Tax Changes for Businesses And Individuals
Posted 1-5-2010 | By Gloria McDonnell | Download Article
As seen in Minnesota Business Experts' Forum
The Worker, Homeownership and Business Assistance Act of 2009 (the Act) signed by President Obama on November 6, 2009 brings tax changes to businesses and individuals as highlighted below.
Business Tax Changes
The expanded five-year net operating loss (NOL) carryback scheduled to expire in 2009 is extended and enhanced for 2010. The American Recovery and Reinvestment Act of 2009 allowed small businesses with average gross receipts of $15 million or less to elect to carry back NOLs from 2008 for three, four or five years rather than the standard two years. The new law allows U.S. businesses of any size to carry back NOLs up to five years. Applicable NOLs may be from either 2008 or 2009, but not both years. However, small businesses that made an election before the date of enactment for the Act may make an election for two tax years instead of one. The NOL provision allows businesses to receive a quick refund for net operating losses carried back to a profitable year giving them access to additional cash now to reinvest in their business.
- For tax years ending after 2002, the Act suspends the 90% limitation on the use of a NOL for alternative minimum tax purposes.
- Under pre-Act law, the Federal Unemployment Tax Act (FUTA) tax was imposed at a rate of 6.2% through 2009. The Act extends the 6.2% FUTA tax rate through June of 2011.
- The Act states that the penalty for failing to file a partnership or S Corporation return increases from $89 to $195 per month per partner or shareholder for up to 12 months.
Individual Tax Changes
- The Act expands and extends the first-time homebuyer tax credit scheduled to expire after Nov. 30, 2009. The tax credit, now available to higher-income taxpayers and to some existing homeowners, has a new expiration date of April 30, 2010 (June 1, 2010 with a written binding contract by April 30, 2010). Existing homeowners who maintained the same principal residence for any five-consecutive year period during the previous eight-year period ending on the date of the purchase of a subsequent principal residence now qualify for a credit at a reduced amount under the new Act. The maximum credit available for existing homeowners is $6,500 rather than the $8,000 for first-time homebuyers. The Act also increases the income level for the credit phase-out to $145,000 for single individuals and to $245,000 for married couples filing jointly. In addition, to receive the credit the purchase price may not exceed $800,000.
Please contact Gloria McDonnell, CPA, gmcdonnell@hlbtr.com with any questions.