HAPPY SAINT PATRICKS DAY

It's no use boiling your cabbage twice.--
Irish proverb

COMMON QUESTIONS ON THE STIMULUS TAX PROVISIONS

If you don't already have the tax provisions of the Stimulus Bill figured out, the American Institute of Public Accountants has prepared a Q&A on individual and business tax-related provisions in the American Recovery and Reinvestment Act of 2009. This is only a couple pages and answers many questions that we have been receiving. Among the subjects covered for individuals are the first-time home-buyer credit, college-funding tax credit, unemployment benefits, benefit for use of public transit and the alternative minimum tax exemption. For businesses, the Q&A highlights depreciation, expensing, capital gains, work opportunity credit and penalty relief from underestimating taxes.

WHAT HAPPENS IF I HAVE MORTGAGE DEBT FORGIVEN?

Thanks for all the information you send out. I have a question. A relative of mine had a portion of their mortgage forgiven. I told him that he would have to pay tax on the forgiveness. He said I was wrong. Who is right?
Eagle

Depends. If a mortgage debt is partly or entirely forgiven during tax years 2007 – 2012, you may be able to claim special tax relief and exclude the debt forgiveness income. You are correct in that normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

Here is the catch. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion. However, proceeds of refinanced debt used for other purposes (for example, to pay off credit card debt) do not qualify for the exclusion.

Also, debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the new tax-relief provision.

SMALL BUSINESS DAY AT THE CAPITOL

On March 31, spend a morning at the Unicameral with fellow small-business owners, employees and supporters to learn about key legislative issues before the Legislature. The 2009 Nebraska Small Business Day at the Capitol will feature State Chamber President Barry Kennedy and NFIB State Director Bob Hallstrom, as both will provide insider information on what issues and legislation to keep your eye on.

From taxes and health care and government regulations, this is your opportunity to ask your state senators about the important issues. Top issues will include Workers’ Compensation, mandated benefits, state spending, employment issues, taxes and union service fees. Highlights include talks from Governor Heineman and several state senators. The event is presented by the NFIB/Nebraska, the State Chamber, the Lincoln and Omaha Chambers of Commerce, and the Lincoln Independent Business Association. Cost for the program is $15, which I will personally pay for the first 10 people that email me at lkopsa@kopsaotte.com.

For more information let me know.

WHAT TO DO IN THESE ECONOMIC TIMES

We have been spending a lot of time advising clients on strategies to weather the economic storm. We call our meetings "Survival Strategy Meetings." Below is an article that summarizes steps that small businesses are taking. I thought you might be interested.


Hey, where is the silver lining on my economic storm cloud?

FOUR CREDITS THAT CAN REDUCE YOUR TAX BILL

Check it out! You might be eligible for a tax credit. A tax credit is a dollar-for-dollar reduction of taxes owed. Some credits are even refundable. That means you might receive a refund rather than owe any taxes. Here are five popular credits you should consider before filing your 2008 Federal Income Tax Return:

1. The Earned Income Tax Credit is a refundable credit for low-income working individuals and families. Income and family size determine the amount of the credit.

2. The Child and Dependent Care Credit is for expenses paid for the care of your qualifying children under age 13, or for a disabled spouse or dependent, to enable you to work or look for work.

3. The Child Tax Credit is for people who have a qualifying child. The maximum amount of the credit is $1,000 for each qualifying child (under age 17). This credit can be claimed in addition to the credit for child and dependent care expenses.

4. The Retirement Savings Contributions Credit, also known as the Saver’s Credit, is designed to help low- and moderate-income workers save for retirement. You may qualify if your income is below a certain limit and you contribute to an IRA or workplace retirement plan, such as a 401(k) plan. The Saver’s Credit is available in addition to any other tax savings that apply.

If you need more information let me know.

UPDATE ON COBRA CREDITS FOR EMPLOYERS

Last week, the IRS provided information that under the federal economic stimulus package, employers need to claim credit for COBRA health insurance premiums they pay for former employees. The information is posted on the IRS website and includes answers to 20 frequently asked questions. The information also includes an updated version of Form 941, the quarterly payroll tax return that employers must use to claim credit for the COBRA subsidy.

The stimulus law, the American Recovery and Reinvestment Act (ARRA), authorizes a 65% federal subsidy for continuing health care coverage under COBRA for employees who are laid off between September 1, 2008 and December 31, 2009. ARRA was enacted February 17 and the IRS notes additional forms are being revised to implement the COBRA subsidy. More information may be found at http://www.irs.gov/newsroom/article/0,,id=204505,00.html