10 Tips for IRA Contributions

Here are 10 tips from the IRS regarding contributions to a traditional Individual Retirement Arrangement, better known as an IRA.

1. You may be able to deduct some or all of your contributions to your IRA and you also may be eligible for a tax credit equal to a percentage of your contribution.
2. Contributions can be made to your traditional IRA at any time during the year or by the due date for filing your return for that year, not including extensions. For most people, this means contributions for 2008 must be made by April 15, 2009.
3. The amount of funds in your IRA are generally not taxed until you receive distributions from that IRA.
4. To figure your deduction for IRA contributions, use the worksheets in the instructions for the form you are filing.
5. For 2008, the most that can be contributed to your traditional IRA generally is the smaller of the following amounts: $5,000 or the amount of your taxable compensation for the year. Taxpayers who are 50 or older can contribute up to $6,000.
6. Use Form 8880, Credit for Qualified Retirement Savings Contributions, to determine whether you are also eligible for a tax credit.
7. You cannot deduct an IRA contribution or claim the Credit for Qualified Retirement Saving Contributions on Form 1040EZ; you must use either Form 1040A or Form 1040.
8. To contribute to a traditional IRA, you must be under age 70 1/2 at the end of the tax year.
9. You must have taxable compensation, such as wages, salaries, commissions and tips. If you file a joint return, only one of you needs to have compensation.
10. Refer to IRS Publication 590, Individual Retirement Arrangements, for information on the amounts you will be eligible to contribute to your IRA account.

10 Things the IRS Won't Tell You

SmartMoney magazine recently published "10 Things the IRS Won't Tell You." Here's what the article listed:

1. Like it or not, you may need help with your taxes.
2. You don’t have to be rich to get audited.
3. Fear is often our best weapon.
4. The AMT is our ATM.
5. Just because we billed you doesn’t mean you owe us money.
6. If you don’t pay, we’ll sic a collection agency on you.
7. Want to go green? We’ll help pay.
8. April 15 isn’t necessarily a hard deadline.
9. We may be a government agency, but that doesn’t mean your data’s safe.
10. We may still have your refund.

Conversely, there are a few things the IRS will tell you that are not necessarily true. Peter Pappas, a CPA and attorney who writes the Tax Lawyer's Blog, listed the following examples of this:

1. Instead of paying a lawyer, just pay us.
2. If you don’t pay your taxes, you might go to jail.
3. Your attorney isn’t returning my calls.
4. Now, it's personal.
5. Your attorney isn’t cooperating.

The IRS may make the same statements in reference to your CPA. Pappas adds: "Of course, not all IRS revenue officers engage in shenanigans like these, but enough of them do to make it a real problem."

With current economic conditions, we're supposed to start seeing a "kindler, gentler" IRS. We'll see how that works out.

7 tips for avoiding an IRS lien

If you owe the IRS money, the problem will only get worse if the IRS places a lien on your property to collect. Tax attorney and CPA Peter Pappas provides the following 7 tips for avoiding an IRS lien: 1. Respond immediately to all IRS notices (even the apparently nice ones). 2. Treat IRS collection agents with respect. 3. Get current with all of your tax filings. 4. Don’t lie to an IRS agent. 5. Pay a downpayment on what you owe. 6. Borrow the money to pay the IRS in full. 7. Consult with a tax lawyer or CPA.

10 Facts about the Child & Dependent Care Credit

If you have a child under age 13 and pay for child care so you can work, you may be entitled to a credit. Here are 10 facts from the IRS about claiming the Child and Dependent Care Credit on your federal income tax return: 1. The care must have been provided for one or more qualifying persons. A qualifying person is your dependent child under age 13. Additionally, your spouse and certain other individuals who are physically or mentally incapable of self-care may also be qualifying persons. You must identify each qualifying person on your tax return. 2. The care must have been provided so you – and your spouse if you are married – could work or look for work. 3. You – and your spouse if you are married – must have earned income from wages, salaries, tips, other taxable employee compensation or net earnings from self-employment. One spouse may be considered as having earned income if they were a full-time student or they were physically or mentally unable to care for themselves. 4. The payments for care cannot be paid to your spouse, to someone you can claim as your dependent on your return, or to your child who is under age 19, even if he or she is not your dependent. You must identify the care provider on your tax return. 5. Your filing status must be single, married filing jointly, head of household or qualifying widow(er) with a dependent child. 6. The qualifying person must have lived with you for more than half of 2008. 7. The credit can be up to 35 percent of your qualifying expenses, depending upon your income. 8. For 2008, you may use up to $3,000 of the expenses paid in a year for one qualifying individual or $6,000 for two or more qualifying individuals. 9. The qualifying expenses must be reduced by the amount of any dependent care benefits provided by your employer that you exclude from your income. 10. If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. If you are a household employer, you may have to withhold and pay social security and Medicare tax and pay federal unemployment tax.

