Do You Need to File 1099s?

If you paid more than $600 to any individual, LLC or partnership for rent or services provided to your business during 2010, then you must send that entity a 1099. You must also file all copies of Forms 1099 with the IRS, along with cover sheet, Form 1096 by February 28, 2011.

Additionally, as a result of the 2010 Small Business Jobs Act, if you are receiving rental income from real property, you are required to file forms 1099 with the IRS and service providers to report payments of $600 or more during the year for rental property expenses, beginning January 1, 2011. Please keep this in mind as you account for your 2011 expenses.

Examples of Rent/Service Providers...
1. Contract Laborers
2. Subcontractors
3. Marketing Services
4. Accountants/Bookkeepers
5. Attorneys
6. Janitorial Services
7. Consulting Services
8. Landlords

What information do you need from the service provider?

You will need the full name of the individual or business, the address and the individual or business' Taxpayer (Employer) Identification Number, along with the amount that you paid to that provider during 2010.

Do you need help in preparing your Forms 1099?

eeCPA is here to help...
1. We will gather the information from you.
2. We will prepare all of the forms and mail them to the recipients by the deadline.
3. We will file the government forms electronically on your behalf.
4. We will send you copies of all of the forms and a summary report once the filings have been completed.

If you provide us with the information that we need, we will charge you just $25 per 1099.

If we need to gather the information from your accounting files and determine the filing requirements, then we will charge you based upon our standard hourly rates.

Why should you file Forms 1099 timely?

The #1 reason to file your Forms 1099 timely is to preserve the deductibility of your expenses.

Secondly, you want to file the 1099's timely to avoid the penalties for late and/or incomplete filings. The penalties range from $15-50 per 1099 Form if not filed, filed late or incorrectly filed.

Tips to make the 1099 process less painless for 2011...

Have all of your service providers complete a Form W-9 prior to making payment to them. That way they have incentive to complete and return the form to you, and you have all of the information that you need when it comes time to prepare your 2011 Forms 1099.

If you think you need to file 1099s, call us right away!

How to Take Advantage of Arizona Tax Credits

Do you pay even $1 of tax to the State of Arizona? If the answer is yes, then you can choose to pledge those dollars directly to education or to charitable organizations that assist the working poor. There are 2 types of Arizona Tax Credits that support the funding of education in Arizona. There is the private school tuition credit and the public school fee credit. The Arizona Department of Revenue recently extended the tax credit deadline. If you make a contribution by April 15, 2011, you have the option of using it as a tax credit on either your 2010 or 2011 return. Here is the Arizona Department of Revenue’s website for details on how you can take advantage of these tax credits. http://www.azdor.gov/TaxCredits.aspx

Furthermore, there are a number of charities that depend on donations and provide programs throughout our community. Many of these organizations are really struggling right now, and you can help them by taking advantage of the Charitable Tax Credit and saving on your 2010 taxes. (Warning - Please note that this credit is only available to individual taxpayers that itemize their deductions. If you take the standard deduction, then you may not claim the credit!)

In sum, every Arizona Resident is eligible to take the following maximum annual charitable/education credits:

Type of Credit	Filing Status
	Single/Head of Household	Married Filing Joint
Private School	500	1,000
Public School	200	400
Charitable Organization	200	400
Total Available	900	1,800

Oftentimes, if you have children in public school, you will be paying fees for extracurricular activities or special programs. Keep track of those fees, since they will most likely qualify for the credit and reduce your tax bill.

If someone close to you is attending a private school (other than your child), you can make a specific tax credit donation to the private school that will benefit that person specifically, if they qualify to receive a scholarship. You would need to contact the school directly to make arrangements for this type of donation.

What the 2010 Tax Relief Act Means for You

With just a little over a week left in 2010, the White House finally delivered an answer to the tax cut quandary when President Obama signed the 2010 Tax Relief Act on December 17, 2010. The law has been championed as a symbol of bipartisan compromise with provisions favored by both parties. Despite the criticism about the deficit, the new law is expected to stimulate the economy; Obama stated, “…real money that’s going to make a real difference in people’s lives.” The new law extends the Bush-era tax cuts for two years, provides relief for the estate tax, and reduces social security taxes in addition to extending other credits. While pundits speculate how the $801 billion tax cut bill will impact Obama’s relationship within his own party, this law can certainly put your mind at ease and here is how.

