Overview of Tax Changes

Pastor, CPA Norma J.<br><br> Ridder, CPA Linda M. Roth, CPA Timothy Sundstrom, CPA Barbara Thomas, CPA Neil C. Trama, Jr., PA Daniel J.<br><br> Vecchio, CPA Sherry L. DeAgostino, Executive Director Pa. Society of Public Accountants 20 Erford Road, Suite 200A Lemoyne, PA 17043 1(717) 737-4439 1(800) 270-3352 A M(ssa*( F0om T+( P0(s,d(.t The autumn is in >ull swing and the Fall Classic is coming up soon.<br><br> As I write this letter the Phillies are up two games to one and have a tough road ahead with the Dodgers. But those darn (you know what I wanted to say) Yankees look like they have bought themselves another World Series championship. Nevertheless think Red and Go Phillies!<br><br> This season has been particularly busy with the chapter visitations. But I have enjoyed meeting PSPA members >rom around the state. The welcome provided to me has been overwhelming and I want to thank the chapters I have visited >or their overwhelming support.<br><br> There is no doubt in my mind what makes PSPA a great organization. It 9s our members. IRS is concluding their nal meeting on the Return Preparer Review and they should begin discussions with their various components to nalize the recommendations they will make to the President and Congress.<br><br> We will keep our members apprised o> the developments that will shortly be >orthcoming. Stay tuned. Our ad hoc committee will be meeting to make recommendations on how our By-Laws should change to accommodate the new Regulatory Model that Commissioner Shulman will be introducing.<br><br> In closing I want to wish all o> our members and their >amilies a happy and healthy holiday season. Be grate>ul >or the many blessings that we have as Americans. And say a prayer >or those who are experiencing some o> li>e 9s challenges.<br><br> Respect>ully Submitted, Paul J. Cannataro, CPA 3 Fall 2009 In this Issue ... A Message From The President ..................................................<br><br> 2 Pennsylvania Tax Update ..................4 NSA State Director 9s Message ............9 Pro cessional 9s Corner .........................10 RIA Federal Tax Handbook, 2010 Edition ...........................................19 Classifed Ads.........................................20 Sign UP FOr The PSPA e-MAil DiScUSSiOn grOUP (liSTServe) - YOUr MOST iMPOrTAnT TAx SeASOn reSOUrce geT A MeMBer 3 geT A SeMinAr PSPA 9S 2009 MeMBerShiP recrUiTMenT cAMPAign PSPA is only as strong as its members. As a member o> PSPA you understand the value o> the many bene ts PSPA o>>ers; your personal endorsement is very important to us and it is the most e>>ective way we build membership. Help us spread the word and through PSPA 9s GET A MEMBER-GET A SEMINAR program you 9ll receive a FREE seminar o> your choice.<br><br> That 9s right, >or recruiting just ONE new member YOU will receive a seminar o> your choice, absolutely FREE. The >ree seminar is a $150 value&another outstanding bene t o> PSPA! Additional in>ormation can be >ound on the PSPA website or by contacting 1-800-270-3352.<br><br> FOr The BeST Price PUrchASe YOUr TAx PUBlicATiOnS FrOM PSPA! Discounts on technical publications including all versions o> the Thomson Quickfnder Handbook , the RIA Federal Tax Handbook , the Tax Book published by Tax Materials Inc., and ALL publications o>>ered by CCH including the U.S. Master Tax Guide , the Guide to Pennsylvania Taxes , the U.S.<br><br> Master Depreciation Guide , and Express Answers. PSPA members save 30-40% o>> o> the list price o> these publications. Order >orms >or these products appear in this issue.<br><br> Community Accountants & Tax Professionals 4 Fall 2009 PENNSYLVANIA TAX UPDATE 2009-2010 PA BUDgET - oVErVIEw of TAX chANgES By Sharon R. Paxton Governor Rendell signed appropriation and tax bills on Friday, October 9th. Un>ortunately, although the budget reduces spending >rom 2008-2009 levels, it includes a substantial tax increase >or Pennsylvania businesses.<br><br> Adjustments to major corporate taxes will generate an additional $300 million in scal year 2009-10 and $460 million in 2010-11. Capital StoCk & FranChiSe tax phaSe-out DeFerreD The Capital Stock and Franchise Tax ( cCSFT d) rate >or calendar year 2009 and tax years beginning in 2009 is increased by 53% - >rom 1.89 mills to 2.89 mills (the 2008 rate). And, the phase-out o> the tax is delayed - the 2.89 mill rate will apply >or 2010 (previously scheduled at 0.89 mills) and 2011 (previously scheduled as the rst post-phase-out year).<br><br> Now, the rate will be reduced to 1.89 mills in 2012 and to 0.89 mills in 2013, with >ull elimination in 2014. The rate change will be slightly o>>set by an increase in the valuation deduction, >rom $150,000 to $160,000, e>>ective >or taxable years beginning a>ter December 31, 2009. The rate increase will not be >actored into estimated tax payments due prior to January 1, 2010.<br><br> While the CSFT rate change will have a broad impact on Pennsylvania businesses, some will enjoy at least a small bene t >rom other changes. Cni net loSS Cap expanDeD In one o> the >ew bright spots in Pennsylvania business taxes, the Corporate Net Income Tax ( cCNI d) Net Loss Carry>orward cap is increased to the higher o> $3 million or 15% o> Pennsylvania taxable income >or taxable years beginning a>ter December 31, 2008, and to the higher o> $3 million or 20% o> Pennsylvania taxable income >or taxable years beginning a>ter December 31, 2009. The cap previously was $3 million or 12.5% o> taxable income.<br><br> Cni SaleS FaCtor Weighting inCreaSeD In addition, the Corporate Net Income Tax apportionment >ormula will be modi ed. The weighting >or the Sales Factor will be increased >rom 70% to 83% >or taxable years beginning a>ter December 31, 2008, and to 90% >or taxable years beginning a>ter December 31, 2009. ManageD Care groSS reCeiptS tax E>>ective October 1, 2009, Managed Care Organizations that are party to a Medicaid managed care contract are subject to a tax o> 59 mills on gross receipts >rom Medicaid managed care contracts.<br><br> The tax will be terminated i> determined to be in violation o> >ederal law. Proceeds >rom the tax will augment the capitation appropriation o> the Department o> Public Wel>are. Cigarette & clittle CigarS d tax The Cigarette Tax is expanded to include cLittle Cigars, d and the tax rate is increased by 25 cents per pack, e>>ective November 1, 2009.<br><br> Special provisions apply to retailers and other persons in possession, on the e>>ective date, o> untaxed little cigars and cigarettes on which the additional tax has not been paid, to ensure that the new and additional taxes will be paid. Cigarette stamping agent commission rates are adjusted. Procedures are established >or remittance and en>orcement o> tax due on unstamped cigarettes.<br><br> heliCopter Sale anD repair exeMption E>>ective immediately, the sale and use o> helicopter and similar rotorcra>t are exempted >rom Pennsylvania sales and use tax. Repair parts and components, as well as installation in such cra>t, also are exempted. pit CheCkoFFS extenDeD Personal Income Tax re>und checko>>s >or Breast and Cervical Cancer Research and >or Juvenile Diabetes Cure Research have been reenacted without sunset dates.