On Nov. 6, President Obama signed H.R. 3548, the ”Worker, Homeownership, and Business Assistance Act of 2009″ (Act). The signing came just one day after the House passed it and two days after the Senate did. Below are some of the provisions that you may be interested in.
BUSINESS TAX PROVISIONS:
Five Year Carryback of NOLs Extended to Include 2009 Net Operating Losses (NOLs) and to Apply to Most Businesses. We previously reported back in February that 2008 NOLs were allowed to be carried back 5 years for “qualified small business”. The new law expands this provision. Now most taxpayers, not just qualified small businesses, can carry back losses 5 years. However, the loss carried back to the 5th year can only offset 50% of the income for the 5th year, the balance can be used to offset all income in years 4, 3, and 2. If any additional loss remains it can be carried forward. Example……
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Company X, not a small business, has NOL of $4 MM for 12/31/09. the Company can carry back the loss 5 years to 12/31/07 where it had taxable income of $5 MM. it can carry back the loss to 2004 and take $2.5MM in 2004 and then offset any income for the years 2005, 2006, 2007, and 2008 to get the benefit of the remaining $1.5 MM. If the loss is still in excess of the income for all years the balance would be carried forward.
Additional FUTA Surtax is Extended through June, 2011. The Act provides the 6.2% FUTA tax rate continues through June, 2011.
Increased Penalty for Failure to File Partnership or S Corporation Returns. Previous law provided civil penalties for failure to file a partnership or S corporation return. The penalty was $89 per partner or shareholder for each month, or fraction thereof, for up to 12 months. The new law increases the penalty to $195 per partner or shareholder per month.
Expansion of Electronic Filing by Return Preparers. The IRS continues to push electronic filing. Don’t be surprised if we let you know your business return will have to be filed electronically.
INDIVIDUAL TAX PROVISIONS
Homebuyer Credit Extended and Liberalized. The Act extends the first time homebuyer tax credit (FTHTC) and makes it available to higher income taxpayers and existing homeowners who are “long-time residents” who are looking to buy another principal residence. However, there will be a dollar cap on the residences qualifying for this credit. If you are thinking about purchasing a home, you should probably touch base with us to see if Uncle Sam will help you out.
We will continue to keep you informed of changes as they happen. However, please call or e-mail any of the team members at Rackers & Fernandez, LLC to discuss any of the items above.
Circular 230 Disclosure: In compliance with requirements imposed by the Internal Revenue Service pursuant to IRS Circular 230, we inform you that any U.S. tax advice contained in this communication (including any attachments thereto) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein, and (iii) any fees payable to Rackers & Fernandez, LLC in connection with this written tax communication are not refundable or contingent on the taxpayer’s realization of tax benefits from the advice contained herein.