· Extension of Bush-era Tax Rates. Had the law not passed, rates were scheduled to rise to 15%, 28%, 31%, 36%, and 39.6%. With the passing of the 2010 Tax Relief Act, tax rates for individuals are 10%, 15%, 28%, 33%, and 35%. Since the rates are unchanged, you no longer have to worry about a tax hike in 2011.

o However, there is still plenty of time to finalize any tax savings plans. Contact us for ideas or assistance.

o Now, it might make some more sense to those with lower tax bills to convert your traditional IRA to a Roth IRA. This conversion will allow you to defer the taxes on the income until 2011 and 2012, taking advantage of the lower tax rates that have been extended through 12/31/2012. Furthermore, if you feel the Roth IRA does not suit you, you do have a second chance and can undo the Roth conversion until October 15, 2011, which is unprecedented. However, the ROTH Conversion must be effectuated by 12/31/2010. Please contact us if you are considering this option; we can help guide you!

· Estate Tax Relief. Heirs can opt to treat the estate by 2010 tax laws and calculate the capital gains on all assets in the estate to be taxed at 15%. Otherwise, the 2011 law would exempt the first $5 million and tax the rest at a rate of 35%. The news of this relief will certainly bring holiday cheer to affluent Americans.

· Reduction on Social Security Taxes. This historic bill cuts by two percentage points an employee’s portion of the 6.2% tax. Viewed as the replacement to the Making-Work-Pay income tax credit, the reduction on social security tax can actually apply to a broader range of workers.

Employers Beware: The Department of Labor is Out to Get You

By Rachel Weiss

This is not a threat, it’s a reality. The DOL’s focus has shifted from helping employers comply with the Fair Labor Standards Act (FLSA) to nailing those who do not.

This is also not a secret. In fact, watch for public service announcements in multiple languages featuring the Secretary of Labor and celebrities urging employees to call their hotline if they believe they are being paid unfairly. (See for yourselves at http://www.dol.gov/wecanhelp/psa.htm) Aptly named the “We Can Help” campaign, this initiative was launched just one week after the DOL announced that it is abandoning its practice of publishing Opinion Letters, which historically have provided important guidance to employers. Reliance on DOL Opinion Letters has also served as a defense to liability for back-wages and other damages. Instead, broader “Administrator Interpretations” will be issued that will not address the finer points of particular policies and practices, thereby requiring litigation to determine their application to the facts of each case.

Then there’s the “Plan/Prevent/Protect” initiative, which proposes new regulations that will require employers to audit their pay practices, document how each employee’s exempt status and pay calculations are determined as well as the reasons why certain individuals are categorized as independent contractors and not employees. Employers would need written plans and be required to track how they are implemented. The failure to do all of this to the DOL’s satisfaction will be deemed noncompliance and result in sanctions and/or costly litigation. The pending Employee Misclassification Prevention Act (H.R. 5107, S. 3254) seeks to impose similar obligations.

If you think I’m trying to scare you, you’re right. Most employers also don’t realize that once a violation is established in an FLSA lawsuit, the burden is on the employer to prove why double damages should not be awarded, and the employer will be liable for the employee’s legal fees. Moreover, the owner of the company, or whoever was responsible for the decisions that led to the violation, will be held personally liable along with the company, regardless of laws that limit personal liability in other contexts. Unlike cases brought under Title VII for discrimination, there are no administrative hoops to jump through before employees can go to court. And remember, too, that wage and hour claims are not usually covered by insurance.

Now more than ever, employers need to develop not just a plan for compliance, but a culture of compliance. Consider conducting an internal or external audit of your employee classifications and pay practices, and seek advice from an employment attorney. Wage and hour laws are complex and nuanced, and the DOL clearly is not interested in educating you. If that were the case, it would have created an employer “help desk.” Instead, it beefed up its enforcement staff with 250 new investigators and got famous people to reach out to employees.

Lest there be any misunderstanding, I do not mean to imply that the DOL should not be an advocate for employee rights or that employers should be able to shirk their obligations under the FLSA. Just consider this a public service announcement for the other side.

Rachel Weiss practices labor and employment law with the law firm of Gammage & Burnham in Phoenix. If you have questions about wage and hour issues, you can reach her at (602) 256-4448 or rweiss@gblaw.com.