10 Tips for Deducting Charitable Contributions

10 tips from the IRS on deducting charitable contributions:

1. Contributions must be made to qualified organizations to be deductible. You cannot deduct contributions made to specific individuals, political organizations and candidates.

2. You cannot deduct the value of your time or services. Nor can you deduct the cost of raffles, bingo or other games of chance.

3. If your contributions entitle you to merchandise, goods or services, including admission to a charity ball, banquet, theatrical performance or sporting event, you can deduct only the amount that exceeds the fair market value of the benefit received.

4. Donations of stock or other property are usually valued at the fair market value of the property. Special rules apply to donation of vehicles.

5. Clothing and household items donated must generally be in good used condition or better to be deductible.

6. Regardless of the amount, to deduct a contribution of cash, check, or other monetary gift, you must maintain a bank record or a written communication from the organization containing the name of the organization, the date of the contribution and amount of the contribution.

7. To claim a deduction for contributions of cash or property equaling $250 or more you must obtain a written acknowledgment from the qualified organization showing the amount of the cash and a description of any property contributed, and whether the organization provided any goods or services in exchange for the gift. One document from the organization may satisfy both the written communication requirement for monetary gifts and the written acknowledgement requirement for all contributions of $250 or more.

8. If you claim a deduction of more than $500 for all contributed property, you must attach IRS Form 8283, Noncash Charitable Contributions, to your return.

9. Taxpayers donating an item or a group of similar items valued at more than $5,000 must also complete Section B of Form 8283, which requires an appraisal by a qualified appraiser.

10. Contributions made for relief efforts in a Midwest disaster area receive special benefits. For more information, see Publication 4492-B, Information for Affected Taxpayers in the Midwest Disaster Areas.

President pushes for tax reform

Could tax simplification really be on the horizon? We can hope. The recently-formed President's Economic Recovery and Advisory Board has been given three tasks:

1. tax simplification
2. closing tax loopholes and reducing tax evasion
3. reducing corporate welfare

From the press briefing Tuesday:

"One of the key things that the Volcker board will be examining is ways of unifying, streamlining, making more consistent the various credits that are out there: Making Work Pay, the Earned Income Tax Credit, the Child Tax Credit, and what have you. And in addition, with regard to the tax gap, there are hundreds of billions of dollars in uncollected taxes each year."

The board has only the following two restrictions on the options it brings to the President:

• No tax increases during 2009 or 2010
• No tax increases on families making less than $250,000

The board will report back to the President with options for tax reform by Friday, December 4th.

More information is available from the Wall Street Journal. We at TY will be watching the developments closely, and hoping for some real simplification of the tax law.

Obama proposal for small business lending

The U.S. Treasury has published information on the administration's plans to aid small business. The fact sheet titled Unlocking Credit for Small Businesses outlines the following 5 meaures:

1. Jumpstart Credit Markets For Small Businesses By Purchasing Up to $15 Billion in Securities
2. Temporarily Raise Guarantees to Up to 90 Percent in SBA's 7(a) Loan Program
3. Temporarily Eliminate Certain SBA Loan Fees to Reduce the Cost of Capital
4. Call by Secretary Geithner for New Reporting Requirements on Bank Lending to Small Businesses and Greater Efforts to Extend Small Business Loans
5. Issue Guidance for an Expanded Carryback Provision as Part of the Recovery Act's Comprehensive Tax Cut Package for Small Businesses

The Treasury has also published several related Questions & Answers on the plan.

First-time homebuyer credit

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1 can receive up to:

• $4,000 for married individuals filing separately, or
• $8,000 for all other individuals.

