First Time Homebuyer Credit extension

President Obama signed the following into law this month:

First Time Homebuyer’s Credit. Again we have changes. The credit is extended to closings on or before April 30, 2010. This is extended to closings on or before June 30, 2010 IF the taxpayer has a binding contract on or before April 30, 2010. Taxpayers who have served at least 90 days on “qualified official extended duty service” between January 1, 2009 and April 30, 2010, have an extra year to make their purchase (extending their date to April 30, 2011).Again a taxpayer can elect to claim the credit for a qualifying 2010 purchase on the 2009 income tax return or wait until the 2010 return is filed.The credit is not available for purchases AFTER November 6, 2009, to a taxpayer:- Who is eligible to be claimed as a dependent,- Is not at least the age of 18 years of age on the purchase date (if the taxpayer’s spouse is at least age 18, the taxpayer is deemed to have met this test),- Who purchases the property from a family member of the taxpayer’s spouse, or- Who purchases a residence for more than $800,000.(Previously the denial for purchases from the family member was limited to the family member’s family and did not mention the spouse’s family.)Effective for purchases AFTER November 6, 2009, the modified AGI limitation starts at $125,000 ($225,000 for MFJ).Effective for purchases AFTER November 6, 2009, a “first time homebuyer” includes a “long-time resident” which is defined as an individual (and, if married, such individual’s spouse) who purchases a new principal residence if the individual has owned and used the same prior residence as such individual’s principal residence for any 5-consecutive period during the 8-year period ending on the date of the purchase of the new principal residence. The maximum dollar credit for this individual is $6,500 ($3,250 for MFS) instead of the $8,000.Effective for dispositions or cessations of use as a principal residence after December 31, 2008, the recapture does NOT exist if the taxpayer, or taxpayer’s spouse, received Government orders for qualified official extended duty service. For purposes of this paragraph and the extended eligible dates above, “qualified official extended duty service” means service on qualified official extended duty as 1) a member of the uniformed services, 2) a member of the Foreign Service of the United States, or 3) an employee of the intelligence community. All three of these are defined in Section 121(d)(9).Effective for taxable years ending after December 31, 2009, documentation MUST be sent with the tax return verifying the qualifying purchase. (IRS has been asking for documentation on many claims already filed if it appears the taxpayer may be ineligible.)

FUTA tax surcharge. This .2% surcharge has been around many years and is why our FUTA tax rate is 6.2% instead of 6.0%. This surcharge is now extended to run through June 30, 2011.

Failure to File Penalty. The Failure to File penalty for Partnerships and S Corporations is increased from $89 per month to $195 per month. This brings the penalty to $195 per month per partner/shareholder with a maximum of 12 months. This is effective for tax years beginning after December 31, 2009.