/more. Refer to the EPA's combined city-highway rating (check here for a guide).

Buyers get a $3,500 voucher for the old car getting at least 22 mpg. Voucher increases to $4,500 if the new car gets 10 mpg more than the trade-in. Buyers can use the voucher toward a 5-year lease. Vouchers are available for small/large light-duty trucks.

IRS E@lert notes the lack of means testing (higher earners aren't excluded). Dealers participating in the program will get voucher payments directly from the Department of Treasury. Vouchers will not be considered income, the traded-in vehicle can't be resold or used for parts, and the MSRP of the new vehicle can't exceed $45,000.

Ameritax Waltham

A warm welcome to Patrick McKrill and our Ameritax Waltham office!

Patrick has a wealth of experience in paralegal work, QuickBooks accounting, and specializes in Chapter 11 monthly bankruptcy trustee reporting.

Visit our partner www.greywolfllc.com for Patrick's other services.

Alaska, Delaware, Hawaii, Montana, New Hampshire or Oregon?

The IRS has clarified what you may deduct in lieu of sales tax on your tax return.

Taxpayers in these states may deduct other fees or taxes imposed by state and/or local governments (purchase between February 17th and December 31st inclusive).

The qualifying fees or taxes must be assessed on the purchase, and based on the sales price or per unit fee. Congress intended these fees or taxes to qualify for this above-the-line deduction.

"This tax break is available for people purchasing a new car this year. That can include people in states without a sales tax,” said IRS Commissioner Doug Shulman. “This means more people can take advantage of this deduction when they file tax returns next year.”

The deduction is limited to fees or taxes paid on up to $49,500 purchase price for a qualified new car, light truck, motor home or motorcycle.

See the following link for more information:

http://www.irs.gov/newsroom/article/0,,id=206633,00.html

2009 $8000 Home Buyer's Tax Credit

HUD has issued Mortgagee Letter 2009-15 outlining official guidance on how to use all/part of your tax year 2009 $8,000 Home Buyer's Tax Credit for part of your down-payment, or to help pay closing costs. You have to make the first 3.5% of the down-payment before you can use up to $8,000 for the remainder. Talk to your bank or go to:

http://www.hud.gov/news/release.cfm?content=pr09-072.cfm for more information.

To see if you qualify for the Home Buyer's Tax Credit, read IRS Form 5405 instructions at:

http://www.irs.gov/pub/irs-pdf/f5405.pdf

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Hawaii Tax Amnesty

Hawaii has an ongoing 30-day tax amnesty ending June 26th, 2009 should you happen to owe taxes to that state. Penalties will be set aside during that time, and statutory interest will be halved to 4%. So if you should be lucky enough to owe Hawaii, now's the time to file and pay!

Time To Clean Up the Tax Preparation Industry?

IRS Launches Tax Return Preparer Review; Recommendations to Improve Compliance Expected by Year End

IR-2009-57, June 4, 2009

WASHINGTON — IRS Commissioner Doug Shulman announced today that by the end of 2009, he will propose a comprehensive set of recommendations to help the Internal Revenue Service better leverage the tax return preparer community with the twin goals of increasing taxpayer compliance and ensuring uniform and high ethical standards of conduct for tax preparers.
Some of the potential recommendations could focus on a new model for the regulation of tax return preparers; service and outreach for return preparers; education and training of return preparers; and enforcement related to return preparer misconduct. The Commissioner will submit recommendations to the Treasury Secretary and the President by the end of the year.

“Tax return preparers help Americans with one of their biggest financial transactions each year. We must ensure that all preparers are ethical, provide good service and are qualified,” Shulman said. “At the end the day, tax preparers and the associated industry must be part of our overall game plan to strengthen the integrity of the tax system.”

The first part of this groundbreaking effort will involve fact finding and receiving input from a large and diverse constituent community that includes those that are licensed by state and federal authorities — such as enrolled agents, lawyers and accountants — as well as unlicensed tax preparers and software vendors. The effort will also seek input and dialog with consumer groups and taxpayers.

“We plan to have a transparent and open dialogue about the issues,” Shulman said. “At this early and critical stage of the process, we need to hear from the broadest possible range of stakeholders.”

Later this year, the IRS plans to hold a number of open meetings in Washington and around the country with constituent groups.

More information, including schedules and agendas for public meetings, will be posted on the “Tax Professionals” page on this Web site and will be communicated to stakeholder groups.

IRS Fact Sheet for Business Owners

Media Relations Office, Washington, D.C.

Media Contact: 202.622.4000
Public Contact: 800.829.1040

Business Provisions of the American Recovery and Reinvestment Act of 2009 (ARRA)

2009-11, May 2009

The American Recovery and Reinvestment Act of 2009 (ARRA) provides a number of tax incentives for businesses. Most of the tax incentives for businesses are found in Subtitle C of Division B, Title I of ARRA. In addition, some of the energy incentives, contained in Subtitle B, [and a subsidy for premiums for COBRA health continuation coverage in Title III of Division B,] provide tax relief for businesses.