People can claim the credit either on their 2008 tax returns due April 15 or on their 2009 tax returns next year. If you are a qualified first-time homebuyer in 2009, the filing options to consider are:

• File an extension. Taxpayers who haven't yet filed their 2008 returns but are buying a home soon can request a six-month extension to October 15. This step would be faster than waiting until next year to claim it on the 2009 tax return. Even with an extension, taxpayers could still file electronically, receiving their refund in as few as 10 days with direct deposit.
• Amend the 2008 tax return. Taxpayers buying a home in the near future who have already filed their 2008 tax return can consider filing an amended tax return. The amended tax return will allow them to claim the homebuyer credit on the 2008 return without waiting until next year to claim it on the 2009 return. Keep in mind, however, that the IRS may scrutinize an amended return more closely than it would an originally filed return.
• Claim the credit in 2009 rather than 2008. For some taxpayers, it may make more financial sense to wait and claim the homebuyer credit next year when they file the 2009 tax return rather than claiming it now on the 2008 tax return. This could benefit taxpayers who might qualify for a higher credit on the 2009 tax return. This could include people who have less income in 2009 than 2008 because of factors such as a job loss or drop in investment income.

For more information on the credit, including how to qualify, please visit the IRS website here.

For information on the California credit for purchases of new homes, please visit our blog post here.

No more hiding in Switzerland

If you've been evading taxes in Switzerland, you're out of luck. The European tax haven has announced it will no longer protect tax evaders from foreign governments. The New York Times reports that leaders of many other countries have criticized the Swiss for their tolerance of tax evaders, who have hid an estimated $7 trillion dollars in their protective borders. Austria and Luxembourg, two other tax havens, have also agreed to assist other countries in going after tax cheats.

April filing deadlines

Common tax filing deadlines for the month of April: April 15

• Income tax returns for individuals, partnerships, and trusts are due for calendar year 2008. Any tax due must be paid by April 15, even if an extension is filed.

• Estimated tax payments for individuals, trusts, and corporations are due for the first quarter of 2009.

California Taxpayers

• California taxpayers must pay 30% of their total estimated tax in the first quarter (instead of the usual 25%).

• California corporations must make at least a first quarter payment, as all California corporations pay an $800 annual minimum tax.

• California LLCs must pay an $800 annual LLC tax.

April 30

• Federal Form 941 (Employer's Quarterly Federal Tax Return) due for the first quarter of 2009.

• California Form DE 6 (Quarterly Wage and Withholding Report) due for the first quarter of 2009.

Worker's Compensation-Expect Large Increases

Just when you thought things were bad enough, more potential bad news is looming. On March 18th, the Workers Compensation Inspection Rating Bureau (WCIRB) recommended that worker's compensation rates need to be increased 24% in order to cover the cost of anticipated claims. The WCIRB gathers all the claim and payroll information for each class of business in California and sets guidelines for rates. They also project where rates and expenses will be each year. This is just a recommendation and each carrier can revise their rates as they see fit, but based on this reccomendation it is likely that workers compensation rates will have large increases at your next renewal. You may want to start the dialogue with your insurance broker earlier this year so you know what to expect. Also, if you are estimating projects this is something you will want to keep in mind. Good luck.

Path to Financial Stability

The AICPA (American Institute of Certified Public Accountants) published a checklist for business owners titled "A Path to Financial Stability." Although there's no "magic checklist" for these turbulent times, perhaps this guide may be helpful for small business owners. Let us know whether you find it valuable.

Tax credit for hybrids

A purchaser of a hybrid passenger automobile may be allowed a tax credit of up to $3,400 depending on the model. A credit is usually more advantageous than a deduction because a tax credit is subtracted dollar-for-dollar off the bottom line of your federal tax bill, while a deduction simply reduces taxable income.

The law limits the credits to the first 60,000 hybrid vehicles from each automaker. As of January 1, 2009, the credit for both Toyota and Honda hybrids has completely phased-out.

A few additional points about the credit:

• In general, the credit is allowed to the vehicle owner, including the lessor of a vehicle subject to a lease. Thus, if you lease a hybrid (rather than purchase it), you won't qualify for the credit.
• The original use of the hybrid auto must begin with you, i.e., the vehicle must be new.
• The credit isn't allowed if you buy the hybrid auto for resale.