<br><br> Checko>>s >or Wild Resource Conservation, Organ and Tissue Donation Awareness and Military Family Relie> Assistance have been extended through 2013. pit WithholDing reMittanCe DeaDlineS reviSeD New, accelerated deadlines have been established >or employers withholding more than $20,000 o> Personal Income Tax annually. Beginning in June 2010, such employers will be required to remit the tax on the Wednesday >ollowing payday i> payday >alls on Wednesday- Friday, and to remit by the >ollowing Friday i> payday is on Saturday-Tuesday.<br><br> The thresholds >or classi cation o> lers have also been revised to annual amounts, instead o> quarterly amounts. FilM proDuCtion tax CreDit The amount available under the Film Production Tax Credit program is reduced >rom $75 million to $42 million >or scal 2009-10, then increased to $60 million in 2010-11. r&D tax CreDit The R&D Tax Credit provisions have been amended to eliminate the one- year holding period be>ore a credit may be sold.<br><br> However, the amounts available >or award have been reduced by 50% >or scal 2009-10 and 55% >or 2010-11. eDuCational iMproveMent tax CreDit The amount available under the Educational Improvement Tax Credit program is reduced >rom $75 million to $60 million in scal 2009-10, and to $50 million in 2010-11. The statute 5 Fall 2009 has been amended to clari>y that where a pass-through entity trans>ers a tax credit to its shareholders, members or partners, an election may be made to use the credit in the year o> contribution or the >ollowing year.<br><br> The de nition o> cpass-through entity d now explicitly includes single member limited liability companies treated as disregarded entities >or >ederal tax purposes. Credits continue to be granted on a c rst-come, rst- served basis d except that i> applications received prior to October 1, 2009, exceeded the allocation, such applications will be granted pro-rata. other tax CreDitS The total amount available in 2009- 10 under the Call Center, EIP, REAP, Job Creation, Neighborhood Assistance and First Class Cities Economic Development District Tax Credits are reduced by 50%.<br><br> The Alternative Energy Investment Credit is suspended. tax aMneStY planneD For 2010 The scal 2009-10 Pennsylvania budget package includes a Tax Amnesty to be conducted >rom April 26, 2010, through June 18, 2010. The amnesty will apply to state taxes (and related interest and penalties) delinquent as o> June 30, 2009.<br><br> Taxpayers who, during the amnesty period, report and pay eligible delinquent taxes and 50% o> applicable interest will be relieved o> penalties and the other 50% o> applicable interest. In the case o> liabilities >or which no return has been led or liabilities that have been underreported on a led return, i> the taxpayer has not been contacted by the Revenue Department, liability >or similar taxes due prior to July 1, 2004, will be >orgiven. Only the Pennsylvania portion o> IFTA >uel taxes will be eligible >or amnesty.<br><br> Payment must be by certi ed check, money order, EFT, credit card, cash or its equivalent. In addition to ling a tax amnesty return, participants will be required to le complete tax returns >or all un led taxes, and to le complete amended returns >or all underreported eligible taxes. Participants who become delinquent beyond certain parameters within two years a>ter the end o> the amnesty period will lose their penalty and interest >orgiveness under amnesty.<br><br> Participants will waive all rights to le a petition >or re>und or otherwise contest taxes reported under amnesty. Any taxpayer >ailing to report and pay an eligible tax during the amnesty period will be subject to a special, additional 5% penalty. The 5% penalty will not apply where a taxpayer has entered into a de>erred payment plan or led an administrative or judicial appeal during the amnesty period.<br><br> The Department o> Revenue will publish amnesty guidelines and sample >orms by December 8, 2009. philaDelphia SaleS tax inCreaSe E>>ective October 8, 2009, Act 44 o> 2009 authorized the City o> Philadelphia to impose an additional 1% sales and use tax, increasing the total state and local tax to 8% within the City. This increased tax rate is e>>ective until June 30, 2014.<br><br> MeDiCal SCanning SYSteMS ruleD creal eState d For pa SaleS tax purpoSeS 3 realtY/ perSonaltY teSt ClariFieD On July 29, 2009, a three-judge panel o> the Commonwealth Court, with one dissent, issued a decision in Northeastern Pennsylvania Imaging Center v. Commonwealth , No. 635 F.R.<br><br> 2007, clari>ying the crealty v. personalty d test >or Pennsylvania sales and use tax purposes. The court applied the principles established in In re Appeal o0 Sheetz , in which the court ruled that canopies placed over gasoline pumps became part o> the real estate >or local property tax purposes, and ruled that MRI and PET/CT scanning systems became part o> the real estate upon installation.<br><br> There>ore, the imaging center was entitled to a re>und o> sales tax paid on its purchase o> these systems, which were installed pursuant to construction contracts. In an unreported opinion issued on August 5, a majority o> a three-judge panel reached the same result in a companion case including a leased MRI scanning system on leased premises ( Medical Associates o0 the Lehigh Valley, P.C. v.<br><br> Commonwealth , No. 50 F.R. 2006).<br><br> On August 19, 2009, the Commonwealth led exceptions to the panel decisions in both o> these cases. The Court recently denied the exceptions led by the Commonwealth, and a >urther appeal by the Commonwealth to the Pennsylvania Supreme Court is expected shortly. This is the rst time that a Pennsylvania court has applied the Sheetz test >or sales tax purposes.<br><br> Under the Sheetz test, in determining whether items that are a> xed to real estate but can be removed without material injury to themselves or to the real estate should be treated as realty or personalty, the >ollowing three >actors must be considered: (1) the manner in which the item is physically attached or installed, (2) the extent to which the item is essential to the permanent use o> a building or other improvement, and (3) the objective intention o> the parties regarding permanence. Importantly, the Court rejected the Commonwealth 9s contention that an item must be essential to all possible uses o> a building to be essential to the permanent use o> the building. The Court also reiterated that absolute permanence is not required >or a xture to become part o> the real estate.<br><br> Rather, it is su> cient i> the item will remain in place so long as the property continues to be used >or its current purpose or until the item wears out or becomes obsolete. legiSlative reMeDY Sought to ClariFY BuSineSS privilege tax liaBilitieS oF ConStruCtion ContraCtorS anD other ServiCe proviDerS Doing BuSineSS in Multiple loCal tax JuriSDiCtionS Recent court decisions have created con>usion concerning the scope o> a municipality 9s authority to impose a business privilege tax ( cBPT d) on construction contractors and other 6 Fall 2009 service providers doing business in multiple local tax jurisdictions. Senate Bill 601 introduced by senator Pat Browne would amend the Local Tax Enabling Act to provide that a BPT on the cprivilege d o> doing business within a local taxing jurisdiction may be imposed only on taxpayers with a cbase o> operations d in that taxing jurisdiction.