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More on the Worker, Homeownership, and Business Assistance Act of 2009

November 20, 2009 3:14 pm / Leave a comment

Here is an expanded outline on how the Worker, Homeownership, and Business Assistance Act of 2009 may affect some businesses (this outline does not include all the provisions of the act). Click here to read the bill as passed by both the House and the Senate.

  1. Allow for a 5 year carryback of 2009 NOLs
    1.  
        i. Small business will be exempt from the 1 election rule. Thus small business claiming the 5 year carryback for 2008 losses can still elect 5 year carryback for 2009 losses

      2. a. Removes the small business requirement
      b. Offset 50% of taxable income in 5th prior year
      c. Offset 100% of taxable income in 4th thru 1st prior years
      d. Only 1 election allowed (either for fiscal years beginning in 2008 or fiscal years beginning in 2009)

  2. Homebuyer credit
    1.  
        i. If using binding contract rule – must close by July 1, 2010

      2. a. Extended for purchases (binding contracts entered into by) through 4/30/2010b. Recapture waived for 2009 purchases
      c. Credit = lesser of 10% of purchase price or $8,000.
      d. Credit phases out for modified agi between $125k and $145k ($225k and $245k for married joint returns.)
      e. Can elect to treat 2009 purchases as if made in 2008 and claim credit on 2008 return
      f. Need not be a new buyer

        i. Existing homeowners living in current residence for at least 5 consecutive years during 8 year period ending on date of purchase are eligible for credit
        ii. Must live in new home for at least 3 years
        iii. Credit reduced to $6,500

      g. Limitations

        i. Purchase price must be < $800,000 ii. Skip buying a house for the kids – no credit allowed if can be claimed as a dependent of another taxpayer iii. No credit for taxpayers under 18 1. Emancipated minors out of luck unless one is at least 18

      h. MUST attach copy of settlement statement to the return

  3. Penalty for failure to file partnership or s corp returns increased to $195 per partner/shareholder per month beginning with 2010 returns.
  4. Electronic filing mandate
      a. Must use efile if preparing at least 10 individual income tax returns
      b. Individual income tax returns means returns for individuals, estates & trusts
  5. Large Corporation estimated tax payments increased to 100.58% for payments due in July, August or Sept.
      a. Large corporation is a corporation with at least $1b in assets at the end of the preceding tax year.

Expanded NOL Election Deadline September 15 for Corporations – Don’t Miss Out

September 12, 2009 2:00 pm / Leave a comment

WASHINGTON — Eligible taxpayers must act soon if they want to take advantage of the expanded business loss carryback option included in this year’s Recovery law. According to the Internal Revenue Service, eligible calendar-year corporations have until Sept. 15, and eligible individuals have until Oct. 15 to choose this special option.

This carryback provision offers small businesses that lost money in 2008 an excellent way to quickly get some much needed cash if they were profitable in previous years. This option is only available for a limited time, so small businesses should consider it carefully and act before it’s too late.

Under the American Recovery and Reinvestment Act (ARRA), enacted in February, many small businesses that had expenses exceeding their income for 2008 can choose to carry the resulting loss back for up to five years, instead of the usual two. This means that a business that had a net operating loss (NOL) in 2008 could carry that loss as far back as tax-year 2003, rather than the usual 2006. Not only could this mean a special tax refund, but the refund could be larger, because the loss is being spread over as many as five tax years, rather than just two.

This option may be particularly helpful to any eligible small business with a large loss in 2008. A small business that chooses this option can benefit by:

Offsetting the loss against income earned in up to five prior tax years,
Getting a refund of taxes paid up to five years ago,

Using up part or all of the loss now, rather than waiting to claim it on future tax returns.

Under ARRA, eligible taxpayers can choose to carry back a NOL arising in a taxable year beginning or ending in 2008 for three, four or five years instead of two. Eligible taxpayers are eligible small businesses (ESB) that have no more than an average of $15 million in gross receipts over a three-year period ending with the tax year of the NOL. This includes a sole proprietor that qualifies as an ESB, an individual partner in a partnership that qualifies as an ESB and a shareholder in an S corporation that qualifies as an ESB. This choice may be made for only one tax year.

Taxpayers must choose this special carryback by either:

Attaching a statement to an income tax return for the tax year that begins or ends in 2008 or,

Claiming a refund on Form 1045, Application for Tentative Refund or Form 1139, Corporation Application for Tentative Refund, or on an amended return for the tax year to which the NOL is being carried back.

Most taxpayers still have time to choose the special carryback and get a refund. A calendar-year corporation that qualifies as an ESB must make this choice by Sept. 15, 2009. For individuals, the deadline is Oct. 15, 2009. Deadlines vary for fiscal-year taxpayers, depending upon when their fiscal year ends and whether they are making the choice for the tax year that ends or begins in 2008.

A calendar-year taxpayer that chooses the special carryback by attaching a statement to the income tax return has until December 31, 2009, to claim the refund on Form 1045 or 1139, or 3 years after the due date (including extensions) for filing the 2008 income tax return to claim a refund on an amended return.

These forms, along with answers to frequently-asked questions about this special carryback, and other details can be found on IRS.gov
Related Items:
Net Operating Loss Carryback

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