Donovan, Klimczak & Company CPAs

Worker, Homeownership, and Business Assistance Act of 2009
Enacted Nov, 6, 2009

  • First-time homebuyer credit of lesser of 10% of the purchase price or $8,000 extended to April 30, 2010.
  • Extension to July 1, 2010 if enter into a binding contract before May 1, 2010 and close before July 1, 2010.
  • Allocation of the credit among two or more unmarried taxpayers using any reasonable method.
  • Election to accelerate the claim for the credit as made on December 31 of the calendar year preceding the actual date of the purchase, made on Form 5405.
  • Application of a reduced credit of up to $6,500 for “long-time” residents. Long-time resident is anyone who has owned and used the same residence as their principal residence for any five-consecutive year period during the previous eight-consecutive year period ending with the date of purchase of the new residence.
  • Credit phases out for individuals with modified adjusted gross incomes above $125K and for joint filers with incomes above $225K.
  • Generally no repayment of the credit for principal residences purchased in 2009 and 2010, unless the residence ceases to be the taxpayer’s principal residence within 36 months from the date of purchase. Repayment is due on the tax return for the year the residence ceases to be the taxpayer’s principal residence.
  • Credit is available for purchase price of $800K or less. Vacation homes are not eligible.
  • Credit is extended until June 30, 2011 for members of the military serving outside the US for at least 90 days.
  • New law expressly excludes dependents and related parties from claiming the credit and the taxpayer must be at least 18 years of age. A copy of the settlement statement must be attached to the tax return.
  • New law gives the IRS “math error” authority to disallow the credit during return processing.
  • Expansion of three, four or five year Net Operating Loss carrybacks to all US businesses of every size, but imposes a 50-percent income limit in year five.
  • Applies to NOL’s incurred in either 2008 or 2009, not both, unless a qualified small business that elected to carryback a 2008 loss.
  • Election for NOL carrybacks must be made by the due date of the 2009 return, including extensions.
  • Suspension of 90-percent income limitation on the use of NOL’s for purposes of determining AMT.
  • Not available to companies receiving TARP assistance, not available to Fannie Mae or Freddie Mac agencies.
  • Expansion of electronic filing requirements for return preparers of 10 or more individual, estate and trust returns.
  • Increased failure to file penalties for partnerships and S-Corporations.
  • Extension of the federal unemployment surtax through June 30, 2011.
Note: This is not a complete list of all the provisions in the Act. Please give us a call to discuss an item in greater depth or to inquire about an item not on this list.

Disclaimer: This document represents a general overview of recent tax developments and should not be relied upon without an independent, professional analysis of how any of these provisions may apply to your specific situation. Any tax information contained in the body of this narrative was not intended or written to be used, and cannot be used, by the recipient for the purposes of avoiding penalties that may be imposed under the Internal Revenue Code or provisions of applicable state or local law.

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