Here is a summary of the key ARRA provisions, in numerical order, which may impact businesses, large and small:

Tax Incentives for Business (Subtitle C)

50-Percent Special Depreciation Allowance/Bonus Depreciation (Section 1201)

The new law extends the 50-percent special depreciation allowance that was available for 2008 acquisitions to acquisitions of qualifying property in 2009. This provision enables businesses to deduct half the adjusted basis of qualifying property in the year it is placed in service. The extension applies to qualifying property placed in service in 2009 (2010 for long production period property and certain transportation property).

Acceleration of Certain Business Credits (Section 1201)

Corporations that acquire eligible business property have an additional year to accelerate certain tax credits in lieu of a bonus depreciation deduction. The extension applies to eligible business property placed in service in 2009 (2010 for long production period property and certain transportation property).

Section 179 Expensing (Section 1202)

During 2009, small businesses can elect to expense up to $250,000 of the cost of qualifying property under section 179. Without the new law, the limit would have dropped to $133,000. The existing $25,000 limit still applies to sports utility vehicles. The $250,000 amount provided under the new law is reduced if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $800,000.

Expanded Net Operating Loss Carryback (Section 1211)

Many small businesses that had expenses exceeding their income for 2008 can choose to carry the loss back for up to five years, instead of the usual two years. For small businesses that were profitable in the past but lost money in 2008, this could mean a special tax refund. The option is available for a small business that has no more than an average of $15 million in gross receipts over a three-year period. This option is available for most eligible taxpayers for a limited time. A corporation that operates on a calendar-year basis, for example, must file a claim by Sept. 15, 2009. For eligible individuals, the deadline is Oct. 15, 2009.

Estimated Tax Requirement Modified (Section 1212)

Many individual small business taxpayers may be able to defer until the end of the year paying a larger part of their 2009 tax obligation. For 2009, eligible individuals can make quarterly estimated tax payments equal to 90 percent of their 2009 tax or 90 percent of their 2008 tax, whichever is less. Individuals qualify if they received more than half of their gross income from their small business in 2008 and meet other requirements. For details, see Publication 505.

Discharge of Business Indebtedness (Section 1231)

The act allows certain businesses that repurchase specific types of debt in 2009 and 2010 to pay taxes on cancellation of debt income over a five year period, starting with tax year 2014.

Exclusion of Gain on the Sale of Certain Small Business Stock (Section 1241)

ARRA provides an extra incentive for investment in small businesses. The new law provides an increase in the Section 1202 exclusion from 50 percent (60 percent for enterprise zone qualified business entity stock) to 75 percent for any gain from the sale or exchange of qualified small business stock acquired after Feb. 17, 2009 and before Jan. 1, 2011, and held for more than five years. This provision is limited to individual investors and not available to corporations.

S-Corporation Built-in Gains Holding Period (Section 1251)

For tax years beginning in either 2009 or 2010, the new law eliminates the corporate level tax on the built-in gains of an S-Corporation that converted from C-corporation status at least seven tax years before the current tax year.

COBRA PREMIUM ASSISTANCE (title III)

COBRA: Health Insurance Continuation Subsidy (Section 3001)

Under the new law, employees who were involuntarily terminated after Aug. 31, 2008 and before Jan. 1, 2010, and who elect COBRA health continuation coverage, are entitled to receive a 65 percent subsidy on their COBRA premiums. For periods of COBRA coverage beginning after Feb. 16, 2009, the involuntarily terminated employee must be treated as having paid the required COBRA premium if the individual pays 35 percent of the premium amount. The employer (or, in some cases, multiemployer health plan or insurer) may recover the other 65 percent by taking the subsidy amount as a credit on their quarterly employment tax return.

Energy Incentives (Subtitle B)

Extension of Renewable Energy Production Tax Credit (Section 1101)

The new law generally extends the “eligibility dates” of a tax credit for business facilities producing electricity from wind, closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste, qualified hydropower and marine and hydrokinetic renewable energy. The new law extends the "placed in service date” for wind facilities to Dec. 31, 2012. For the other facilities, the placed-in-service date was extended from Dec. 31, 2010 (Dec. 31, 2011 in the case of marine and hydrokinetic renewable energy facilities) to Dec. 31, 2013.

Election of Investment Credit in Lieu of Production Credit (Section 1102)

Businesses that place in service facilities that produce electricity from wind and some other renewable resources after Dec. 31, 2008 can choose either the energy investment tax credit, which generally provides a 30 percent tax credit for investments in energy projects or the production tax credit, which can provide a credit of up to 2.1 cents per kilowatt-hour for electricity produced from renewable sources. A business may not claim both credits for the same facility.

