Worker, Homeownership & Business Assistance Act
Congress has passed and President Obama has signed into law HR 3548, the Worker, Homeownership & Business Assistance Act of 2009. This law extends unemployment compensation benefits. "The extension provides for 14 weeks of extended benefit coverage for every state and an additional 6 weeks, for a total of 20 weeks, in high unemployment states where unemployment is over 8.5%," reports Alison Doyle, About.com's Guide to Job Searching.
The law provides a number of tax law changes as well. Some extend or enhance current tax breaks, while other changes are designed as revenue raisers. Here's highlights of the tax changes.
The tax credit for first-time homebuyers was scheduled to expire on November 30, 2009. HR 3548 extends the credit to April 30, 2010. Additionally, Congress has expanded the definition of who qualifies as a "first-time homebuyer" to include people who currently own a house and have owned and lived in their residence for any consecutive five-year period during the eight-year period ending with the date when their new home is purchased. Such long-time homeowners who buy a new residence are eligible for a tax credit of up to $6,500 if they buy another residence between November 7, 2009, to April 30, 2010.
HR 3548 adds new restrictions and criteria designed to combat fraudulent homebuyer credit refund claims. Dependents are now prohibited from claiming this tax credit, taxpayers will need to submit documentation with their tax return to prove they really bought a house, and the IRS has been given the authority to automatically assess tax and begin collection proceedings in cases where they suspect fraud (thus shortening the normal time it takes for the IRS to collect additional tax through the normal deficiency procedures). This IRS authority (called "math error authority") is retroactive to April 9, 2008, thus giving the IRS the ability to quickly address any erroneous refund claims that have been previously filed.
Mandatory Electronic Filing for Professionals
All tax professionals are now required to file individual, estate, and trust returns electronically. As yet there's no mandate for individuals preparing their own returns to file electronically. HR 3548 makes an exception for preparers who file 10 or fewer returns per year.
Business Tax Provisions
Increased S-Corporation and Partnership Penalties
HR 3548 increases the penalties for late-filing tax returns for S-corporations and partnerships, including LLCs treated as partnerships. The late-filing penalty has more than doubled, from $89 to $195 per month per shareholder or partner for each month that a return is filed after the deadline (including extensions). If you have an S-corp, partnership, or LLC, be sure to file those extensions.
Business Net Operating Losses Carryback
Businesses of all sizes can now carryback operating losses for up to five years. Previously this 5-year carryback was limited to small businesses with revenues of $15 million or less.
FUTA Surtax Extended
The temporary surtax of 0.20 percent on the federal unemployment tax has been extended through June 2011. The FUTA rate continues to be 6.2 percent. (This surtax was scheduled to expire at the end of 2009.)
More resources:
- Homebuyer credit from About.com
- Summary and text of HR 3548 from Open Congresss
- Home buyer credit new definitions, limits from DontMessWithTaxes
- In-depth tax briefing from CCH
So I’ve read the bill, checked out the IRS website, but not the existing first-time home buyer legislation which the bill references in regard to extending the credit to existing home owners. So answer me this. My wife and I bought a house August 2009 after living in our old house for 5+years, but before this legislation was signed. Is it retroactive?
Sorry smet…the act indicates that it is for homes purchased after the enactment date. This means for purchases Nov 7 2009 or after.
I haven’t seen the dates of when the 6500 credit is applicable for previous homeowners, only the dates which is applicable for the first time buyers. What are the applicable dates for the 6500 credit?
To Laura, The applicable dates are from November 6th 2009 to April 30th, 2010. (purchasing a principal residence after November 6th, and entering into a binding contract signed byApril 30th assuming a purchase by June 30th)
To anyone: Is their a stipulation on what indivdual was the primary borrower on previous house, and is this credit not applicable if not having owned a principal residence for a specified period of time?
I have a question of eligibility regarding the $6,500 “move up” home buyer tax credit.
I closed on my home on 12/31/03 and it is our primary residence. Last year I decided to sell my house when I found out a Registered Sex Offender was relocated next door. As a single mother of a nine year old I temporarily moved in with friend in July of 2008. This also gave me an opportunity to renovate the house in order to sell it. My mail was also forwarded to my friends address during this time.