<br><br> Senate Bill 601 would also de ne a cbase o> operations d as can actual, physical and permanent place o> business >rom which a taxpayer manages, directs and controls its business activities d and clari>y that cpermanent d means ca building or other structure owned or rented or used by the taxpayer that is permanently attached to the ground via a xed >oundation or similar construction and which cannot be removed without demolition or dismantling. d Various interest groups are supporting this proposed legislation. As discussed in more detail below, in late 2007, the Pennsylvania Supreme Court issued a decision in V. L.<br><br> Rendina, Inc. v. City o0 Harrisburg and Harrisburg School District ( cRendina d) , 938 A.2d 988 (Pa.<br><br> 2007), which rejected and eliminated the cbright- line d test established by a line o> Commonwealth Court decisions that had required the presence o> a local cbase o> operations d to support a tax imposed on the cprivilege o> doing business d within a taxing jurisdiction. See, e.g., Township o0 Lower Merion v. QED, Inc.<br><br> , 738 A.2d 1066 (Pa. Cmwlth. 1999), appeal denied , 775 A.2d 811 (Pa.<br><br> 2001). Earlier court decisions had also established that a construction job trailer was not generally viewed as a cbase o> operations. d See, e.g., Northwood Construction Co. v.<br><br> Township o0 Upper Moreland , 856 A.2d 789 (Pa. 2004); G.A & F.C. Wagman, Inc.<br><br> v. Manchester Township, 535 A.2d 702 (Pa. Cmwlth.<br><br> 1988). Under the Rendina decision, it appears that a cprivilege- based d BPT may be imposed on a company that conducts signi cant activities within a taxing jurisdiction whether or not it regularly maintains an o> ce or other place o> business there. Exactly how much cactivity d is required in a local taxing jurisdiction to support imposition o> a cprivilege- based d BPT is not clear.<br><br> renDina DeCiSion In Rendina , the Pennsylvania Supreme Court upheld the City o> Harrisburg 9s right to impose its BPT on a contractor per>orming construction work, but not maintaining a traditional business o> ce, in the city. Three justices joined in the opinion o> the court, one concurred, one dissented, and two did not participate. From 1999 to 2001, Rendina constructed a major o> ce building in Harrisburg.<br><br> The company maintained the usual jobsite trailer but did not have any other o> ce in the city. Rendina paid the city 9s BPT and then led a re>und claim. The city 9s appeals board and the Dauphin County Court o> Common Pleas held that the job trailer was a c eld o> ce d which constituted su> cient presence to support imposition o> the tax.<br><br> On appeal, the parties treated the tax as one imposed on the privilege o> conducting business in the city, as opposed to a tax on business ctransacted d in the city. Following a line o> cases requiring the presence o> a cbase o> operations d be>ore a company could be subjected to a cprivilege-based d tax, see, e.g. , QED, supra , the parties >ocused their arguments on whether or not the job trailer should be considered a cbase o> operations d in the city.<br><br> A divided panel o> the Commonwealth Court reversed and struck the tax, holding that Rendina 9s jobsite trailer was not a cbase o> operations. d The city then appealed to the Pennsylvania Supreme Court. Somewhat surprisingly, the Pennsylvania Supreme Court completely side-stepped the question o> whether the job trailer constituted a cbase o> operations. d In >act, the court suggested that whether a company has a cbase o> operations d in the taxing municipality is relevant only when the municipality seeks to tax income >rom activities outside the municipality. In Gilberti v.<br><br> City o0 Pittsburgh , 511 A.2d 1321 (Pa. 1986), the court ruled that revenues >rom activities outside the city could not have been taxed by the City o> Pittsburgh i> its tax had been imposed on business ctransactions d within the city. However, Pittsburgh 9s tax was imposed on the privilege o> doing business >rom a location within the city.<br><br> Since the services provided by Gilberti were directed and controlled >rom Gilberti 9s o> ce or cbase o> operations d in the city, the court held that revenues >rom those services were >airly related to the exercise o> the privilege o> doing business in the city and could be taxed. The Rendina court re>used to require the inverse o> Gilberti - to preclude a privilege-based tax in the absence o> a cbase o> operations d in the municipality. The court noted that the Local Tax Enabling Act ( cLTEA d) broadly authorizes local taxing 7 Fall 2009 bodies to impose taxes on cpersons, transactions, occupations, privileges, subjects and personal property within the limits o> such political subdivisions .... d 53 P.S.<br><br> § 6924.301.1. And, the City o> Harrisburg 9s tax ordinance and regulations de ned cbusiness d broadly, so as to encompass local construction activities. In this light, the court held that Rendina 9s presence in the City o> Harrisburg >or ca major long-term construction project d represented an exercise o> the privilege o> doing business a>>orded by the city.<br><br> Furthermore, the court indicated that Rendina 9s activities were subject to tax cregardless o> whether the job site trailer was used as a 8base o> operations 9 ..., or whether the three- year construction project can, in some sense, be viewed as constituting a single lengthy 8transaction. 9 d Justice Baer, in a concurring opinion, indicated that the Majority Opinion unnecessarily blurred the lines between the local taxation o> cprivileges d and o> ctransactions. d He would adhere to the requirement o> a cbase o> operations d to support imposition o> a privilege-based tax, and would not view a jobsite trailer as a cbase o> operations. d However, he also opined that, under the LTEA, a local government was permitted to adopt a chybrid tax d on both the exercise o> a privilege to do business and on transactions within the taxing jurisdiction. In his opinion, Harrisburg had adopted a chybrid tax. d Justice Cappy dissented, indicating that he agreed with the reasoning o> the Common wealth Court majority, that the contractor 9s job trailer did not constitute a cbase o> operations d within the taxing jurisdiction and that the tax could not be upheld in the absence o> a cbase o> operations. d a&l DeCiSion On June 4, 2009, in the rst post- Rendina BPT decision issued by an appellate court addressing the applicability o> BPT to a construction contractor, a three-judge panel o> the Commonwealth Court, in A & L, Inc. v.<br><br> Township o0 Rostraver , No. 1651 C.D. 2008 (unreported opinion), a> rmed the trial court 9s nding that a construction company had >ailed to meet its burden o> proving that it maintained business o> ces at locations outside o> the taxing district in which its headquarters was located, to which some o> its income was attributable >or business privilege tax purposes.