BTB Tax News Update - January 27, 2010

Newsletter Topics: (click on the topic title below to jump directly to the topic)

New law to permit 2010 Haitian relief contributions to be deducted on 2009 returns
Economic Recovery Payment Contact Information – Form 1040, Schedule M
New Homebuyer Credit Form Released and Reminded to Attach Key Documents
BTB Income Tax Planner Software

New Law to Permit 2010 Haitian Relief Contributions to be Deducted on 2009 Returns

President Obama signed legislation Friday, January 22 that allows taxpayers to deduct their charitable contributions toward Haiti relief from their 2009 tax returns.
The bill allows individuals who make charitable contributions to aid Haitian earthquake victims to elect to claim an itemized charitable deduction on their 2009 tax return (instead of having to wait until next year to claim the deductions on their 2010 tax return). The election applies only to Haitian relief contributions made in cash after January 11, 2010, and before March 1, 2010. If the election is made, Haiti relief donations would be deductible on the 2009 return, not the 2010 return.
The bill also relieves recordkeeping requirements for Haitian relief contributions. For these contributions, a telephone bill would satisfy the Code Sec. 170(f)(17) recordkeeping requirements if it shows the name of the charitable organization, the date of the contribution, and the amount of the contribution.

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Economic Recovery Payment Contact Information – Form 1040, Schedule M

The Economic Recovery Payment (ERP) will be a reduction to any Making Work Pay Tax Credit for which the recipient qualifies. The Making Work Pay tax credit will be claimed on the recipient's 2009 tax return filed in 2010.
Taxpayers who can't recall if they received the economic recovery payment should contact their respective agency for confirmation before completing and filing their 2009 tax return in 2010. The IRS will not be able to provide this information. If a taxpayer needs to know whether they got a payment they should contact their respective agency personally.
Social Security Administration: Toll Free number 800-772-1213. General ERP inquiries can be answered by the SSA Web site: www.ssa.gov/recovery.
Veterans Administration: Toll free number is 800-827-1000. General ERP inquiries can be answered by going to the VA Web site: www.va.gov/recovery.
Railroad Retirement Board: Go to the RRB Web site at www.rrb.gov/recovery for more details.
As a general rule, these agencies will not provide the verification to a return preparer who calls the agency independently.  These agencies have policies, similar to the IRS, that information is available to a third party representative only if that individual is formally authorized to represent the taxpayer with the agency.
For tax related questions, these agencies will refer callers back to our IRS.gov web site www.IRS.gov/recovery and only secondarily be advised to call our toll free number (800-829-1040).

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New Homebuyer Credit Form Released and Reminded to Attach Key Documents

The Internal Revenue Service has released the new form that eligible homebuyers need to claim the first-time homebuyer credit this tax season and announced processing of those tax returns will begin in mid-February. The IRS also announced new documentation requirements to deter fraud related to the first-time homebuyer credit.
The new form and instructions follow major changes in November to the homebuyer credit by the Worker, Homeownership, and Business Assistance Act of 2009. The new law extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit.
With the release of Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and the related instructions, eligible homebuyers can now start to file their 2009 tax returns.
Note: Taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements.
The IRS expects to start processing 2009 tax returns claiming the homebuyer credit in mid-February after it completes the updating and testing of systems to meet the law’s new requirements. The updates allow the IRS to put in place critical systemic checks to deter fraud related to the homebuyer credit.
Some of these early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks.
In addition to filling out a Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:
•   A copy of the settlement statement showing all parties' names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
•   For mobile home purchasers who are unable to get a settlement statement, a copy of the executed retail sales contract showing all parties' names and signatures, property address, purchase price and date of purchase.
•   For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.
In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:
•   Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
•   Property tax records or,
•   Homeowner’s insurance records.

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BTB Income Tax Planner Software

2009 BTB Income Tax Planner Software is available to help you organize your tax preparation details and stay on top of your work.  It is only $129 for new purchasers and $99 for renewing purchasers. Click here to purchase or for more information.

To view past BTB Tax Updates, visit the Back to Basics Income Tax Seminars' Newsletter Archives

Our Instructors:

Thomas Zoeller EA, CFP, MST	James Hockenberry EA	John Geigel JD, CPA	Jaye Tritz EA, CFP, ChFC

Disclaimer
This publication is distributed with the understanding that the author and publisher are not engaged in rendering legal, accounting or other professional advice and assume no liability in connection with its use. Tax laws are constantly changing; are subject to differing interpretation; and the facts and circumstances in your particular situation may not be the same as those presented here. Therefore, we urge you to do additional research and make sure that you are fully informed and knowledgeable before using the information contained in this publication.

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