Last Month on February 17, 2009 President Obama signed into law
THE 2009 AMERICAN RECOVERY AND INVESTMENT ACT
In the message I will highlight specific instances that you might be able to use for your 2009 tax return.
1. Making Work Pay Credit
Eligible individuals are allowed a refundable income tax credit for tax years beginning in 2009 and 2010.
The amount of the credit is the lesser of:
• 6.2% of the taxpayer's earned income , or
• $400 ($800 for a joint return).
An “eligible individual” for purposes of the credit is any individual, except:
• A nonresident alien;
• An individual who can be claimed as a dependent by another taxpayer; and
• An estate or trust.
Each tax return on which this credit is claimed must include the social security number of the taxpayer (in the case of a joint return, the social security number of at least one spouse must be included). The credit is phased out at a rate of 2% of the individual's modified adjusted gross income (AGI) above $75,000 ($150,000 for joint returns). Revised income tax withholding schedules will be designed to reduce the taxpayers' income tax withheld for the remainder of 2009 in such a manner that the full annual benefit of the provision is reflected in income tax withheld during the remainder of 2009. The amount of the otherwise allowable credit must be reduced by the $250 economic recovery payment. Effective only for tax years beginning in 2009 and 2010.
2. ECONOMIC RECOVERY
A one-time $250 economic recovery payment is available to:
• Adults eligible for social security benefits;
• Adults eligible for railroad retirement benefits;
• Adults eligible for veterans compensation or pension benefits; and
• Individuals of any age eligible for supplement security income (SSI) benefits, other than individuals who receive SSI while in a Medicaid institution.
To receive an economic recovery payment, the individual must have been eligible for one of the above four benefit programs for any of the three months before February 17, 2009 (i.e., November or December 2008, or January 2009).
Additional rules:
• No payments will be made to an individual who died before becoming certified to receive the payment.
• The payment is not taxable.
• An individual is entitled to only one payment even if he/she is eligible for more than one benefit from the four benefit programs.
Payments are to begin as soon as practicable, but no later than 120 days after February 17, 2009. No payments are to be made after December 31, 2010.
3.Depreciation
Bonus Depreciation
The 50% bonus depreciation and alternative minimum tax (AMT) depreciation relief are extended for one year through December 31, 2009. The placed-in-service date for certain aircraft and certain long-production-period property is extended to December 31, 2010.
Section 179
The regular §179 deduction limit of $250,000 and beginning of phase-out amount of $800,000 for 2008 are each extended to apply to tax years beginning in 2009. Effective for tax years beginning after December 31, 2008.
Passenger Autos
The $8,000 increase in first-year depreciation limit for passenger automobiles that are “qualified property” is extended through December 31, 2009.
Effective for property placed in service before January 1, 2010, and after December 31, 2008, in tax years ending after December 31, 2008.
Corporate Credit Election
The election available to corporations to trade bonus and accelerated depreciation for otherwise-deferred credits is optionally extended through December 31, 2009. If the property placed in service is certain aircraft and certain long-production-period property, the election is extended to December 31, 2010.
If a taxpayer didn't make the election for its first tax year ending after March 31, 2008 the taxpayer may make the election for its first tax year ending after December 31, 2008, and each later year.
4. Net Operating Losses
2008 Carryback Period
An eligible small business can elect to carryback a 2008 net operating loss (NOL) for up to five years. In other words, an eligible business may elect a three-, four-, or five-year carryback period for the 2008 NOL, instead of the general two-year carryback period.
Any election under §172(b)(1)(H) must be made by the due date (including extensions) for filing the taxpayer's return for the tax year of the NOL.
§172(b)(1)(H) provides for three elections:
• An election to apply the increased carryback provision;
• An election as to the length of the increased carryback (i.e., three, four, or five years). This election is part of the election above, and is made when that election is made; and
• An election to have the increased carryback period apply to NOLs for tax years beginning in 2008 (instead of NOLs for tax years ending in 2008).
Effective for NOLs arising in tax years ending after December 31, 2007 (i.e., NOLs for tax years ending in 2008) or, if the taxpayer so elects, NOLs for tax years beginning in 2008.
These are some of the main changes for 2009, I will try and get you more information on other tax law changes within the week.
Franklin Katz, ATP,PA, CPB
Frank’s Tax and Business Service
120 York Rd
Kings Mountain, NC 28086-3151
(704) 739-4039
Fax: (704) 739-3934
Circular 230 Ruling: Compliance
This email (including any attachments) contains PRIVILEGED AND CONFIDENTIAL INFORMATION protected by federal and/or state law and is intended only for the use of the individual(s) or entity(is) designated as recipient(s). The information contained within this email should not be construed as tax advice. If you are not an intended recipient of the email, you are hereby notified that any disclosure, copying, distribution, or action taken in reliance on the contents of this email is strictly prohibited. Disclosure to anyone other than the intended recipient does not constitute a waiver of any applicable privilege. If you have received this email in error, please immediately notify us by phone at (704) 739-4039 or by email at [email protected] and then permanently delete the original and any copy of this email (including any attachments) and destroy any printout thereof.