To find out if a car qualifies for the credit, and to find the credit amount, go to the following IRS website, scroll down, and click on the appropriate model year: Qualifying Hybrids

California New Jobs Tax Credit

The California Franchise Tax Board released guidance on a new tax credit that was part of the recent budget package. The new credit is $3,000 for each additional full-time employee hired is available to small businesses with 20 or less employees beginning January 1, 2009. The total amount of credit available to be claimed by all taxpayers is capped at $400 million. For more information on the new credit, please visit the FTB announcement.

Help meeting new COBRA requirements

The Department of Labor has published model notices to help plans and individuals comply with the new COBRA requirements of the recent economic stimulus package.

By April 18, an employer must send a "Notice in Connection with Extended Election Periods" to any eligible individual who:

• Had a qualifying event (more info here) at any time from September 1, 2008 through February 16, 2009; and
• Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

Applicable Federal Rates (AFRs) for April

	Period for compounding
	Annual	Semiannual	Quarterly	Monthy
Short-term	0.87%	0.87%	0.87%	0.87%
Mid-term	2.39%	2.38%	2.37%	2.37%
Long-term	4.61%	4.56%	4.53%	4.52%

Small businesses may be entitled to refunds

The federal economic stimulus package includes a change that could mean refunds for some small businesses. Under the new law, a small business that reports a federal taxable loss on its 2008 tax return may elect to carry the loss back 5 years to get a refund of taxes paid in the prior year(s). The new rule will benefit a business:

• That reports a net operating loss for 2008,
• Whose average gross receipts were less than $15 million for the three-years ending with the year of the loss, and
• That paid federal income tax in one or more of the 5 previous years.

From the IRS news release:

"The new provision, enacted as part of the American Recovery and Reinvestment Act of 2009, enables small businesses with a net operating loss (NOL) in 2008 to elect to offset this loss against income earned in up to five prior years. Typically, an NOL can be carried back for only two years. " 'The new net operating loss provisions could throw a lifeline to struggling businesses, providing them with a quick infusion of cash,' said IRS Commissioner Doug Shulman. 'We want to make it as easy as possible for small businesses to take advantage of these key tax benefits.' " We will communicate with any clients who are eligible for refunds under the new rule.

Obama announces more plans for small business

From MSNBC: "The Obama administration announced Monday that the 21 largest banks receiving U.S. government money must report monthly on how much they lend to small businesses. "All other banks getting federal taxpayer help are being asked to report quarterly on small business loans. Even banks that are not taking government funds are being told by the administration to 'make an extra effort' to increase small business lending... "The new measures taking effect Monday focus on opening up small-business lending, seen as critical to cities’ growth. While the SBA typically guarantees $20 billion in loans annually, new lending this year is on track to fall below $10 billion, according to the administration. Under the two-month-old administration’s new initiative, the government will step in to buy these loans to help unlock the frozen credit market, using money from the recently passed bailout package in the range of between $10 billion to $20 billion, one official briefed on the plan said."

Free tax help March 21

From the IRS newsroom: The Internal Revenue Service and scores of its community partners will open their doors on Saturday, March 21, to help people who need free tax preparation, a question answered or a payment schedule arranged. The IRS will open more than 250 local offices from 9 a.m. to 2 p.m. Community partners will open approximately 1,000 sites on March 21. Tax return preparation is limited to people who earn $42,000 or less. There is no income limitation for people needing IRS assistance for other services at Taxpayer Assistance Centers. Click here to find a location near you.

Tax deduction for auto expenses

A recent Tax Court case reminds us to keep records to support any tax deductions for auto expenses. In the case, the court recognized that the taxpayer, a traveling salesperson, did conduct business travel. But the court denied a deduction because the taxpayer didn't have credible substantiation for the mileage. The lesson learned? Keep a record of business mileage. Find a system that works for you. If you have an appointment book, consider writing down any mileage to get there and back. Even though tracking mileage is an inconvenience now, it will save you stress and tax dollars in an audit. For more information on the case, visit the article from the Journal of Accountancy. For more information on travel, meals and entertainment expenses, visit the FAQ on our website at: http://ty-llp.com/about_faq.html.

Will "Ugly Betty" come back to California?