Update on the New 1099 Reporting Requirements

The Patient Protection and Affordable Care Act included a provision that dramatically changed the 1099 reporting requirements for businesses. Recently Congress passed the 2010 Small Business Jobs Act on September 27, 2010, which further alters the 1099 requirements.

The new law requires that persons/entities receiving rental income from real property to file forms 1099 with the IRS and service providers to reports payments of $600 or more during the year for rental property expenses. This new law takes effect beginning January 1, 2011.

Prior to the Small Business Jobs Act, taxpayers who were not considered active in renting property as a trade or business were exempt from this reporting requirement. Now, all passive investors in rental real estate will be subject to this new requirement.

What happens if you fail to comply? Under audit, all deductions for expenses paid for services: i.e. repairs, landscaping, pool care, etc. may be denied if you fail to issue a 1099 to the service provider.

What does this mean to you?

a. It means that you will need to track your payments by Vendor as well as by Expense Category, beginning next year.

b. You will need to gather address and Taxpayer Identification Numbers for all of your vendors.

c. You will need to issue 1099’s to your vendors by January 31, 2012 for 2011 and you will need to file a copy of those 1099’s with the IRS, along with Form 1096 by February 28, 2012, for 2011.

The Small Business Jobs Act also accelerated the start date for 1099 reporting to Corporations to become effective 1/1/2011 (rather than 1/1/2012, under the 2012 Health Care & Reconciliation Acts enacted back in March 2010). Prior to these law changes, payments to Corporations were exempt from 1099 reporting. If you contracted with a company that was a Corporation (i.e. Inc. or Corp. at the end of the name), then you did not have to track and report payments of $600 or more to these entities. Now, under the new laws, you must report to Corporations as well as all other entities.

How to Plan when the Future of Tax Rates is Uncertain

It’s October and the fate of the Bush tax cuts is still uncertain. Due to the Midterm Elections, the vote regarding the tax cuts has been placed on the back burner, which makes year-end tax planning nearly impossible. If Congress does not vote to extend the tax cuts, rates for the high income brackets would return to the rates in 2001. The 33% bracket would rise to the 36% and 35% would rise to 39.6%. The 10% bracket would be eliminated completely. Some pundits are predicting that Congress will extend the Bush tax cuts for another two years. However, there is a chance that a filibuster could thwart any tax changes and the tax cuts might expire for everyone. With all that said, you are probably asking, “So how am I supposed to plan?”

In order to approach the unknown future of the tax cuts, you do not have to plan three different strategies (Pre-Bush tax cuts, status quo, and Obama’s Proposals). There are ways to approach this conundrum efficiently and economically.

· Accelerate income into 2010. This approach does seem contrary to conventional wisdom, but due to the uncertain climate, you will benefit at the lower tax rates.

· Consider selling open unrealized-gain positions. If you accelerate a gain transaction on an asset you believe to have strong market-value, you will avoid future taxation on the increased basis and will qualify for a lower tax rate.

· Wait. If you wait to play it safe, look for strategies that can be reclassified after year-end.

· Roth IRA Conversions. As of 2010, all taxpayers may convert their retirement plans to a ROTH IRA. You can take the Roth converted amounts into 2010 income or defer it to 2011 and 2012. Additionally, if you feel the Roth IRA does not suit you, you do have a second chance and can undo the Roth conversion until October 15, 2011, which is unprecedented. However, in order to qualify for this tax break, you must convert before year-end. The decision to convert to a Roth IRA is complex so contact us if you need assistance.

It may seem concerning to you to base your tax planning around speculation. However, there are strategies to approach this very unusual year-end situation. Contact our office today to schedule appointments regarding your tax projections.

How a Client’s Audit Went from a Nightmare to a Success

This January I met a new client who received a notice from the IRS with intent to levy their bank account in the amount of $160,000. Naturally, the threat of levy and an audit would be a scary experience for anyone. In this particular case, the penalties alone amounted to over $15,000. eeCPA, PLC saved this client $145,000, making this our most successful audit to date.

Here are some lessons to be learned from this audit:

· Make sure your company is organized properly. My client’s company was originally organized as a Sole Proprietorship, which was the wrong entity for her business. We reclassified her business as an S-Corp, which significantly reduced her taxes.