<br><br> The applicable taxing ordinances contained an exemption >or receipts attributable to an o> ce or place o> business regularly maintained outside the limits o> the taxing district. The court held that this exemption applies to o> ces serving as a cbase o> operations d in another taxing district and to revenues subject to BPT in another jurisdiction. There was no evidence that BPT had been imposed on the disputed receipts by another local taxing district.<br><br> In addition, the court stated that the taxpayer had not demonstrated that any o> its co> ces d in other jurisdictions constituted a base o> operations. The taxpayer argued that the court did not apply the correct standard in determining whether its various eld o> ces quali ed >or the co> ce exemption. d The taxpayer 9s application >or reargument was denied on July 30, 2009. The taxpayer led a Petition >or Allowance o> Appeal with the Pennsylvania Supreme Court on August 28, 2009.<br><br> The Supreme Court has not yet acted on that Petition. general Bpt prinCipleS Each cbusiness privilege tax d ordinance or resolution must be construed to give e>>ect to its speci c terms. For example, BPT ordinances contain varying de nitions o> the term cbusiness. d In addition, in contrast to a traditional cprivilege-based d tax, some local taxing jurisdictions have adopted taxes that are labeled as a cbusiness privilege tax, d but which impose tax only on the cvolume o> business transacted d within the taxing jurisdiction and not on a taxpayer 9s entire gross receipts.<br><br> Although these cprinciples d are subject to the speci c terms o> a particular BPT ordinance or resolution, case law developments, including the Rendina decision, suggest the >ollowing general principles now apply to local business privilege taxes in Pennsylvania (subject to potential modi cation by Senate Bill 601): 1. Pursuant to Rendina , a cprivileged- based d tax may be imposed on revenues >rom signi cant activities carried on within the taxing jurisdiction, whether or not the taxpayer has an o> ce or other cbase o> operations d in the jurisdiction. It seems unlikely that tax may be imposed >or an isolated activity.<br><br> 2. Pursuant to Gilberti and its progeny, a properly-dra>ted ordinance or resolution may impose a cprivilege-based d tax on intrastate gross receipts attributable to activities carried on outside the jurisdiction but managed and controlled >rom a cbase o> operations d within the jurisdiction. 3.<br><br> Under a ctransaction-based d tax, the taxing jurisdiction may not tax revenues >rom business transacted outside the jurisdiction. See J&K Trash Removal, Inc. v.<br><br> City o0 Chester , 842 A.2d 983 (Pa. Cmwlth. 2004), appeal denied , 867 A.2d 524 (Pa.<br><br> 2005). However, the Rendina majority 9s reluctance to draw clean lines and the willingness o> the concurrence to view a tax as both a cprivilege-based d and ctransaction-based d tax may encourage municipalities and school districts to argue that their tax ordinances and resolutions are both cprivilege-based d and ctransaction-based. d We will be >aced with sorting out o>ten imprecise or conficting language in tax ordinances and resolutions. 4.<br><br> A Pennsylvania municipality or school district must >airly apportion receipts derived >rom interstate operations, even when the taxpayer 9s only permanent place o> business is located within the municipality. Sharon R. Paxton is a member o0 McNees Wallace & Nurick LLC 9s State and Local Tax Group.<br><br> Firm:Contact: Address: City: State:Zip: Phone: Fax:Email: Annual Fees: $ _________ YIE: __________ Number of accountants (with years of experience): F/Time:P/Time*: 5+ years:________________ 4 years:________________ 3 years:________________ 2 years:________________ 1 year:________________ <1 year:________________ Total: ________________ *Average of 25 hours per week or less In the past three years, how many firm members attended a loss control seminar ____ On what date was the firm established___________ Within the past 5 years: Has the firm provided services to a client that is engaged in the issuance, offering, registration or sale of securities or bonds; or provide d clients with forecasts or projections for inclusion in sales literature, etc., of any securities or bonds? YES o NO o Has any member of the firm provided services or acted as a director/officer/committee member for any financial institution? YES o NO o Has any member of the firm had an accounting license or authority to practice accounting revoked, or been subject to disciplinary action, fine reprimand, or criminal penalty related to performance of professional services?<br><br> YES o NO o Renewal: ___/___/___ Insurer: ___________________ Limit: $ ___________ Deductible: $ ___________ Premium: $________________ What is the retroactive date on your current policy ___/___/___ o None o N/A Approximately percentage of income received from the following activities for the last annual period: Activity% Audit: Public Companies** Audit: Other Review Compilation Bookkeeping Tax Business Valuation Computer Consulting Litigation Support ""Calls for a supplement CLAIMS HISTORY (within the past five years): Date claim(s) ReportedOne: ____/____/19______Two: ____/____/19______Three: ____/____/19______ Amount Paid, including$______________________$______________________$______________________ Defense Expenses (if closed)$______________________$______________________$______________________ Reserve amount (if open)$______________________$______________________$______________________ Please return to Custom Brokers Insurance, 3659 Green Road Suite 209, Beachwood, Ohio 44122 Tel: 800-969-7475 3 Fax: 216-831-6819 Email to: rditomaso@job-cbi.com 3 http:www.cpagold.com Activity% Litigation Support Management Advisory Services Assurance Services Financial Planning Asset Management Sale of Mutual Funds SEC/Sarbanes Oxley Related Services** Other* Total100% 9 Fall 2009 Firm:Contact: Address: City: State:Zip: Phone: Fax:Email: Annual Fees: $ _________ YIE: __________ Number of accountants (with years of experience): F/Time:P/Time*: 5+ years:________________ 4 years:________________ 3 years:________________ 2 years:________________ 1 year:________________ <1 year:________________ Total:________________ *Average of 25 hours per week or less In the past three years, how many firm members attended a loss control seminar ____ On what date was the firm established___________ Within the past 5 years: Has the firm provided services to a client that is engaged in the issuance, offering, registration or sale of securities or bonds; or provide d clients with forecasts or projections for inclusion in sales literature, etc., of any securities or bonds? YES o NO o Has any member of the firm provided services or acted as a director/officer/committee member for any financial institution? YES o NO o Has any member of the firm had an accounting license or authority to practice accounting revoked, or been subject to disciplinary action, fine reprimand, or criminal penalty related to performance of professional services?