A: Just before an important deadline was set to expire, the House and Senate extended the homebuyer tax credit for certain taxpayers. Previously, the credit was available to qualified taxpayers for purchases made before May 1, 2010 - or July 1 if a binding contract was in place before May 1. Congress has extended the July 1 deadline to Oct. 1, 2010.

It's important to note that the May 1 deadline was not extended - for a taxpayer to benefit from the credit, a binding contract still must have been in place before that date. The extension simply gives taxpayers with such a contract in place more time to complete the closing.

The maximum credit is $8,000 ($4,000 for married filing separately) for "first-time" homebuyers and $6,500 ($3,250 for married filing separately) for "long-time" homeowners. The credit starts to phase out for joint filers with modified adjusted gross incomes (MAGIs) exceeding $225,000 ($125,000 for single filers). It's completely eliminated for joint filers with MAGIs exceeding $245,000 ($145,000 for single filers).

Additional rules apply regarding who is eligible and what their maximum credit is, so it's important to consult your tax advisor to determine how the credit may apply to you.

Q: My friends are telling me I should have my pension plan reviewed now. Is this really necessary?

A: Absolutely yes. In the past year, retirement plans have come under the intense scrutiny of the federal government. Now, more than ever, you need to be empowered with as much information and trusted advice as possible.

It is strongly recommended that your retirement plan be reviewed with regard to the Pension Protection Act of 2006, and other more recent changes to the rules and laws that could directly affect you, and/or your retirement plan.

Some areas of concern that may need to be addressed:

• Some pension plans may be underfunded due to recent market instability and in fact, may be in danger of losing their tax benefits!
  
• A Pension Protection Act (PPA) ruling has mandated that all pension plans must be re-stated in 2010.
  
• Retirement Plan Contribution limits have been increased, which can impact you.
  
• The PPA requires increased monitoring of employees' retirement plans.
  
• The PPA and subsequent court rulings implemented more stringent guidelines on pension plan reporting, and providing of benefit statements. In addition, there is increased fiduciary liability of key business officers in providing employees with information on, and control over their retirement accounts.
  
• The PPA has required all 401K plans to now offer automatic enrollment.

We can help provide a thorough review of your pension plans in order to maximize your benefits and ensure your compliance with the new regulations. At Israeloff, Trattner & Co., our professionals are dedicated to providing you with the ideal solutions to help you achieve your financial objectives. Isn't it time you made Israeloff, Trattner & Co. part of your team?

Q: When do Employers have to make their Metropolitan Commuter Tax (MCTMT) payments?

A: Employers are required to make their MCTMT payments quarterly. However, if they participate in the PrompTax program for New York State withholding tax purposes, employers (other than school districts) are required to make MCTMT payments on the same dates their withholding tax payments are remitted under the PrompTax program.

Mandatory participation in PrompTax is determined annually for the July 1 through June 30th program year. In May, a review of all New York State Withholding Tax accounts is completed for the previous year to identify taxpayers who reported $100,000 or more in Withholding Tax liability. A Notice of Participation is sent on or about June 1, and Taxpayers must enroll within 20 days.

Q: The new Patient Protection and Affordable Care Act is quite complex. What are some of the highlights?

A: The Patient Protection and Affordable Care Act (the "Act", as amended) was recently signed into law. The Act will affect nearly every individual and business in the U.S.

The Act generally requires most individuals to have at least a minimum level of essential health care coverage (or imposes penalties on individuals who fail to do so). Under the new law, lower income individuals (with income up to 400% of the poverty level) may be entitled to receive tax credits and cost-sharing reductions to help pay for the coverage.

Employer Responsibilities
The Act also contains numerous provisions affecting employers.

Employer Shared Responsibility. While the Act does not require employers to provide minimum essential health coverage to employees, it encourages them to do so by offering penalties and incentives.

Employer Penalty. The new law exacts a penalty on larger employers (at least 50 full-time or full-time equivalent employees during the prior year) who fail to provide adequate coverage. If the employer doesn't offer minimum essential coverage to employees and at least one employee receives a premium tax credit or cost-sharing reduction, it will be assessed a penalty of $2,000 per full-time employee per year. The Act excludes the first 30 employees from the penalty.

For those employers offering coverage where the coverage is "unaffordable" or where the coverage has an "actuarial value" of less than 60% of the cost of benefits, a penalty will apply if at least one employee receives a premium tax credit or cost-sharing reduction. The penalty is the lesser of $3,000 for each employee receiving the credit or reduction or $2,000 multiplied times the total number of full-time employees. Employers with fewer than 50 full-time employees are exempt from the penalty assessment.