· Attention to detail. Be sure to track all your expenses, especially auto and home office expenses. When you track your expenses properly, you will be able to achieve greater savings. In this case, the former tax preparer failed to account for the client’s credit card expenses. That is why we need all of your statements for all accounts.

· Intent to levy= close your accounts. When a client receives a notice of intent to levy, panic is often the first reaction. When my client received the notice of intent to levy her account, I advised her to close her bank accounts immediately and open accounts at other banks. She followed the advice and avoided the levy.

· Make sure payroll expenses are accurately stated. My client’s payroll expenses were understated. That is why we always take the time to perform a reconciliation of all of our client’s payroll expenses. We automatically include the payroll reconciliation with our service, which you cannot find from any of our competitors.

· Use eecpa! If you are facing an audit, we can help you save significantly. In the case of this audit, we saved our client more than 10 times our fee!

Reminder: Final Deadlines for 2009 Tax Returns Looming

Just a reminder- the deadline for S-Corp, C-Corp, fiduciary, and partnership tax returns is due September 15, 2010! In order to have your returns filed timely, we must have all your documents in our office by August 15, 2010.

The deadline for individual income tax returns is October 15, 2010. We must have all your documents in our office by September 15, 2010, in order to timely file your returns.

Please contact us if you have any questions!

New 1099 Reporting Requirements Could be the Kiss of Death for Small Businesses

The Patient Protection and Affordable Care Act passed in March 2010 includes a provision that dramatically changes the 1099 reporting requirements for businesses. The new law effective January 1, 2012, now requires businesses to report ALL purchases of BOTH GOODS and SERVICES from ANY vendor which total over $600 per year. Did your business purchase 10 tanks of gas? A new computer? An airline ticket? According to the new law, all of these purchases are now reportable.

Do you buy gas at Shell? Do you think that you have filled up more than 12 times at the Shell on the corner? If you pay for gas with a debit card, then you may have to issue Shell a 1099… Can you imagine having to go into the convenience store and asking the minimum wage clerk for the exact address, legal name of the station, and Taxpayer Identification Number?

The new requirements are completely misdirected at the wrong target. Rather than improving the tax gap from individual to business transactions, the new law targets business to business transactions. Not to mention, the effects of the new reporting requirements would create an administrative maelstrom and would have a devastating economic impact on small businesses. Here are the biggest issues with the new law:

· Complete overhaul of current accounting systems. Accounting systems in use today are not set up to segregate payments by vendor and method. Modifying the accounting software could be more costly in administrative burden and expense than the Y2K conversion.

· Filing Costs. With the new law, business and government agencies are expected to file more than 250 information returns through the IRS FIRE system, a special software designed for large businesses. Most small businesses do not have access to the IRS FIRE system and will have to outsource the filing to data processing companies who typically charge $3-4 per form.

· Accuracy. Forms 1099 cannot be prepared without federal identification numbers, legal business names and legal addresses. The current on-line Taxpayer Identification Number matching program will be inadequate because the filer does not have the complete information. Providing the complete information will increase the risk of fraud and identity theft. Additionally, many issues remain unclear about who the recipient of the 1099 should be. For example, you, the employer reimburse an employee for a business purchase. Would you issue the 1099 to the original vendor or to the employee?

· Meeting the Deadline. The above named issues subject businesses to making several errors on the information returns, which can be costly. Even if you filed error-free information returns, you still have to meet the January 31^st deadline, which is the same deadline as payroll reports. This adds a greater burden to small businesses.

· Exclusion of Credit Card Payments. The new law will exclude credit card payments from the reporting requirements, which will force businesses who do not take credit cards to do so. Businesses will be forced to incur additional fees to process simple transactions. Many new businesses do not have the credit rating to qualify for credit card payments and will be forced to follow the reporting requirements.

Despite the long list of obvious issues with this regulation, the biggest concern with the new law is that it will cost businesses as well as the IRS at least 100 times more than the previous information reporting requirements.

To avoid the administrative nightmare and devastation to small businesses, speak out! Contact our elected representatives in DC!