The new budget allocates $100 million annually for tax credits to lure television series back to California. The LA Times reports: "More than 30 states now offer tax credits and rebates to lure production crews to their locales. New York, New Mexico, Louisiana and Michigan have seen a surge in production and jobs since implementing incentive programs, contributing to historic lows in L.A. shoots. " 'So much has disappeared, anything we bring back will be a boon,' said Paul Audley, president of FilmL.A., which processes filming permits. "The tipping point came last summer when ABC moved production of its sitcom 'Ugly Betty' to New York from Los Angeles, creating an uproar among hundreds of crew members.Attracting such shows back is the primary aim of the new incentives, which offer a 25% tax credit for TV series that relocate to California." More information on the credit is available on the California Film Commission website.

Tax deduction for home office expenses

In today's world of telecommuting and environmental awareness, many taxpayers opt to work from a home office. Deducting home office expenses can create tax savings, but should be done with care. The rules are very strict, and IRS scrutinizes home office deductions carefully. To help taxpayers determine whether to take the deduction, the AICPA published a short (less than 2 page) summary of the rules, which you can visit here. The IRS also published recent guidance, which you can find here.

Have a tax question?

When you have a tax question, you probably don't want to read through the 3.6 million words in the tax code. Our Tax FAQs are written to answer common tax questions. (A few FAQs are listed on the right of our blog, along with a link to the FAQ page.) We welcome and appreciate your suggestions for new FAQs. You can use the form below to submit questions, and are not required to provide any contact information if you don't want to (even though we hope you'll let us follow up with you). Thank you for reading!

California sales tax increases by 1% on April 1

If you are planning to make a major purchase soon, you may want to act before April 1, when the statewide California sales tax increases by 1%.

The temporary 1% tax rate increase will expire on either July 1, 2011, or July 1, 2012, depending upon whether voters approve the proposed Proposition 1A, Budget Stabilization Act, in a statewide election to be held May 19, 2009.

There is an exemption from the tax rate increase for fixed-price contracts and fixed-price lease agreements entered into prior to April 1, 2009. To qualify as fixed-price,:

• Neither party can have the unconditional right to adjust the price for an increase in costs or terminate the contract or lease, and
• The tax amount or rate must be specifically stated in the contract or lease agreement.

For more information, including FAQs about the tax increase, please visit the California State Board of Equalization website.

Tax incentive to purchase a new car

In hopes of spurring the overall economy in general, and the automobile industry in particular, the recently enacted “American Recovery and Reinvestment Act of 2009” includes a new tax break for purchasers of new cars: a deduction for state and local sales and excise taxes paid on new vehicle purchases.

This new tax deduction for sales tax:

• Applies to purchases of passenger cars, minivans, light trucks, motorcycles, and motor homes, but it only applies on $49,500 of the vehicle's price and it only applies to new vehicles.
• Applies for new vehicles purchased between Feb. 17, 2009 and the end of 2009.
• Is available even if you do not itemize your deductions.
• Is not available for couples who earn over $260,000 or individuals who earn over $135,000 in 2009.

Avoiding a tax audit

The fear of audit keeps many taxpayers from claiming excessive deductions or credits. Of course, none of us wants to pay more tax than we have to, and the Supreme Court has affirmed our right to try to minimize our taxes:

"The legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted." (US Supreme Court, Gregory v. Helvering, 55 S Ct. 266, 1/7/1935)

So while minimizing our taxes, how can we also minimize our risk of audit?

Although there's no bullet-proof formula to avoid audit, there are some things to watch out for, such as excessive deductions for charitable contributions. For more suggestions, please visit the complete article.

Webinar for Small Business

The Small Business Administration (SBA) and the Internal Revenue Service (IRS) are hosting a webinar on small business survival in tough economic times. The webinar is scheduled for Thursday, March 19 from 10:00-12:00 EDT (7:00 - 10:00 PDT).

Topics discussed will include:

• IRS relief for those in difficult financial situations
• The Earned Income Tax Credit
• SBA programs and services to help small businesses secure capital and credit
• Selected topics from the recently passed American Recovery and Reinvestment Act

To register, click here.

Treasury to focus on small business

Today's issue of the Wall Street Journal reports: "The Obama administration is looking to steer new assistance to the nation's small-business community, Treasury Secretary Timothy Geithner told members of Congress Monday night. "White House officials on Monday night pointed to $730 million from the stimulus plan that went to the Small Business Administration to reduce small-business fees and guarantee a greater share of some SBA loans. The Obama budget would authorize the SBA to support $28 billion in lending guarantees. "In what appears to be an expansion of those efforts, Mr. Geithner said Monday that the Obama administration will launch a plan next week that will provide financing, liquidity and guarantees to open up small-business lending, which is seen as a crucial element of economic recovery." Please click here for the complete article: "Treasury Plans Small-Business Aid."

