Marianne K Kingman, LLM, JD
President & CEO
Kingman Winslow, LLC
Tax Attorneys & Accountants
We are THE Real Estate Tax Firm
Energy Tax Credit
One credit applies to primary residences. It is for 30% of the cost of upgrading an existing home to save energy. Items that qualify include: insulation, windows, doors, roofing, hot water heaters and air-conditioning systems. Not included: ceiling fans or window air-conditioning units. Installation costs are permitted. This benefit expires at the end of 2010. This means you have to spend $5,000 to receive the maximum credit. The amount claimed in 2009 counts toward the $5,000.
The other credit applies to primary residences and second homes. It is for 30% of the cost of upgrading existing homes to save energy. Items that qualify include: solar water heaters, geothermal heat pumps, solar panels, windmills and fuel cells for primary homes only. Installation costs are permitted. This benefit expires at the end of 2016. The credit amount is unlimited.
Healthcare Tax Credit
Employers who subsidize 50% or more toward the cost of their employee’s health coverage get a tax credit in 2010. The credit is available only on the portion they pay. Small businesses get the highest credit: 35% of the plan’s cost or the average group premium for small companies in their state, whichever is lower. The maximum 35% rate is available to employers with 10 or fewer full-time employees on the payroll and average yearly wages of less than $25,000.The credit decreases for employers with more employees and higher annual pay.
The employer subsidy in 2010 can be as low as 50% of the premium for single coverage for an employee with family coverage. The credit can offset the alternative minimum tax. It is also not refundable if it exceeds their tax bill. Any unused amount is carried forward for 20 years. The credit reduces the employer’s deduction for health insurance premiums.
New Hires Tax Credit
Taxpayers get a Social Security tax break for hiring the unemployed. One does not have to pay Social Security tax on the wages of people hired after February 3rd if they worked less than 40 hours in the previous 60 days. The exemption applies to wages paid after March 18th and before January 1st. However, the worker’s 6.2% share of the Social Security tax still must be collected and sent to IRS as well as the employer and employee shares of the 1.45% Medicare tax.
If a new hire replaces someone, the credit is allowed only if the worker quit or was fired for cause. IRS Form W-11 is used by employees to certify that they were jobless. The tax credit is claimed on Form 941.
There is currently no federal estate tax this year. The tax is set to return to a 55% rate this January 1st. This is important because large numbers of families who suffer a death this year could end up paying capital gains tax on inheritances.
The “step-up” in basis which allowed assets to be revalued for tax purposes at the time of death has disappeared. In 2009, estates below $3.5 million (or $7 million for a couple) were exempt from the estate tax. Assets were revalued at the time of death or “stepped up” to their full current value and not subject to capital gains tax on past appreciation. No so in 2010.
Withholding Compliance Program
The IRS will try to catch tax return filers who are severely under withheld. The IRS computers will examine W-2s looking for people with large discrepancies between the amount of tax withheld and the norm for their income level. That is, people claiming more than 10 allowances.. The IRS will tell employers to boost the amount of tax withheld for these people.
Foreign Account Reporting
Congress has stepped up to stem tax evasion by foreign account holders. Foreign Bank Account Reports must be filed for any year if the total amount in foreign accounts exceeds $10,000. This includes those with a foreign bank or brokerage account, offshore annuities or cash-value insurance policies, those who invest in mutual funds that are based offshore, and those who own or control foreign firms.
The penalties for willful failure to file are severe: $100,000, or half the value of the account per year. Even non willful failures can earn a $10,000 per year penalty. Forms also must be filed on paper and received by June 30th, not the normal tax filing deadline of April 15th.