SHOP Exchanges. The Act creates state-based exchanges (known as Small Business Health Options Program, or "SHOP", Exchanges) through which small businesses (up to 100 full-time employees) can buy health care insurance coverage for employees (and possibly save money by doing so).

Small Employer Tax Credit. The Act offers small employers (generally those with no more than 25 full time employees and paying average annual wages of no more than $50,000 per employee) that purchase health insurance coverage for employees a sliding-scale income-tax credit to help them pay for the plan.

Free Choice Vouchers. Employers that offer coverage to their employees will be required to provide a "Free Choice Voucher" to certain employees whose income is not more than 400% of the federal poverty level under specified circumstances. The voucher is generally equal to an amount the employer would have paid to cover the employee under the employer's plan.

Grandfathered Coverage. The Act allows personal or employer-provided health benefit coverage existing at the time of enactment to stay in place under a "grandfather" provision. The Act considers the grandfathered coverage to meet the law's individual coverage mandate, if certain requirements are met.

Medicare Tax Increases
The Act imposes Medicare tax increases on higher income taxpayers.

Additional Medicare Tax on Earnings. Individual taxpayers who earn more than $200,000 a year, married taxpayers filing jointly who earn more than $250,000, and married taxpayers filing separately who earn more than $125,000 will have to pay an additional Medicare tax equal to .9% of their wages over the relevant threshold amount for their filing status. Self-employed individuals will be liable for an additional tax of .9% on self-employment income over certain thresholds. The additional self-employment tax is not deductible.
Surtax on Investment Income. A 3.8% surtax will be imposed on the investment income of higher income individuals, estates, and trusts. For individuals, the tax is equal to 3.8% of the lesser of (1) net investment income for the year or (2) the amount by which modified adjusted gross income exceeds the annual threshold amounts specified above for the additional Medicare tax on earnings. The thresholds are not inflation-adjusted. The 3.8% surtax does not apply to qualified retirement plan and individual retirement account distributions.

For More Information
The new law contains many more provisions that may affect you and your business. The good news is that, while some provisions of the Act take effect in 2010, most of the employer provisions go into effect later this decade. We would be happy to consult with you on what the new law means to you -- today and tomorrow. Please let us know if we can be of assistance.

Isn't it time you made Israeloff, Trattner & Co., part of your team?

Q: What are the tax incentives provided by the HIRE Act of 2010?

A: The Hiring Incentives to Restore Employment (HIRE) act, signed into law March 18, provides tax incentives for hiring and retaining workers and purchasing equipment and many other business assets.

Payroll tax forgiveness
This essentially exempts qualified employers (generally employers other than government entities) from having to pay the 6.2% Social Security portion of Federal Insurance Contribution Act (FICA) taxes on certain new hires through the end of the year. To qualify, a worker must be hired after Feb. 3, 2010, and before Jan. 1, 2011, and must have been unemployed (defined as not having worked more than 40 hours) for the 60-day period ending on his or her start date.

Retention credit
This credit applies to workers who qualify for payroll tax forgiveness if they are retained for 52 consecutive weeks. The tax savings per qualified retained worker are equal to the lesser of 6.2% of the wages paid to the worker in 2010 or $1,000.

Sec. 179 expensing
The HIRE act extends the increase in the Section 179 limit for initial year expensing to $250,000 (from $134,000). The Sec. 179 expensing election allows a current deduction for newly acquired assets that otherwise would have to be depreciated over a number of years. The HIRE act also extends the increase in the threshold at which the expensing election begins to phase out to $800,000 (up from $530,000). The higher limits apply for calendar year 2010 or a business's fiscal year that begins in 2010. A business can claim the expensing election only to offset its net income, not to reduce net income below zero.

Other provisions
The HIRE act includes additional provisions that may be of interest to you, such as:

* A new election to convert tax credit bonds to Build America Bonds,

* Extension of highway and transit programs through 2010,

* Strengthening of foreign account tax compliance, and

* Deferral of implementation of "worldwide allocation of interest" to 2020.

Various changes to estimated tax payment requirements for certain large corporations also were included in the act, but they don't go into effect until 2014 or later.

Many rules apply These breaks might provide your business with valuable tax savings, but many rules apply to them. So please contact us for the details before acting.

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Please E-mail us if there is a particular tax question that you would like us to answer. marketing@israeloff.com