IRS Releases Form W-11 for Employers to Claim Credit from HIRE Act

In March, Congress passed the HIRE Act, which benefits employers who hire previously unemployed workers this year. As we reported in May, employers who qualify are eligible for a 6.2% payroll incentive, which can save you a lot! In order to qualify for the incentive, employers must have the new hire fill out Form W-11. Form W-11 confirms the new hire’s previous status as unemployed. Employers need to retain the Form W-11 with their payroll and tax records .

Make this a part of your new hire packet. Along with having them complete their initial application and tax withholding elections, have them complete Form W-11.

Make sure you give Form W-11 to your payroll processer to be sure that you get this credit.

In this tough economy, every penny counts. Our clients have already saved thousands of dollars!

Take Advantage of the Summer Downtime and Reevaluate Your Business

It’s that time of year again. Every day the temperature is a predictable triple digit number and Phoenix seems to be a ghost town. Just because summer is here does not mean business has to slow down for you. In fact summer is the perfect opportunity for you to reevaluate your expenses for the year, set goals for your company, and review your employees’ performances. Here are a few suggestions on how you can take advantage of this downtime and make sure your business thrives in the coming year.

· Get new quotes from your vendors! Take a look at your expenses from this year and request new quotes from your vendors. This is the perfect time to examine everything from insurance premiums, internet services, rents, landscaping, etc. If your current vendors cannot offer you a better rate, then investigate other options. Your customers are putting pressure on you right now-remember you’re a customer too! Put pressure on your vendors and seek relief!

· Reevaluate your marketing plan. Devote some time to research different marketing plans. You can trim your expenses by cutting out archaic marketing techniques such as advertising in the yellow pages.

· Examine your retirement plan. Now is the perfect time to evaluate your retirement plan to see if you need to make any modifications. Converting from a 401k plan to a SIMPLE IRA plan may save you more than $1,500 in administration fees. SIMPLE IRA plans have no annual filing requirements, which is an excellent option for business looking for leaner expenses. The deadline to set up a SIMPLE IRA or safe harbor 401k is October 1, 2010.

Feel free to give us a call if you have any questions!

Fannie Mae Announced Sanctions for Struggling Homeowners for Strategic Defaults

Fannie Mae recently announced sanctions against homeowners who strategically default on their mortgage, making them ineligible for Fannie Mae mortgages for seven years. A “strategic default” is defined when a homeowner did not work in good faith to avoid foreclosure and has as the ability to pay but chooses to walk away when the value of the home is less than what is owed.

Fannie Mae also announced that they would seek “deficiency judgments” against homeowners in court to recover debt by seizing borrower’s other assets. Since Arizona is a non-deficiency state, this threat does not hold much clout against Arizona homeowners.

The Wall Street Journal recently reported that nearly one in five mortgage defaults in the first half of 2009 were considered strategic. Fannie Mae’s recent decision attempts to curb homeowners from forcing foreclosure to pursue other alternatives such as a lender-approved short sale or formally giving up the deed.

Analysts question whether the aggressive Fannie Mae sanctions will have a positive effect on the housing market. The plan clearly challenges the Obama administration’s policy of stimulating the fragile housing market.

Furthermore, Fannie Mae’s policy might be impossible to execute. The task of distinguishing between intentional defaults and homeowners who had no other options will subject Fannie Mae to scrutiny. Additionally, Fannie Mae’s pursuit of deficiency judgments is economically inefficient since there is no tax liability on forgiven portions of home mortgages until 2012.

Whether or not Fannie Mae will be able to execute the new policy is to be determined. However, the policy draws one important question: will the housing market improve with decrease of mortgage defaults, especially with a decline in unemployment or do home prices need to appreciate before the market can improve? Time can only tell.

Health-Care Overhaul Imposes Wealth Taxes, Makes Roth IRA Conversions More Attractive

Last March Congress passed the landmark Patient Protection and Affordable Care Act. This radical policy forced many critics to ask “How is the government going to pay for this?” The answer to this million dollar (or $1 trillion according to the Congressional Budget’s Office’s projection) question? The health-care overhaul will impose two new taxes on earnings: 1) an extra 0.9% levy on wages for couples earning more than $250,000 (or $200,000 for singles) and a 3.8% tax on investment income for the same group. How could these taxes affect you?

Let’s say you and your spouse both earn $150,000, combined income is $300,000. In 2013, you will owe an extra 0.9% on the excess earnings over $250,000, or $450, in addition to your regular Medicare tax because your combined wages are above $250,000.