THE 2009 AMERICAN RECOVERY AND INVESTMENT ACT
In the message I will highlight specific instances that you might be able to use for your 2009 tax return.
1. Making Work Pay Credit
Eligible individuals are allowed a refundable income tax credit for tax years beginning in 2009 and 2010.
The amount of the credit is the lesser of:
• 6.2% of the taxpayer's earned income , or
• $400 ($800 for a joint return).
An “eligible individual” for purposes of the credit is any individual, except:
• A nonresident alien;
• An individual who can be claimed as a dependent by another taxpayer; and
• An estate or trust.
Each tax return on which this credit is claimed must include the social security number of the taxpayer (in the case of a joint return, the social security number of at least one spouse must be included). The credit is phased out at a rate of 2% of the individual's modified adjusted gross income (AGI) above $75,000 ($150,000 for joint returns). Revised income tax withholding schedules will be designed to reduce the taxpayers' income tax withheld for the remainder of 2009 in such a manner that the full annual benefit of the provision is reflected in income tax withheld during the remainder of 2009. The amount of the otherwise allowable credit must be reduced by the $250 economic recovery payment. Effective only for tax years beginning in 2009 and 2010.
2. ECONOMIC RECOVERY
A one-time $250 economic recovery payment is available to:
• Adults eligible for social security benefits;
• Adults eligible for railroad retirement benefits;
• Adults eligible for veterans compensation or pension benefits; and
• Individuals of any age eligible for supplement security income (SSI) benefits, other than individuals who receive SSI while in a Medicaid institution.
To receive an economic recovery payment, the individual must have been eligible for one of the above four benefit programs for any of the three months before February 17, 2009 (i.e., November or December 2008, or January 2009).
Additional rules:
• No payments will be made to an individual who died before becoming certified to receive the payment.
• The payment is not taxable.
• An individual is entitled to only one payment even if he/she is eligible for more than one benefit from the four benefit programs.
Payments are to begin as soon as practicable, but no later than 120 days after February 17, 2009. No payments are to be made after December 31, 2010.
3.Depreciation
Bonus Depreciation
The 50% bonus depreciation and alternative minimum tax (AMT) depreciation relief are extended for one year through December 31, 2009. The placed-in-service date for certain aircraft and certain long-production-period property is extended to December 31, 2010.
Section 179
The regular §179 deduction limit of $250,000 and beginning of phase-out amount of $800,000 for 2008 are each extended to apply to tax years beginning in 2009. Effective for tax years beginning after December 31, 2008.
Passenger Autos
The $8,000 increase in first-year depreciation limit for passenger automobiles that are “qualified property” is extended through December 31, 2009.
Effective for property placed in service before January 1, 2010, and after December 31, 2008, in tax years ending after December 31, 2008.
Corporate Credit Election
The election available to corporations to trade bonus and accelerated depreciation for otherwise-deferred credits is optionally extended through December 31, 2009. If the property placed in service is certain aircraft and certain long-production-period property, the election is extended to December 31, 2010.
If a taxpayer didn't make the election for its first tax year ending after March 31, 2008 the taxpayer may make the election for its first tax year ending after December 31, 2008, and each later year.
4. Net Operating Losses
2008 Carryback Period
An eligible small business can elect to carryback a 2008 net operating loss (NOL) for up to five years. In other words, an eligible business may elect a three-, four-, or five-year carryback period for the 2008 NOL, instead of the general two-year carryback period.
Any election under §172(b)(1)(H) must be made by the due date (including extensions) for filing the taxpayer's return for the tax year of the NOL.
§172(b)(1)(H) provides for three elections:
• An election to apply the increased carryback provision;
• An election as to the length of the increased carryback (i.e., three, four, or five years). This election is part of the election above, and is made when that election is made; and
• An election to have the increased carryback period apply to NOLs for tax years beginning in 2008 (instead of NOLs for tax years ending in 2008).
Effective for NOLs arising in tax years ending after December 31, 2007 (i.e., NOLs for tax years ending in 2008) or, if the taxpayer so elects, NOLs for tax years beginning in 2008.
These are some of the main changes for 2009, I will try and get you more information on other tax law changes within the week.
Franklin Katz, ATP,PA, CPB
Frank’s Tax and Business Service
120 York Rd
Kings Mountain, NC 28086-3151
(704) 739-4039
Fax: (704) 739-3934
Circular 230 Ruling: Compliance
This email (including any attachments) contains PRIVILEGED AND CONFIDENTIAL INFORMATION protected by federal and/or state law and is intended only for the use of the individual(s) or entity(is) designated as recipient(s). The information contained within this email should not be construed as tax advice. If you are not an intended recipient of the email, you are hereby notified that any disclosure, copying, distribution, or action taken in reliance on the contents of this email is strictly prohibited. Disclosure to anyone other than the intended recipient does not constitute a waiver of any applicable privilege. If you have received this email in error, please immediately notify us by phone at (704) 739-4039 or by email at [email protected] and then permanently delete the original and any copy of this email (including any attachments) and destroy any printout thereof.