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Tax Tips Newsletter
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December 2009 - Vol 4, Issue 7
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Greetings!
Linda Head Short 0608

Boy, it seems like this year has really flown by. I can't believe that the last newsletter I sent was back in August. Now tax season is just around the corner.

If I prepare your individual income tax returns, we will be sending out the 2009 organizers right after the New Year. If you would prefer to get a PDF organizer, please let me know before December 18, 2009. The PDF organizer is simply a PDF copy of the paper organizer that I would send out. It is not an electronic file that you fill in. You will still have to print the PDF file, fill it in and send it to us.

The office will be closed on December 24, 25, 31 and January 1st so that my staff can enjoy the holidays with their families. Wishing you a happy holiday season.

House
The "Worker, Homeownership, and Business Assistance Act of 2009," which was signed into law on November 6, 2009, made significant changes to the homebuyer tax credit. Here are the details.

CREDIT EXTENDED. The new law makes the credit available through April 30, 2010. If your transaction is incomplete as of April 30, you'll still be able to claim this tax break on your 2009 or 2010 return, provided you have a binding written contract and close by June 30, 2010.

In most cases, the amount of the credit remains the same - 10% of the price of your new home, up to a maximum of $8,000 - and it's still refundable. In addition, recapture requirements are unchanged. That means you won't have to pay the money back as long as you live in your new home three years.

PURCHASE PRICE RESTRICTION. For homes bought after November 6, 2009, the credit is available only when the total purchase price is less than $800,000.

RELAXED ELIGIBILITY REQUIREMENTS. You're now a "first-time homebuyer" if you used the same residence as your main home for five consecutive years of the eight years prior to buying the new house. However, if you qualify under this rule, the credit is limited to a maximum of $6,500.

INCREASED INCOME PHASEOUTS. If you purchase or close on your new home between November 6, 2009, and June 30, 2010, the credit begins to shrink when your modified adjusted gross income reaches $225,000 if you're married filing jointly. The threshold is $125,000 if you're single.

MINIMUM AGE AND DEPENDENCY STATUS. You or your spouse must be at least 18 years old and not claimed as a dependent on anyone else's return.

UNRELATED SELLER. The person you purchase the house from cannot be a relative.

RETURN ATTACHMENTS. You'll have to include a copy of the closing statement with your tax return.

Please contact us if you would like more information about the homebuyer's credit.
Business Team in Meeting
Normally, a business can carry back a net operating loss (NOL) for only two years before carrying it forward for up to 20 years. The "American Recovery and Reinvestment Act of 2009," signed earlier this year, allowed a carryback for three, four, or five years to qualified small businesses for NOLs in tax years beginning or ending in 2008. To qualify for the longer carryback period, the business had to have average gross receipts of $15 million or less.

NEW LAW. A new law signed November 6, 2009, expands the longer carryback period to include businesses of any size. The longer carryback is generally available for NOLs incurred in either 2008 or 2009.

One important restriction: An NOL carried back to the fifth year is limited to 50% of the taxable income for the year. Any remaining NOL may offset income in the remaining four years.

These rule changes are important if your business suffered a loss in 2008 or 2009. For a complete discussion of how the changes affect your company's tax situation, give us a call.
Golden Egg
The Tax Tip this week deals with shareholder loans in business. It is important that they are structured correctly, so if you have a shareholder loan, please read this article.

The Business Tip of the Month deals with starting a home business.

The Financial Tip of the Month warns that loans with friends and family can have some serious consequences.

The Fraud Alert has to do with phony anti-virus software.

Photos © Bigstockphotos.com, istockphoto.com

Sincerely,
Linda Heineman
Linda L. Heineman, CPA, CITP

phone: 626-577-0979
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