<br><br> YES o NO o Renewal: ___/___/___ Insurer: ___________________ Limit: $ ___________ Deductible: $ ___________ Premium: $________________ What is the retroactive date on your current policy ___/___/___ o None o N/A Approximately percentage of income received from the following activities for the last annual period: Activity% Audit: Public Companies** Audit: Other Review Compilation Bookkeeping Tax Business Valuation Computer Consulting Litigation Support ""Calls for a supplement CLAIMS HISTORY (within the past five years): Date claim(s) ReportedOne: ____/____/19______Two: ____/____/19______Three: ____/____/19______ Amount Paid, including$______________________$______________________$______________________ Defense Expenses (if closed)$______________________$______________________$______________________ Reserve amount (if open)$______________________$______________________$______________________ Please return to Custom Brokers Insurance, 3659 Green Road Suite 209, Beachwood, Ohio 44122 Tel: 800-969-7475 3 Fax: 216-831-6819 Email to: rditomaso@job-cbi.com 3 http:www.cpagold.com Activity% Litigation Support Management Advisory Services Assurance Services Financial Planning Asset Management Sale of Mutual Funds SEC/Sarbanes Oxley Related Services** Other* Total100% NSA State Director 9s Message Report on NSA Annual Meeting held in San Diego NSA held their 64 th Annual Meeting in San Diego, CA on August 12-15, 2009. Elected as President was r7b-:< l. C:7ss o> Northglenn, CO.<br><br> D766y J. W77ds o> Nashville, AR was elected as First Vice President. In a contested election >or Second Vice President, >ormer District Governor S0):76 C773 was success>ul in her bid >or election.<br><br> S<->-6 J. h)6s76 o> Cokato, MN was re-elected as Secretary/Treasurer. In addition, elections were held >or all District Governors in the codd d numbered districts and all State Directors in the ceven d numbered districts.<br><br> There was only one contested election >or Governor o> District IX. Joyce Funkhouser-Lingelbach >rom Oregon was success>ul in her bid, and will be the new Governor. All other positions were unopposed.<br><br> Proposed Bylaw Changes In addition to election o> o> cers, there were >our major bylaw changes proposed. 1) Proposed Bylaw Amendment to allow all Active and Li>e Members o> NSA to participate in and vote on all matters at the Annual Meeting propoSeD BYlaW Change approveD 2) Proposed Bylaw to Allow Board Members to receive a salary or >ees >rom NSA with Board Approval propoSeD BYlaW Change approveD 3) Proposed Bylaw to Change the NSA Name propoSeD BYlaW DeFeateD 4) Proposed Bylaw To Allow Online Voting >or NSA O> cers, District Governors, State Directors and Bylaw Amendments propoSeD BYlaW taBleD until next Year NSA Awards Banquet During the awards portion o> the event, PSPA was awarded a plaque >or success>ully cMonitoring the State Board o> Accountancy d. In addition, Mary Lew Kehm won an award >or the cBest Single Article in an ASO 9s publication. d More News Related to Tax Preparer Registration In October, NSA Executive Director John Ams reported his attendance at several IRS Tax Preparer Forums held in September.<br><br> In October, Executive Director Ams issued an NSAlert regarding Tax Preparer Regulation. As part o> the NSAlert, John re>erenced remarks presented by OPR Director Karen Hawkins at the >all meeting o> the American Bar Association. According to her remarks, the introduction o> tax preparation so>tware >or commercial preparers has made it possible >or people who never would have considered it be>ore to start their own tax preparation businesses.<br><br> She was particularly critical o> those cwho use this so>tware and rely on it as i> it does everything >or them. d She noted that the so>tware makers have expressed the view that their product does not make anyone a tax expert. Hawkins said she thinks it is legitimate to consider having individuals take some sort o> test to gain authorization to prepare tax returns. Questions that have arisen on this issue include whether certain groups or individuals should be exempt >rom an exam or i> they can be cgrand>athered d into the system, she said.<br><br> Individuals currently subject to Circular 230 believe they should not have to take an additional test to quali>y to register as paid preparers, Hawkins mentioned by way o> example. However, Hawkins, who is a licensed lawyer in Cali>ornia, said that lawyers and CPAs have yet to convince her that there is anything inherent in attaining their licenses that makes them quali ed or competent tax return preparers. cI am not convinced that they should be exempted >rom testing by the mere >act that they are licensed by their state bar or by their state accountancy board, d she said.<br><br> In addition, many unenrolled and unlicensed preparers who have been preparing returns >or a long time support the grand>athering concept, as they do not think they should have to take a test this late in their careers, she said. These individuals o>ten do not enroll or become licensed because they just want to prepare returns and do not want to represent taxpayers in >ront o> the IRS, Hawkins said. She noted that groups like NSA, H & R Block and the ABA have expressed the view there should be some kind o> examination process to test an individual 9s minimum tax competency, with some exceptions >or those who have already taken a competency exam that IRS deems su> cient.<br><br> The consensus at the Tax Preparer Forums held by IRS, most recently on September 30 in Chicago, is that cminimum competency d is knowledge o> the tax law as >ound in Publication 17. Clearly, since any ACAT examination is more di> cult than the Pub. 17-based test contemplated above, we have asked the IRS to exempt >rom any testing requirement ACAT credential holders who have passed a valid ACAT examination.<br><br> Even the potential requirement >or continuing education has caused some controversy, according to Hawkins. She noted that some individuals, primarily CPAs and attorneys, are required to NSA State Director o0 the Year NSA State Director 9s Message continued on page 18 10 Fall 2009 New Video Series Helps Exempt Organizations Understand Redesigned Form 990 Requirements The Internal Revenue Service has launched a new case study and video program to help exempt organizations and their tax preparers better understand the newly revised Form 990 series which must be led >or the 2008 tax year. The Form 990 series, redesigned >or the rst time in nearly 30 years, requires more disclosure and transparency by exempt organizations.<br><br> With some exceptions, organizations that are exempt >or >ederal taxation are required to le the Form 990 in>ormation return. The additional in>ormation will give the IRS and the public a better view o> how the exempt organizations work, especially in terms o> expenditures and executive salaries. To help illustrate key points and answer important questions about the new Form 990, the IRS 9 Exempt Organizations Division developed cThe New Form 990: Getting Started, d a case study about a hypothetical organization 3 Exempt Organization >or Disaster Relie> (EODR).