In a related article, today's issue of the WSJ discusses how small businesses are looking to the federal government as a potential customer. Please click here for the complete article: "Opportunity Knocks and Uncle Sam Is at the Door."

Energy tax credits

The recently enacted American Recovery and Reinvestment Act of 2009 (the 2009 economic stimulus act) includes a package of tax incentives to encourage investments in renewable energy projects or more-efficient technologies. The new law includes or expands the following credits:

• Energy property credit for qualified energy-efficient equipment or building components installed in the taxpayer's principal residence
• Credits for plug-in electric vehicles
• Renewable energy production credit for wind facilities and other sources

For more information on these and other energy tax incentives in the new law, visit: http://www.journalofaccountancy.com/Web/20091531.htm

Cutting Energy Costs

The March issue of the Journal of Accountancy provides suggestions for how small businesses can cut energy costs. "For many business owners 2008 was a record year for energy costs. The Obama administration, while pledging to reduce greenhouse gas emissions 80% by 2050, has said that ‘energy efficiency’ is the cheapest, cleanest and fastest energy ‘source.’ " For the complete article, please visit: http://www.journalofaccountancy.com/Issues/2009/Mar/EnergyStar.htm

Murder plot to kill IRS agent

Don't you hate it when your hired hit man turns out to be an undercover FBI agent? Last Thursday, a man convicted of hiring an undercover FBI agent to murder an IRS employee was sentenced to 30 years in prison. Randy Nowak of Mulberry, Florida arranged the hit on an IRS employee who was examining his individual and business tax liabilities. He paid the would-be killer a $10,000 down payment to close the deal. The undercover FBI agent called himself "Reaper," and was posing as a member of a motorcycle gang. The 6-foot, 4-inch agent wore a goatee and claimed to be a member of the Outlaws gang. The jury took less than 3 hours to reach a guilty verdict. For more details, please visit the article on Webcpa.com at: http://www.webcpa.com/article.cfm?articleid=30924.

Recovery Rebate Credit

The federal "Recovery Rebate Credit" may be available to the following individuals:

• Individuals who did not receive an economic stimulus payment.
• Those who received less than the maximum economic stimulus payment in 2008 — $600 per taxpayer; $1,200 if married filing jointly — because their qualifying or gross income was either too high or too low.
• Families who gained an additional qualifying child in 2008.
• Individuals who could be claimed as a dependent on someone else’s tax return in 2007, but who cannot be claimed as a dependent on another return in 2008.
• Individuals who did not have a valid Social Security number in 2007 but who did receive one in 2008.

You can quickly find the amount of stimulus payment you received at: http://www.irs.gov/individuals/article/0,,id=185471,00.html

Congratulations McGuire & Hester

Everyone at ThomasYork would like to congratulate our client, McGuire & Hester, for being featured as the cover story in the Construction Today Magazine. The article highlights how McGuire & Hester has become successful during the past 80 years and how they continue to thrive. To read the article, please visit: http://www.construction-today.com/content/view/1246/31/

California begins releasing refunds

Today, State Controller John Chiang announced he has begun releasing more than $2.8 billion in payments that were delayed in February due to the state's cash shortage. The Controller anticipates all of the delayed payments will be made within the next several weeks on a “first in, first out” basis, and March payments will be made as scheduled. For more information from the State Controller's office, please visit: http://www.sco.ca.gov/eo/fiscalissues/payments03-09.shtml

Making Work Pay Credit

For 2009 and 2010, the Making Work Pay provision of the American Recovery and Reinvestment Act provides a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns. This tax credit is 6.2 percent of earned income, and will phase out for taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.

Taxpayers will not get a separate, special check mailed to them from the IRS like last year’s economic stimulus payment. Instead, employers will begin decreasing the amount of federal tax withheld from employees' paychecks. Most employees will receive an additional $33 per month from the credit. (Try not to spend this cash windfall all at once.)

The IRS released new withholding tables to reflect the credit, and requests that employers start using these new tables as soon as possible but not later than April 1.

