IN THE NEWS

PA Tax amnesty program

The Pennsylvania amnesty program applies to those taxpayers who are delinquent on payment of a liability for an eligible tax as of June 30, 2009, including a liability for returns not filed; liabilities according to records of the Department of Revenue as of June 30, 2009; and liabilities not reported, underreported, or not established - but delinquent - as of June 30, 2009. If you feel you are eligible for this please contact your Baratz representative.

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Baratz Food Drive

Baratz & Associates will be holding a food drive during our 2010 "tax season" beginning January 1, 2010 and running through April 15, 2010 to help support the programs of the Food Bank of South Jersey. This is an excellent chance to make a difference in the lives of many as well as making a significant impact on our community. Please bring in your nonperishables when you bring up your tax documents.

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New regulations on 401k contributions

The DOL has issued on 1/14/10 new regulations concerning the payment of 401k contribution deposits. For plans with less than 100 participants, the funds must be deposited within 7 business days. This is actually a safe harbor for small plans only. In reality the funds are due "as soon as such amounts can reasonably be separated from the general assets of the employer" which could be sooner than 7 days. There are severe consequences for failure to adhere to the rules.

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Haiti Donations are Deductible for 2009

The U.S. Senate by voice vote approved legislation to allow taxpayers who make contributions to the Haiti earthquake relief effort between January 12 and February 28, 2010, to take a deduction for those contributions on their 2009 income tax return.

Those who have already filed their 2009 income tax return may amend to take advantage of the new deduction.

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Work Opportunity Credit

Two new targeted groups have been added to the work opportunity credit.

Unemployed veterans.
Disconnected youth.

Generally, an unemployed veteran is one who has been discharged or released from active duty in the Armed Forces at any time during the 5-year period ending on the hiring date and who receives unemployment compensation for not less than 4 weeks during the 1-year period ending on the hiring date.

A disconnected youth is one who is certified as:

Being at least age 16 but not age 25 or older on the hiring date;
Not attending any high school, technical school, or post-secondary school during the 6-month period ending on the hiring date;
Not being regularly employed during that 6-month period; and
Not being readily employable due to a lack of having a sufficient number of basic skills.

This applies to employees who begin work after 2008 and before 2011. Use the Form 5884, Work Opportunity Credit, to claim the credit.

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Standard Mileage Rate Changes

For 2009, the standard mileage rate for the cost of operating your car for business use is 55 cents per mile.

Car expenses and use of the standard mileage rate are explained in chapter 4 of Publication 463, Travel, Entertainment, Gift, and Car Expenses, which can be obtained on www.irs.gov.

Medical and move related mileage: For 2009, the standard mileage rate for the cost of operating your car for medical reasons or as part of a deductible move is 24 cents per mile.

See Transportation under What Medical Expenses Are Includable in Publication 502 or Travel by car under Deductible Moving Expenses in Publication 521, Moving Expenses which is available on www.irs.gov

Charitable related mileage: For 2009, the standard mileage rate for the cost of operating your car for charitable purposes remains 14 cents per mile.

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Philadelphia sales tax increase.

Governor Edward Rendell has signed legislation authorizing the city of Philadelphia to levy an additional 1% sales and use tax. The bill authorizes the city of Philadelphia to impose an additional 1% tax on the retail sale or use of tangible personal property or services effective December 17, 2009. The tax hike takes effect on October 8th with a new rate of 8%. However, the tax may not be imposed on charges for hotel occupancy and may only be imposed for a 5-year period that expires on July 1, 2014.

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Delaware and Maryland Offer Tax Amnesty Programs

The Delaware Division of Revenue is offering a State of Delaware Tax Amnesty Program this fall.

From September 1 to October 30, 2009, any individual or business taxpayer who pays their current outstanding State of Delaware tax liability administered by the Division of Revenue will have their interest and penalty fees waived, if registered for the amnesty program.

Individuals or businesses with balances from tax periods before January 1, 2009, must pay their liabilities in full or enter into a payment plan. Full payment must be received before June 30, 2010, in order to have all penalty and interest fees waived.

Non-filers who file all past-due returns can enter into the same plan as taxpayers with existing liabilities, except the state will waive their tax, penalty and interest fees for all periods filed prior to January 1, 2004.

For more information, go to www.revenue.delaware.gov.