<br><br> The hypothetical case study includes a set o> >acts describing organizational and nancial aspects o> EODR, and a completed Form 990 based on those >acts. A video series walks you through key reporting issues common to most organizations required to le Form 990. Be>ore starting the videos, people should read the hypothetical EODR case study and review the example Form 990.<br><br> The series o> videos, each between ve and ten minutes long, cover a key area o> the Form 990, using >acts >rom the case study. The videos are listed in an order based on the sequencing list >ound on page 5 o> the Form 990 instructions. However, they can be viewed in any order.<br><br> Included in the video series are: o>-:>1-w This video is a good place to start >or people who have questions about the redesigned Form 990. It looks at some o> the key things to consider about the Form 990 and the various schedules that exempt organizations may need to complete, particularly Schedule R. r->-6=- )6d e@8-6s-s This segment covers two o> the nancial statement portions: Part VIII, Statement o> Revenue, and Part IX, Statement o> Functional Expenses.<br><br> It looks at how to ll out the required columns o> in>ormation >or revenue and expenses. B)4)6c- S0--<, S=884-m-6<)4 F16)6c1)4 S<)<-m-6<s, )6d Sc0-d=4- D This video reviews Part X o> the Form 990, the Balance Sheet, and Part XI, which covers Financial Statements and Reporting. It explains some di>>erences between the redesigned and previous version o> Form 990.<br><br> It also >ocuses on parts o> Schedule D, Supplemental Financial Statements. p:7/:)m S-:>1c-s, o<0-: irS F1416/s )6d t)@ C7m841)6c- This video >ocuses on Part III, which allows an organization to ctell its story d and describe its program services, and Part V, which covers other IRS lings and areas o> tax compliance. Part V will alert organizations i> they have other ling obligations besides the Form 990 and will help them to determine i> they engage in activities that raise tax compliance concerns.<br><br> C7m8-6s)<176 This segment reviews the Form 990 compensation reporting in Part VII. It explains who needs to be listed in Part VII and explains the three types o> compensation to report. It also highlights Schedule J, the compensation continuation schedule.<br><br> g7>-:6)6c- This segment describes how to complete Part VI o> the redesigned Form 990, which requests in>ormation about the organization 9s governing body, management, policies and procedures and disclosure practices. It also >ocuses on Schedule L, which requests in>ormation on transactions with interested persons, such as directors, o> cers, key employees and their >amily members. S=mm):y, Sc0-d=4-s, S1/6)<=:-s This segment covers Parts I, II and IV o> the Form 990 4Summary, Signature Block and Checklist o> Required Schedules.<br><br> It also provides an overview o> several new schedules to the Form 990. cThe New Form 990: Getting Started d is only one o> the online resources the IRS o>>ers >or 990 lers. There is a ve-part interactive course at www.stayexempt.irs.gov and a series o> 990 ling tips, plus the 990 >orm, schedules and instructions at www.irs.gov/charities.<br><br> New IRS Retirement Plan Navigator Aims to Help Small Businesses The Internal Revenue Service has created a new Web-based tool to help small business owners determine which tax->avored pension plan best suits their needs and how to keep their plans in compliance. The IRS Retirement Plan Navigator is intended to provide employers with an easy-to-use guide that >ocuses on three areas: choosing a plan, maintaining a plan and correcting a plan. By using the navigator, employers may nd that choosing and maintaining a pension plan is not as daunting as they thought.<br><br> Some plan types are less costly and easier to establish than others. The navigator does not suggest which plan may be best >or a speci c employer but it does lay out the options to allow them to choose one that best ts their situations. The navigator includes a side-by-side comparison o> pension plans and their requirements.<br><br> The navigator provides a checklist and suggested resources >or maintaining compliance. Pension 11 Fall 2009 laws change >requently. Employers can minimize problems by doing a once- a-year review to ensure they maintain compliance.<br><br> The IRS also recognizes that mistakes can be made unintentionally, and many errors can be corrected without noti>ying the agency. The navigator o>>ers suggested options to employers seeking to correct errors and bring their plans back into compliance. Although the Retirement Plan Navigator is aimed at small business owners, it also can help mid-size businesses review their options as well.<br><br> Individuals who want to better understand their employer 9s plan may also nd it o> use. The Web-based guide will be kept up to date as pension laws and regulations change. Microso,t 9s HealthVault to Assist in Disability Process Social Security has entered into an agreement with Microso>t to test the use o> Microso>t 9s HealthVault service in the disability process.<br><br> HealthVault is a >ree online service people can use to gather, store, and manage their >amilies 9 health in>ormation. They can share the in>ormation with doctors and healthcare providers. cThe use o> personal health records holds great promise >or ensuring that the medical in>ormation we collect >rom someone applying >or disability bene ts is accurate and complete, d said Michael J.<br><br> Astrue, Commissioner o> Social Security. cCombined with other advancements in health in>ormation technology, our use o> HealthVault should result in >aster decisions >or disability applicants. d Learn more about this new partnership by reading the press release at www. socialsecurity.gov/presso> ce/pr/ms 2009-47 (IRB 2009-42) 3 Change to: Travel Rules Updated 2009-47 (IRB 2009-42) updates the rules >or employer who are reimbursed >or lodging, meals, and incidental expenses, or meals and incidental expenses only, while traveling away >rom home, to substantiate the expenses by per diem allowance in lieu o> actual expenses.<br><br> The revenue procedure also provides an optional method >or employees and sel>-employed individuals who are not reimbursed to use in computing the deductible costs they pay or incur >or business meal and incidental expenses, or >or incidental expenses only i> they pay or incur no meal expenses, while traveling away >rom home. Use o> a method described in this revenue procedure is not mandatory, and a taxpayer may use actual allowable expenses i> the taxpayer maintains adequate records or other su> cient evidence >or proper substantiation. The new high-low rates are $258 >or high cost areas and $163 >or all others.<br><br> The IRS has issued Publication 4128, Tax Impact o, Job Loss The publication discusses the taxability o> various employer and government payments, getting your W-2 >rom a bankrupt employer, tax consequences o> taking money >rom your retirement plan. Overstatement o, Basis The IRS has issued temporary (replacing an existing nal regulation) (T.D. 9466) and proposed (REG-108045- 08) regulations de ning an omission >rom gross income >or purposes o> the six-year minimum period >or assessment o> tax attributable to partnership items and the six-year period >or assessing tax.