For information on the credit and access to the new withholding tables, visit: http://www.irs.gov/newsroom/article/0,,id=204521,00.html

President Establishes Recovery.gov

President Obama has overseen the development of Recovery.gov, a new website on the recent economic stimulus package. In the President's words: "The American Recovery and Reinvestment Plan represents a strategic and significant investment in our country's future. The size and scale of this plan demand unprecedented efforts to rule out waste, inefficiency, and unnecessary spending. Recovery.gov will be the online portal for these efforts, publishing information about how the funding secured by the legislation will be spent in a timely, targeted, and transparent manner." To view the website, which provides information on where funds are going, visit: http://www.recovery.gov/.

Where's my California refund?

State tax refunds for California taxpayers continue to be delayed. Individuals will receive interest due to the delay only if their refund is not issued within 45 days after April 15, or the date that your return is filed, whichever is later. You can check the status of your refund at: http://www.ftb.ca.gov/online/refund/index.asp You can check the status of your federal tax refund at: http://www.irs.gov/individuals/article/0,,id=96596,00.html.

Funds for Small Business

The American Recovery and Reinvestment Act of 2009 (Recovery Act) signed into law by President Obama on February 17, 2009 includes more than just tax changes. The law also provides $730 million to the Small Business Administration (SBA) and makes changes to the agency’s lending and investment programs so that they can reach more small businesses that need help. The funding includes:

• $375 million for temporary fee reductions or eliminations on SBA loans and increased SBA guaranteed shares, up to 90 percent for certain loans
• $255 million for a new loan program to help small businesses meet existing debt payments
• $30 million for expanding SBA’s Microloan program, enough to finance up to $50 million in new lending and $24 million in technical assistance grants to microlenders
• $20 million for technology systems to streamline SBA’s lending and oversight processes
• $15 million for expanding SBA’s Surety Bond Guarantee program
• $25 million for staffing up to meet demands for new programs
• $10 million for the Office of Inspector General

For more information from the SBA, visit: http://www.sba.gov/recovery/index.html

California FTB urges caution when choosing a tax preparer

The California Franchise Tax Board (FTB) issued a press release last week urging taxpayer caution when choosing a tax preparer. "Taxpayers should realize they are ultimately held accountable for the information on their tax return even if they pay someone else to prepare it. The majority of tax professionals are honest and provide a quality service. Unfortunately, there are dishonest tax preparers who may inflate expenses and deductions, claim unallowable credits, or take excessive exemptions and leave their clients accountable." For the complete press release, please visit: http://www.ftb.ca.gov/aboutFTB/press/2009/09_11.shtml

How will the new CA budget affect you?

An online calculator is available to estimate how the new California budget will affect your household. To use the calculator, and for information on the new budget, visit the website for The Sacramento Bee at: http://www.sacbee.com/1098/story/1627728.html

California Tax Credit for New Home Purchases

A new California tax credit is available for new home purchases between March 1, 2009 and February 28, 2010. The credit applies only to homes that have never been occupied. The tax credit is equal to 5% of the purchase price, up to a maximum credit of $10,000. Qualifying taxpayers need to act fast, because the credit is available on a first-come, first-served basis until the $100 million budgeted for the credit has been used up. Within one week of the close of escrow, certain forms must be completed by both the buyer and seller, and faxed to the Franchise Tax Board. Taxpayers who are allocated a portion of this credit will claim the credit on their tax returns starting with the year the home was purchased. For more information, including how to fax in the application to be allocated the credit, please visit the FTB website here.

More Info on New COBRA Rules

The US Department of Labor (DOL) has published guidance and resources on the new law, which provides for a 65% reduction in COBRA premiums for certain eligible individuals for up to 9 months. For FAQs for employers, employees, fact sheets, and other resources from the DOL, please visit: http://www.dol.gov/ebsa/COBRA.html

New Rule for COBRA Health Insurance

The 2009 Tax Act made changes to the health benefit provisions of COBRA. Eligible former employees who were enrolled in their employer's health plan when they lost their job need only pay 35% of the cost of COBRA coverage, while employers are entitled to a credit for the other 65% of the COBRA cost on their payroll tax return. The IRS posted guidance, including questions and answers for employers, at www.irs.gov/newsroom/article/0,,id=204505,00.html.