"Worker, Homeownership and Business Assistance Act" Signed into Law

On Friday November 6, 2009, the President signed the "Worker, Homeownership and Business Act" (the Act) into the law. The major tax provisions of the Act that we believe could affect many of our readers are as follows:

Homeowner Tax Credit

The Act extends the $8,000 first-time home buyer tax credit through April 30, 2010, and creates a new $6,500 tax credit for existing homeowners who want to purchase a different home as their primary residence. Parties that have already entered into a binding contract on a home are still eligible for the credit if they close on the home in 60 days. Individuals earning up to $125,000 and couples earning up to $225,000 are eligible for the credit.

Business Net Operating Loss (NOL) Carryback

The Act provides an election for most taxpayers (not just small businesses) to increase the carryback period for a 2008 or 2009 NOL to 3, 4 or 5 years from the current 2 years. The election may be made for only one year, except that eligible small businesses making an election under the Code in effect before the effective date of the new bill (i.e., Nov. 6, 2009) can make the election for both 2008 and 2009.

Generally, taxpayers can apply the longer carryback to only one tax year's NOL and to offset only 50% of income in the fifth year back, 100% in the other four. For qualifying small businesses, taxpayers can apply the longer carryback to both 2008 and 2009 NOLs, and the 50% limit applies only to 2009 NOLs. Taxpayers also have the option to use the normal two-year carryback or to waive the carryback period entirely and carry the loss forward.

Increase in Penalties on Late Filing of S Corporation and Partnership Tax Returns

Late filing penalties are increased from $106 to $195 per owner (per Form K-1) for failure to file S Corporation and Partnership tax returns.

Extended FUTA Surtax

The 0.2 percent Federal Unemployment Tax Act (FUTA) surtax is extended through June 30, 2011, to pay for the bill's extension of unemployment insurance benefits. The FUTA surtax extension would pay for 14 more weeks of UI benefits in all 50 states, and up to 20 more weeks in states with a three-month average total unemployment rate of at least 8.5 percent.

If you have any additional questions about the Worker, Homeownership and Business Act, please contact your RBZ representative or other appropriate advisor. We would be glad to answer any questions you may have.

RBZ, LLP is one of the largest public accounting and strategic consulting firms in Los Angeles and has been providing tax services for over 34 years. We are located at 11755 Wilshire Blvd., Ninth Floor, Los Angeles, CA 90025.

Phone: 310.478.4148 | Fax: 310.312.0358 | Web site: www.rbz.com