Maryland's Tax Amnesty program runs September 1 to October 30 and allows individual and business taxpayers to get a Tax Do Over on past liabilities for most tax types.

Maryland's Tax Amnesty program covers liabilities for:

Individual income tax
Fiduciary income tax
Pass-through entity nonresident tax
Corporate income tax
Employer withholding tax
Sales and use tax
Admission and amusement tax

Tax professionals can assist their clients in taking advantage of Maryland's programs for liabilities on returns due on or before December 31, 2008. Approved applicants will have all unpaid civil penalties, except previously assessed fraud penalties, and one-half any unpaid interest waived as part of the program.

Taxpayers are not eligible for amnesty if the applicant:

Has more than 500 employees in the United States or is a member of a corporate group that has more than 500 employees in the United States.
Took advantage of the 2001 Tax Amnesty. Taxpayers are eligible for amnesty for tax types not granted amnesty under the 2001 program.
Was eligible for the July 1, 2004 through November 1, 2004 settlement period as provided in Chapter 557 of the Acts 2004.

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NJ Tax Increase

NEWS-STATE, 2009TAXDAY, (June 29, 2009), Item #S.23, New Jersey -Personal Income Tax: Increased Taxes, Limited Tax Deduction Pass Both Houses New Jersey -Personal Income Tax: Increased Taxes, Limited Tax Deduction Pass Both Houses

Both Houses of the New Jersey Legislature have passed legislation that would, if enacted, increase the gross (personal) income tax rate and reduce the property tax deduction for high-income taxpayers and tax New Jersey lottery winnings in excess of $10,000.

Proposed Income Tax Increase for High-Income Taxpayers
For tax years beginning after 2008 and before 2010, the top personal income tax rates for taxpayers with taxable income exceeding $400,000 would be as follows:

8% if taxable income is over $400,000 but not over $500,000;
10.25% if taxable income is over $500,000 but not over $1 million; and
10.76% if taxable income is over $1 million.

No additions to tax or penalties would be imposed for insufficient payment of estimated tax that would otherwise be due on salaries, wages, and other remuneration received before October 1, 2009, upon which the new tax rates would be imposed. In addition, employers would not be subject to interest, penalties, or other costs that would otherwise be imposed for insufficient withholding as a result of the new tax rates.

Property Tax Deduction Would be Limited
For the tax year beginning January 1, 2009, the deduction of up to $10,000 for property taxes paid would be limited for high-income taxpayers. The deduction would be limited to a maximum of $5,000 for a taxpayer who has gross income over $150,000, but not over $250,000, if the taxpayer is not 65 years old or older, blind, or disabled. For such a taxpayer who has gross income exceeding $250,000, no deduction would be allowed.

Lottery Winnings Would Be Taxable
Currently, winnings from the New Jersey lottery are exempt from personal income tax. For tax years beginning after 2008, New Jersey lottery winnings would be included in gross income if the prize exceeds $10,000. Withholding would be required on such winnings as would be determined by the Director of Taxation.

AB 4102, as passed by the New Jersey Legislature on June 25, 2009

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FASB sets effective date for Codification

On July 1, 2009 the FASB Accounting Standards Codification (the Codification) will be effective. This will act as a single source of authoritative US accounting and reporting standards applicable for all nongovernmental agencies with the exception of guidance issued by the SEC and its staff.

What this means to our clients:
If we issue a financial statement with footnotes to your Company the Codification will most likely change the language in your footnotes. This will be effective for all financial statements for interim or annual periods ending on or after September 15, 2009. For example, if your financial statement refers to FASB Statement 133 it will now reference FASB ASC Topic 815.

To view the complete Codification visit http://www.fasb.org.

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Hope Scholarship Credit Enhanced

This is great news for clients with children attending college who were previously ineligible for the Hope Scholarship Credit. The American Recovery and Reinvestment Act of 2009 has expanded the Hope Scholarship Credit for 2009 through 2010. The maximum credit per student has increased from $1,800 to $2,500 and is now available for the first four years of post-secondary education.

Previously, the credit was phased out for joint filers at between $100,000 and $120,000. The phase out range has been increased to $160,000 to $180,000. In addition, the new Act makes the formerly non-refundable credit now 40% refundable. Under the new Act, expenses for textbooks have been added to qualified tuition and related expenses for the Credit.

Please contact your Baratz & Associates representative if you need assistance in this area.