Many clients are interested in the tax benefits associated with residential energy expenditures. Tax credits are available at 30% of the cost, up to $1,500, in 2009 and 2010 (for existing homes only). Here is a brief overview on which home improvements are eligible:

* Credit equals 30% of expenditures, capped at $1,500.

Qualifying improvements:

• Insulation materials
• Exterior windows (including skylights)
• Exterior doors
• Central air conditioners
• Natural gas, propane and oil water heaters or furnaces
• Hot water boilers
• · Electric heat pump water heaters
• Certain metal roofs and stoves
• Advanced main air circulating fans

If you have questions regarding this or other tax related topics, contact Doug Mathey, CPA, MT at (330) 864-6661 or Douglas.Mathey@BCGcompany.com

The overall amount of taxes collected by the 50 states continued to fall during the fourth quarter of 2008, with state and local sales taxes suffering the worst decline in half a century. According to a new Rockefeller Institute of Government report, 41 states experienced declining revenues, with the Far West suffering the most. “Preliminary data for the January–March quarter suggests that fiscal conditions deteriorated even further, and the second major tax source for states—the income tax—is likely to weaken dramatically in April,” said Donald Boyd, Senior Fellow at the Institute and co-author of the study. For the full study, visit www.rockinst.org .

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.

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…)

On April 3, Finance Committee member Olympia J. Snowe (R-ME) and Committee Chair Max Baucus (D-MT) introduced S. 823, the “Net Operating Loss (NOL) Carryback Act,” which would allow businesses of any size to carryback losses incurred in 2008 and 2009 for five years. Senator Snowe said, “While the recently enacted economic stimulus bill included a modest NOL carryback provision to assist smaller firms, this legislation will help any company that has losses from 2008 or 2009 carry back those losses to offset taxes paid in the previous five years when they were profitable. This will go a long way in helping to keep more workers on payroll and stabilize overall operations.” Snowe was referring to the recently enacted American Recovery and Reinvestment Act of 2009 which allows qualifying small businesses (whose average annual gross receipts in a test period are $15 million or less) to choose a three- four-or five-year net operating loss (NOL) carryback period for certain losses instead of the usual two-year period.  Snowe had previously attempted to establish such a liberal five year carryback for NOLs in the Senate-passed stimulus bill but the provision was cut back in the House-Senate Conference negotiations and instead capped for businesses with gross receipts of $15 million and less.

The bill would also block companies that receive cash from the Trouble Asset Relief Program (TARP) from utilizing this tax incentive.

According to a press release posted to its website at http://www.taxfoundation.org, the Tax Foundation announced that Tax Freedom Day® will arrive on April 13 this year, the 103rd day of 2009. That means that Americans will work about three and a half months of the year, from January 1 to April 13, before they have earned enough money to pay this year’s federal, state, and local tax obligations. This day falls two weeks earlier in 2009 than it did in 2007. The Tax Foundation offers two reasons for this early date: (1) the recession has reduced tax collections even faster than it has reduced income, and (2) the stimulus package includes large temporary tax cuts for 2009 and 2010.