How will your investment income be affected? First of all, let’s define investment income. Investment income includes, interest, dividends, rents, royalties, captain gains in addition to the taxable portion of insurance annuity payouts (unless it is from a company pension). All of these types of investment income are subject to the 3.8% tax on amounts over the $250,000 (or $200,000 for single filers) threshold. For example, if you earned $60,000 a year, but have an investment income of $180,000, your total income is $240,000 and you are subject to additional tax. Because your investment income is $40,000 over the $200,000 threshold, you would owe $1,520.

How can you minimize these taxes? Essentially, your investment income is subject to the new tax when it increases your adjusted gross income. While social security and pensions are not investment income, they still raise your AGI. Here are some suggestions on how you can avoid increasing your AGI.

· Roth IRA conversions. These are an excellent option because they do not raise AGI and are not considered investment income.

· Defined-benefit pensions. If you are in a small business or have consulting income, pensions could be a good fit. Pensions are not investment income and you can contribute more with age.

· Installment sales if you are selling assets. If you are spreading out the income, you would minimize the tax.

· Life Insurance. If you purchase a policy, you could borrow from it and settle before death. You can avoid income tax on investment gains within the policy.

For more information, check out this article from the Wall Street Journal or give us a call!

New Tax Benefits Available to Aid Employers

Last March Congress passed two watershed reform laws, the Hiring Incentives to Restore Employment (HIRE) Act and the Patient Protection and Affordable Care Act, both of which include considerable tax breaks for employers. These tax benefits might be the perfect remedy for employers looking to expand payroll or looking to save.

The HIRE Act

The HIRE Act includes provisions that will benefit employers who hire previously unemployed or underemployed workers this year. The employers who qualify are eligible for a 6.2% payroll incentive, which effectively exempts them from their share of Social Security taxes on wages paid to the employee. How much exactly could that 6.2% save you? It could be a lot!

Let’s say you hire 3 previously unemployed employees and each are paid $25,000. With the HIRE tax benefit, you can save $4650!

Another tax break included in the HIRE act is an additional general business tax credit, up to $1,000, for each previously unemployed worker retained for at least a year. The tax credit applies when businesses file their 2011 income tax return.

Here is the breakdown on how you might qualify:

· Employers must have hired unemployed workers this year from February 3, 2010 and before January 1, 2011.

· The employer must receive a statement from the new hire that confirms he or she was unemployed for at least 60 days before being hired or have worked less than a total of 40 hours in the previous job.

· New hires who fill existing position may only qualify if the previous workers left voluntarily.

Check out this link http://www.paychex.com/hireact/

from PayChex to see how

much you can save.

The Patient Protection and Affordable Care Act

The new health care law offers a tax credit to small employers that provide health care coverage to their employees. Businesses can claim a maximum credit of 35% of the employer’s premium expenses against their income tax return.

How much can you save from this tax credit? Let’s say you have 10 employees on staff and you pay $300 a month for their health care premium, a total of $36,000 a year. If you qualify for the maximum credit of 35%, you can receive a $12,600 credit!

Here is how you may qualify:

• Businesses must have fewer than 25 full time employees for the tax year.
• The wages for the employees must average less than $50,000 per employee.

For more information, give us a call!

Save the Date! - Client Appreciation Party

Mark your calendar for Friday, May 7, 2010 for eeCPA's client appreciation party. Get ready for Casino Night and plenty of food, music, gambling, and prizes. Why? Because we appreciate you! More details to come...

Client Spotlight - Germain Kirk

Germain Kirk is an online designer, developer, and consultant based in Scottsdale, Arizona. Through his company, KirkInteractive, Germain offers small and mid-sized businessess and organizations professional web site design, doman and hosting plans, E-mail marketing, Search Engine Optimization (SEO), consultation, analytics, and site management services. Germain has been involved with internet services for more than 13 years, starting when he was in college at the University of Washington in Seattle. Since then he has worked with inline properties in the broadscast TV industry in Washington state and Arizona- most recently at 3TV KTVK as the Site Master for AZfamily.com

Currently, Germain is a national online consultant for Cox Communication (www.cox.com) and also does online consultation and web development for the Metro Phoenix Parternship for Arts & Culture. If you are interested in any online services, you can email Germain at germain@kirk-interactive.com, call at 1-888-335-3439 or visit www.kirk-interactive.com.