We moved back to the house in June of 2009 when the work was completed and learned that the Sex Offender was sent back to prison. We are presently residing there full time now.
I did not rent the house and continued to pay the mortgage, utilities and taxes on the property during the entire time. I also spent most weekends and various other times at the house doing the renovations.
Will this time I spent at my friends house exclude me from the $6,500 tax credit? As a single parent with a low income this tax credit would be very important to me.
Thank you,
Ok, here’s a question – We currently own a rental/income home that we do not live in, but that we rent out. Here comes the trickier part … We have been renting my parent’s home for the last 23 years. My father’s estate would now like to sell us the house that we have lived in for 23 years. Will we qualify for the $6500 tax credit?
Regarding smet and gb’s comments, what if you were under contract to buy a house before November 6, 2009 when the law went into effect but did not close until between November 6, 2009 and April 30, 2010? What is the definition of “purchased” under the law…is it when you sign the contract to purchase or actually close?
My parents meet the long-term homeowner criteria, and signed the closing paperwork on their new home at 1:00pm November 6th. Do they qualify?
The relevant tax law (Internal Revenue Code section 36) does not define ‘purchase date.’ It is interesting that in the revised law, the credit is allowed for people who enter into a binding contract to purchase the property by April 30, 2010, as long as the deal closes by June 30, 2010. How this affects your parents would be a great question to ask their tax professional.
Ok, I have owned my home for 7 years. I got married 3.5 years ago. Both my husband and I reside in my home. We are purchasing a new home and closing within the required timeframe. My question is do we qualify because I have been in the house for over 5 years or do we not qualify because my husband has not lived there for over 5 years? Is my husband grandfathered because of me?
Beck #5, Technically speaking, you wouldn’t be able to claim the credit due to the lapse of time you resided in the home. However… my first question would be is there any substantiating records to show that this home was not your primary residence for that amount of time (your driver license address changed, had your mail forwarded to the other address, changed the address on your w-4)? The Act specifically states “principle residence,” which basically means it’s a home that you own. And you must have lived in the principle residence for 5 consecutive years. But after reading your post, unless you had these changes and there is nothing else records wise to show that you didn’t reside there, you should actually be able to claim the credit so long as you purchase your new home after Apr 30, 2010.
Deb #6, No, you cannot. Although you own a principle residence as an investment property, not a primary residence and you are renting, the fact is you have been renting from your parents and now plan to purchase the home from them (or their estate). The new act specifically states you cannot purchase a home from your relatives (grandparents, parents, children) nor your spouses relatives. If you were purchasing the home from a non-relative, you would be able to qualify for up to $8,000.
CJL #10, No, your husband would not qualify. You however would, but you’d have to file married separately. The new act states married couples must have resided together in the same principle residence for 5 consecutive years. You could qualify for $3,250 based on the fact that it has been your principle and primary residence for 5 consecutive years. Please remember there also income phase-out limits associated with this credit as well. Whether or not it would be advantageous for you to file married separately for this credit is something you should discuss it with your tax advisor.
adc #7, The act states that “purchase” means to close escrow. If you enter into a contract to purchase a home by Apr 30, 2010, you must close escrow by June 30. This merely serves to give some taxpayers an extra two month window to qualify for the credit. The act does not provide for any other period of time for entering into a contract to purchase. It should be noted though that if you did purchase the home prior to Nov. 6 and meet the qualifications for the credit, you still do NOT have to pay it back over a period of 15 years, so long as you file the claim in 2009. If you would’ve claimed the credit in 2008, you would have to pay credit back over 15 years beginning two years after you claimed the credit.
I purchased my house in 2002, and just recently sold it in May, 2009. So I lived there for the 5 years that are required, but I have not purchased a new home yet. If I were to purchase a home by April 30, 2010 would I qualify even though I sold my home in May?
Mindy, so long as the 5 years that you lived there were “consecutive,” then yes you would qualify provided that you close escrow on the new home by Apr 30, 2010. The next question would be what your filing status is? If you are single, or married filing separately then you’d qualify for up to $3,250. If you are married filing jointly then you’d qualify for up to $6,500, but only if you and your spouse used the old home as a primary residence “together” for the 5 consecutive years.