Repeal of Certain Limits on Business Credits for Renewable Energy Property (Section 1103):

The new law repeals the $4,000 limit on the 30 percent tax credit for small wind energy property and the limitation on property financed by subsidized energy financing. The repeal applies to property placed in service after Dec. 31, 2008.

Coordination with Renewable Energy Grants (Section 1104): Business taxpayers also can apply for a grant instead of claiming either the energy investment tax credit or the renewable energy production tax credit for property placed in service in 2009 or 2010. In some cases, if construction begins in 2009 or 2010, the grant can be claimed for energy investment credit property placed in service through 2016, and for qualified renewable energy facilities, the grant is 30 percent of the investment in the facility and the property must be placed in service before 2014 (2013 for wind facilities).

New Clean Renewable Energy Bonds (Section 1111)

Certain State utilities, governmental entities and cooperatives that initiate projects to generate electricity from renewable sources (for example wind and solar) can finance those projects through qualified tax credit bonds. The new law increases the amount of funds available to issue new clean renewable energy bonds from the one-time national limit of $800 million to $2.4 billion.

Temporary Increase in Credit for Alternative Fuel Vehicle Refueling Property (Section 1123):

The new law modifies the credit rate and limit amounts for property placed in service in 2009 and 2010. Qualified property (other than property relating to hydrogen) is now eligible for a 50 percent credit, and the per-location limit increases to $50,000 for business property (increases to $2,000 for other/residential locations). Property relating to hydrogen keeps the 30 percent rate as before, but the per-business location limit rises to $200,000.

Increased Exclusion Amount for Commuter Transit Benefits and Transit Passes (Section 1151):

The new law increased to $230 the monthly tax exclusion for employer-provided commuter transportation and transit pass benefits, effective from March through the end of 2009. Employers can generally deduct these qualified transportation fringe benefits as a business expense. These benefits are also excluded from an employee's wages for income tax and payroll tax purposes. Because of this exclusion from employee wages, the employer can reduce the amount paid in employment taxes.

A Side Effect of Becoming Engaged!

One way to get a non-filing self-employed contractor to file back tax returns is to have him/her get engaged! I have had more than one fiancée drag the offending “intended” in the door by his ear, stating "No marriage until this tax situation is straightened out!"

Submitted by Pamela Foley Moore, E.A.

Graduation Congratulations!

Congratulations to twins Alicia and Laura Giannotti, daughters of our own Joe Giannotti (Worcester Ameritax office), as they graduate from high school this weekend. Alicia is heading for Wheelock and Laura for Emmanuel. We wish them the very best for a bright future!

Work Opportunity Tax Credit

Tax Credit Guidance to Businesses Hiring Unemployed Veterans and Certain Youth

IR-2009-55, May 28, 2009

Businesses planning to claim the newly-expanded work opportunity tax credit (WOTC) for eligible unemployed veterans and unskilled younger workers hired during the first part of 2009 have until Aug. 17 to request the certification required for these workers, according to the Internal Revenue Service.

Newly-revised Form 8850, now available on IRS.gov, is used by employers to request certification from their state workforce agency. The American Recovery and Reinvestment Act, enacted in February, added unemployed veterans returning to civilian life and “disconnected youth” to the list of groups covered by the credit. Though eligible unemployed veterans and disconnected youth who begin work anytime during 2009 or 2010 may qualify a business for the credit, certification by the state workforce agency is required.

In general, an unemployed veteran is a person discharged or released from the military during the five years preceding the hiring date who received unemployment benefits for at least four weeks during the one-year period ending on the hiring date. A “disconnected youth” is a person age 16 to 24 on the hiring date who has not been regularly employed or attending school and who meets other requirements.

The WOTC offers tax savings to businesses that hire workers belonging to any of 12 targeted groups, including unemployed veterans and disconnected youth. The oth er 10 include people ages 18 to 39 living in designated communities in 43 states and the District of Columbia, Hurricane Katrina employees, recipients of various types of public assistance, and certain veterans, summer youth workers and ex-felons. The instructions for Form 8850 detail the requirements for each of these groups.

The certification requirement applies to all groups of workers except employees who were Hurricane Katrina victims. Normally, a business must file Form 8850 with the state workforce agency within 28 days after the eligible worker begins work. But under a special rule, businesses have until Aug. 17, 2009, to file this form for unemployed veterans and disconnected youth who begin work on or after Jan. 1, 2009 and before July 17, 2009. Notice 2009-28, posted today on IRS.gov, and the instructions for Form 8850 provide details on this special rule.

Wendy W. Campbell
Senior Stakeholder Liaison
Internal Revenue Service
15 New Sudbury Street
JFK P.O. Box 9112, Stop 21300
Boston, MA 02203

Telephone: 617-316-2486< /SPAN>
Fax: 617-316-2713

Late Filing Tax Returns?

I just prepared 9 years worth of tax returns for a non-compliant commercial fisherman! That's a record for this year in our offices! If you need help in becoming compliant, contact me or one of our other offices.