<br><br> The temporary regulations resolve a continuing issue as to whether an overstatement o> basis in a sold asset results in an omission >rom gross income. The regulations will a>>ect any taxpayer who overstates basis in a sold asset creating an omission >rom gross income exceeding twenty- ve percent o> the income stated in the return. The IRS has released an updated version o, Publication 393, Employment Tax Forms The package includes sample Forms W-2 and W-3 and instructions >or the 2009 tax year.<br><br> Clari cation to Energy Property Purchases Announcement 2009-69(IRB 2009-40) includes changes to Revenue Procedure 2007-65. Speci cally, the announcement expands the rights o> developers and owners to enter into agreements >or the purchase o> the wind energy property owned by the partnership to permit a purchase price determined prior to exercise i> the parties reasonably believe that the price will not be less than the >air market value o> the energy property at the time the right may be exercised, clari es how section 469 applies to credits generated by wind energy >acilities, clari es that the revenue procedure only provides sa>e harbor requirements and makes con>orming changes to the revenue procedure to refect these three changes. Enrollment o, Actuaries REG-159704-03 contains proposed amendments to 20 CFR part 901 relating to the enrollment o> actuaries under section 3042 o> the Employee Retirement Income Security Act o> 1974 (ERISA) The proposed amendments would update the eligibility requirements >or per>orming actuarial services >or ERISA- covered employee pension bene t plans, including the continuing education requirements, and the standards >or per>orming such actuarial services.<br><br> The proposed amendments would a>>ect employee pension bene t plans and the actuaries providing actuarial services to those plans. Revenue Filing Out o, State Liens The PA Department o> Revenue has begun ling liens against out o> state businesses that owe Pennsylvania tax liabilities o> at least $5,000. The goal o> the lien e>>ort is to encourage out-o>-state businesses operating in the commonwealth to comply with Pennsylvania tax laws.<br><br> The program will make businesses accountable in their home state >or tax liabilities assessed in Pennsylvania. The Department o> Revenue uses the original liens led in Pennsylvania against a company to export and domesticate the liens in the business taxpayer 9s state o> domicile. Prior to ling a lien, however, the department noti es each taxpayer o> its intent to lien and provides one nal opportunity >or the taxpayer to satis>y its tax obligations.<br><br> New Service Allows Inheritance Tax Extension Requests to Be Submitted Via Email Taxpayers and pro>essionals are encouraged to use the PA Department o> 12 Fall 2009 Revenue 9s Inheritance Tax Divisions new e-mail address RE-InheritanceTaxExt@ state.pa.us to le >or extension requests. Questions may be directed to the division at 717-787-8327. IRS Announces Pension Plan Limitations ,or 2010 The Internal Revenue Service announced cost-o>-living adjustments applicable to dollar limitations >or pension plans and other items >or Tax Year 2010.<br><br> Section 415 o> the Internal Revenue Code provides >or dollar limitations on bene ts and contributions under quali ed retirement plans. Section 415(d) requires that the Commissioner annually adjust these limits >or cost-o>-living increases. Other limitations applicable to de>erred compensation plans are also a>>ected by these adjustments under Section 415.<br><br> Under Section 415(d), the adjustments are to be made pursuant to adjustment procedures which are similar to those used to adjust bene t amounts under Section 215(i)(2) (A) o> the Social Security Act. The limitations that are adjusted by re>erence to Section 415(d) will remain unchanged >or 2010. This is because the cost-o>-living index >or the quarter ended September 30, 2009, is less than the cost- o>-living index >or the quarter ended September 30, 2008, and, >ollowing the procedures under the Social Security Act >or adjusting bene t amounts, any decline in the applicable index cannot result in a reduced limitation.<br><br> For example, the limitation under Section 402(g)(1) on the exclusion >or elective de>errals described in Section 402(g) (3) will be $16,500 >or 2010, which is the same amount as >or 2009. This limitation a>>ects elective de>errals to Section 401(k) plans and to the Federal Government 9s Thri>t Savings Plan, among other plans. E>>ective January 1, 2010, the limitation on the annual bene t under a de ned bene t plan under Section 415(b)(1) (A) remains unchanged at $195,000.<br><br> For participants who separated >rom service be>ore January 1, 2010, the limitation >or de ned bene t plans under Section 415(b)(1)(B) is computed by multiplying the participant 9s compensation limitation, as adjusted through 2009, by 1.0000. The limitation >or de ned contribution plans under Section 415(c) (1)(A) remains unchanged >or 2010 at $49,000. The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation o> Section 415(b) (1)(A).<br><br> A>ter taking into account the applicable rounding rules, the amounts >or 2010 are as >ollows: The limitation under Section 402(g) (1) on the exclusion >or elective de>errals described in Section 402(g)(3) remains unchanged at $16,500. The annual compensation limit under Sections 401(a)(17), 404(l), 408(k) (3)(C), and 408(k)(6)(D)(ii) remains unchanged at $245,000. The dollar limitation under Section 416(i)(1)(A)(i) concerning the de nition o> key employee in a top-heavy plan remains unchanged at $160,000.<br><br> The dollar amount under Section 409(o)(1)(C)(ii) >or determining the maximum account balance in an employee stock ownership plan subject to a 5-year distribution period remains unchanged at $985,000, while the dollar amount used to determine the lengthening o> the 5-year distribution period remains unchanged at $195,000. The limitation used in the de nition o> highly compensated employee under Section 414(q)(1)(B) remains unchanged at $110,000. The dollar limitation under Section 414(v)(2)(B)(i) >or catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) >or individuals aged 50 or over remains unchanged at $5,500.<br><br> The dollar limitation under Section 414(v)(2)(B) (ii) >or catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) >or individuals aged 50 or over remains unchanged at $2,500. The annual compensation limitation under Section 401(a)(17) >or eligible participants in certain governmental plans that, under the plan as in e>>ect on July 1, 1993, allowed cost-o>-living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, remains unchanged at $360,000. The compensation amount under Section 408(k)(2)(C) regarding simpli ed employee pensions (SEPs) remains unchanged at $550.<br><br> The limitation under Section 408(p) (2)(E) regarding SIMPLE retirement accounts remains unchanged at $11,500. The limitation on de>errals under Section 457(e)(15) concerning de>erred compensation plans o> state and local governments and tax-exempt organizations remains unchanged at $16,500. The compensation amounts under Section 1.61-21(>)(5)(i) o> the Income Tax Regulations concerning the de nition o> ccontrol employee d >or >ringe bene t valuation purposes remains unchanged at $95,000.