From the IRS:

The American Recovery and Reinvestment Act provides tax incentives for first-time homebuyers, people purchasing new cars, those interested in making their homes more energy efficient, and parents and students paying for college.

Here are six things the IRS wants you to know about ARRA tax incentives for individuals:

1. First-Time Homebuyer Credit Taxpayers who haven’t owned a principal residence during the past three years prior to the purchase date of a home before Dec. 1 of this year may be eligible to receive a credit of up to $8,000 on an original or amended 2008 tax return. They can also wait and claim the credit on their 2009 return.

2. New Vehicle Purchase Incentive Qualifying taxpayers can deduct the state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction per vehicle is limited to the tax on up to $49,500 of the purchase price of each qualifying vehicle and phases out for taxpayers at higher income levels.

3. Making Work Pay and Withholding The Making Work Pay Credit lowered employees’ tax withholding rates this year and has already put more money into the pockets of wage earners. Self-employed individuals will have an opportunity to claim this credit when they file their 2009 return. Taxpayers who fall into any of the following groups should review their tax withholding rates to ensure enough tax is currently being withheld: multiple job holders, families in which both spouses work, workers who can be claimed as dependents by other taxpayers, workers without a valid social security number, some social security recipients who work and pensioners. Failure to adjust your withholding in these situations could result in potentially smaller refunds or in limited instances may cause you to owe tax rather than receive a refund next year.

4. Tax Credit for First Four Years of College The American Opportunity Credit can help parents and students pay part of the cost of the first four years of college. The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student.

5. Certain Computer Technology Purchases Allowed for 529 Plans ARRA adds computer technology to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan. For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services.

6. Energy-Efficient Home Improvements The credit for nonbusiness energy-efficient improvements is increased for homeowners who make qualified improvements to existing homes. Qualifying improvements include the addition of insulation, energy-efficient exterior windows and energy-efficient heating and air conditioning systems.

For more information on this and other key tax provisions of the Recovery Act, visit the official IRS Website at IRS.gov/Recovery.

Links:

• The American Recovery and Reinvestment Act of 2009: Information Center

The IRS launched a YouTube video site and an iTunes podcast site to help taxpayers take full advantage of the tax provisions in the 2009 American Recovery and Reinvestment Act. The IRS YouTube channel will debut with seven videos in English and American Sign Language and eight in Spanish, featuring such topics as the $8,000 first-time homebuyer’s credit, the sales or excise tax deduction on new car purchases, and the expanded credits for education and energy conservation. Also, included will be a video on using the IRS Withholding Calculator. People can visit the audio site at iTunes to listen to IRS podcasts about Act’s tax credits, or listen to those same podcasts in English and Spanish at the Multimedia Center on www.irs.gov . News Release IR-2009-76 .

IR-2009-69, July 29, 2009

WASHINGTON — The Internal Revenue Service today announced its first successful prosecution related to fraud involving the first-time homebuyer credit and warned taxpayers to beware of this type of scheme.

On Thursday July 23, 2009, a Jacksonville, Fla.-tax preparer, James Otto Price III, pled guilty to falsely claiming the first-time homebuyer credit on a client’s federal tax return. Price faces the possibility of up to three years in jail, a fine of as much as $250,000, or both.

To date, the IRS has executed seven search warrants and currently has 24 open criminal investigations in pursuit of potential instances of fraud involving the credit. The agency has a number of sophisticated computer screening tools to quickly identify returns that may contain fraudulent claims for the first-time homebuyer credit.

“We will vigorously pursue anyone who falsely tries to claim this or any other tax credit or deduction,” said Eileen Mayer, Chief, IRS Criminal Investigation. “The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund.”

Whether a taxpayer prepares his or her own return or uses the services of a paid preparer, it is the taxpayer who is ultimately responsible for the accuracy of the return. Fraudulent returns may result not only in the required payment of back taxes but also in penalties and interest.

First-Time Homebuyer Credit

The First-Time Homebuyer Credit, originally passed in 2008 and modified in 2009, provides up to $8,000 for first-time homebuyers. The purchaser, however, must qualify as a first-time homebuyer, which for purposes of this credit means someone who has not owned a primary residence in the past three years. If the taxpayer is married, this requirement also applies to the taxpayer’s spouse. The home purchase must close before Dec. 1, 2009, to qualify, and the credit may not be claimed on the purchaser’s tax return until after the taxpayer closes and has purchased the home.

Different rules apply for homes bought in 2008.

Full details and instructions are available on the official IRS Web site: http://www.irs.gov

The American Recovery and Reinvestment Act has brought on many changes, it is hard to keep up with all of them, and more importantly know which ones affect you.  We will try and post them as they come through.

The most recent change announced is the the new withholding adjustment for pension plans.

WASHINGTON – As part of a wider outreach effort to educate taxpayers about the benefits they will receive under the American Recovery and Reinvestment Act, the Internal Revenue Service today released new withholding adjustment procedures for pension plans.

In February, the IRS issued revised withholding tables incorporating the Making Work Pay Tax Credit, one of the key provisions of the American Recovery and Reinvestment Act. That change resulted in more take home pay for more than 120 million American households and provided an immediate economic stimulus. The new procedure for pensions will make withholding more accurate for pension recipients. (more…)

Notice 2009-41 provides procedures that manufacturers may follow to certify property as qualified residential energy efficient property under § 25D of the Internal Revenue Code, as well as guidance regarding the conditions under which taxpayers seeking to claim the § 25D credit may rely on a manufacturer’s certification. If you have questions about this please let us know.

See how BCG&Co. is geared for your manufacturing needs.

It’s a moment many taxpayers dread. A letter arrives from the IRS — and it’s not a refund check. Don’t panic; many of these letters can be dealt with simply and painlessly.

Each year, the IRS sends millions of letters and notices to taxpayers to request payment of taxes, notify them of a change to their account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return. Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

• Agree? If you agree with the correction to your account, usually no reply is necessary unless a payment is due.
• Disagree?  If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

Be sure to keep copies of any correspondence with your records.

IRS has issued a notice providing detailed guidance on the new COBRA continuation premium subsidy provided to involuntarily terminated workers and their qualified beneficiaries under the American Recovery and Reinvestment Act of 2009. This article takes an in-depth look at IRS’s explanation of how eligible involuntarily terminated workers, former employers, and health plans figure the COBRA premium subsidy. An earlier article addressed IRS’s interpretation of what constitutes involuntary termination for purposes of the COBRA premium subsidy.

(more…)

Making Work Pay Credit: Questions and Answers, IRS Web Site

IRS has posted a number of questions and answers (Q&As) on the Making Work Pay Credit (MWPC) on its web site. They are grouped into four categories: general issues, Form W-4, new withholding tables, and economic recovery payments. The most widely applicable information from each of the four categories is summarized below. (more…)