Homebuyer Tax Credit - It is No Longer Just for First Time Buyers

On November 6, 2009, President Obama signed into law the “Worker, Homeownership, and Business Assistance Act of 2009.” The new law extends and generally liberalizes the tax credit for first-time homebuyers and includes some restrictions to prevent abuse of the credit. What can this mean for you? The new law will make it easier for you to buy or sell a home and aims to improve the real estate markets. Best of all, the changes can be a tax-saving tool!

Here are the facts about the revised homebuyer credit:

· Deadline Extended. Previously, the homebuyer credit applied only to purchases after April 8, 2008 and before December 1, 2009. Now the homebuyer credit is extended to apply to a principal resident bought before May, 1, 2010. Additionally, homebuyers can use the credit if they bought a principal residence before July 1, 2010 if they entered a written contract before May 1, 2010. With the extra months available, homebuyers can apply the credit if they find a home they like but cannot close on it before May 1, 2010.

· “Long-Time Resident” Credit. The homebuyer credit no longer applies to first time home purchases. If you maintained the same principal residence for any period of five consecutive years during the eight years ending on the date that you buy the subsequent principal residence, you can claim credit of up to $6,500. In order to qualify, you do not need to sell your current home; rather you can buy the replacement home to meet the new deadlines.

· Now available to higher-income taxpayers. The homebuyer credit phases out over higher levels of modified AGI, range is between $125,000 and $145,000.· New home-price limit for the homebuyer credit. The homebuyer credit cannot be claimed for a home if its purchase price exceeds $800,000.

The restrictions:

· Settlement Statement. The homebuyer credit cannot be claimed unless the taxpayer attaches the settlement statement to the return.

Please call us today to find out how you can benefit from the homebuyer credit!

1099's

1099's are due to be sent to recipients no later than January 31, 2010! There are just 20 days left and counting...

Do you need to prepare and file 1099's?

If you paid more than $600 to any individual, LLC or partnership for rent or services provided to your business during 2009, then you must send that individual a 1099. You must also file all copies of Forms 1099 with the IRS, along with cover sheet, Form 1096 by February 28, 2010.

Examples of Rent/Service Providers...

1. Contract Laborers
2. Subcontractors
3. Marketing Services
4. Accountants/Bookkeepers
5. Attorneys
6. Janitorial Services
7. Consulting Services
8. Landlords

What information do you need from the service provider?

You will need the full name of the individual or business, the address and the individual or business' Taxpayer (Employer) Identification Number, along with the amount that you paid to that provider during 2009.

Do you need help in preparing your Forms 1099?

eeCPA is here to help...
1. We will gather the information from you.
2. We will prepare all of the forms and mail them to the recipients by the deadline.
3. We will file the government forms electronically on your behalf.
4. We will send you copies of all of the forms and a summary report once the filings have been completed.


If you provide us with the information that we need, we will charge you just $25 per 1099.

If we need to gather the information from your accounting files and determine the filing requirements, then we will charge you based upon our standard hourly rates.


Why should you file Forms 1099 timely?

The #1 reason to file your Forms 1099 timely is to preserve the deductibility of your expenses.

For example, I had a client that paid several laborers $3,000-5,000 each. He did not file 1099's to report the payments that he made to these laborers because the laborers did not want to report the earnings. Then, when he was audited several years later, the IRS denied the deductions for several thousands of dollars, limiting the deduction to $600 per laborer. Thus, the taxpayer then was forced to pay the tax on the majority of the expenses that he rightfully incurred to operate his business. Rather than the laborers paying the taxes on their earnings, he was forced to pay the taxes on the monies that he paid out to them, plus penalties and interest.

Secondly, you want to file the 1099's timely to avoid the penalties for late and/or incomplete filings. The penalties range from $15-50 per 1099 Form if not filed, filed late or incorrectly filed.


Tips to make the 1099 process less painless for 2010...

Have all of your service providers complete a Form W-9 prior to making payment to them. That way they have incentive to complete and return the form to you, and you have all of the information that you need when it comes time to prepare your 2010 Forms 1099. You may download a copy of Form W-9 directly from our website...on the forms page.