<br><br> The compensation amount under Section 1.61-21(>)(5)(iii) remains unchanged at $195,000. The Code also provides that several pension-related amounts are to be adjusted using the cost-o>-living adjustment under Section 1(>)(3). A>ter taking the applicable rounding rules into account, the amounts >or 2010 are as >ollows: The adjusted gross income limitation under Section 25B(b)(1)(A) >or determining the retirement savings contribution credit >or married taxpayers ling a joint return is increased >rom $33,000 to $33,500; the limitation under Section 25B(b)(1)(B) remains unchanged at $36,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b) (1)(D), remains unchanged at $55,500.<br><br> The adjusted gross income limitation under Section 25B(b)(1)(A) >or determining the retirement savings contribution credit >or taxpayers ling as head o> household is increased >rom $24,750 to $25,125; the limitation under Section 25B(b)(1)(B) remains unchanged at $27,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b) (1)(D), remains unchanged at $41,625. The adjusted gross income limitation under Section 25B(b)(1)(A) >or determining the retirement savings contribution credit >or all other taxpayers is increased >rom $16,500 to $16,750; the limitation under Section 25B(b)(1)(B) remains unchanged at $18,000; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D), remains unchanged at $27,750. The deductible amount under § Pro,essional 9s Corner continued on page 14 14 Fall 2009 219(b)(5)(A) >or an individual making quali ed retirement contributions remains unchanged at $5,000.<br><br> The applicable dollar amount under Section 219(g)(3)(B)(i) >or determining the deductible amount o> an IRA contribution >or taxpayers who are active participants ling a joint return or as a quali>ying widow(er) remains unchanged at $89,000. The applicable dollar amount under Section 219(g)(3) (B)(ii) >or all other taxpayers (other than married taxpayers ling separate returns) is increased >rom $55,000 to $56,000. The applicable dollar amount under Section 219(g)(7)(A) >or a taxpayer who is not an active participant but whose spouse is an active participant is increased >rom $166,000 to $167,000.<br><br> The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(I) >or determining the maximum Roth IRA contribution >or married taxpayers ling a joint return or >or taxpayers ling as a quali>ying widow(er) is increased >rom $166,000 to $167,000. The adjusted gross income limitation under Section 408A(c)(3)(C)(ii)(II) >or all other taxpayers (other than married taxpayers ling separate returns) remains unchanged at $105,000. Philadelphia Local Sales and Use Tax Rate Increase Went into E,,ect October 8, 2009 The City o> Philadelphia raised its local sales and use tax rate >orm 1 percent to 2 percent, except >or the Philadelphia local hotel occupancy tax which will remain at 1 percent.<br><br> This is in addition to the state sales, use and hotel occupancy tax rate which remains at 6 percent. Under Act 44 o> 2009, signed into law on September 18, 2009, this tax rate change is e>>ective >rom October 8, 2009 to June 30, 2014. PA Revenue Department to Reduce Printing and Mailing in 2010 Pennsylvania taxpayers and practitioners will see >ewer materials printed and mailed >rom the PA Department o> Revenue this coming year.<br><br> The >ollowing changes will be made >or tax year 2009 and 2010 >orms, booklets and coupon packets: Corporation Tax Package X (instructions, tax reports and schedules will no longer be printed and mailed. Personal Income Tax Package X (instructions, returns and schedules) will no longer be printed and mailed 3 a letter/order >orm will be mailed in its place. PA-V (Payment Voucher >or Individual Income Tax Returns) will only be printed and mailed to those taxpayers who used a 2008 PA-V to submit their payment to the department.<br><br> 2010 PA-40ES (Individual, Fiduciary and Partnerships/PA S Corporation Estimated Payment Coupons) estimated coupon packets >or taxpayers who used coupons prepared by their practitioner 9s so>tware in 2009 will no longer be mailed. PA Schedule C-F Reconciliation (Adjusting Federal Business Expenses >or PA Tax Purposes) is being discontinued. PA Schedule A/B (Interest Income/ Dividend Income) duplicate copy is being removed >rom PA-40 booklet.<br><br> PA Schedule E [Rents and Royalty Income (Loss)] duplicate copy is being removed >rom PA-40 booklet. PA Schedule J/T (Income >rom Estates or Trusts/Gambling and Lottery Winnings) duplicate copy is being removed >rom PA-40 booklet. PA-20S/PA-65 (PA S Corporation/ Partnership In>ormation Return) will no longer be printed and mailed.<br><br> All the above mentioned >orms will be available on the department 9s Web site, www.revenue.state.pa.us. No Social Security COLA in 2010 Because consumer prices were down over the past year, Social Security and Supplemental Security Income bene ts will not automatically increase in 2010. This will be the rst year without an automatic Cost-o> Living Adjustment (COLA) since they went into e>>ect in 1975.<br><br> Social Security has creased a prominent link on their home page at www.socialsecurity.gov/cola to a portal site with use>ul in>ormation about the COLA, as well as >requently asked questions (FAQs). Various Infation Adjustments Remain Unchanged The IRS has announced (Rev. Proc.<br><br> 2009-50) that because o> very mild infation, tax rate brackets and various tax bene ts indexed >or infation will remain unchanged or change only slightly in 2010. By law, the dollar amounts >or a variety o> tax provisions must be revised each year to keep pace with infation. As a result, more than three dozen tax bene ts are subject to infation adjustments each year, but because recent infation >actors have been minimal, many o> these bene ts will remain unchanged or change only slightly >or 2010.<br><br> Key provisions a>>ecting 2010 returns, led by most taxpayers in early 2011, include the >ollowing: The value o> each personal and dependency exemption available to most taxpayers is $3,650, unchanged >rom 2009. The new standard deduction >or heads o> household is $8,400, up >rom $8,350 in 2009. For other taxpayers, the standard deduction remains unchanged at $11,400 >or married couples ling a joint return and $5,700 >or singles and married individuals ling separately.<br><br> Nearly two out o> three taxpayers take the standard deduction rather than itemizing deductions, such as mortgage interest, charitable contributions, and state and local taxes. Various tax bracket thresholds will see minor adjustments. For example, >or a married couple ling a joint return the taxable income threshold separating the 15 percent bracket >rom the 25 percent bracket is $68,000, up >rom $67,900 in 2009.<br><br> The annual gi>t tax exclusion remains unchanged at $13,000. IRS Issues Erroneous Requests ,or Form 941 Schedule B The IRS has announced that due to a scanning error some small businesses have received notices asking them to submit Form 941 Schedule B although they led the >orm with their return. I> you received one o> the erroneous notices please resubmit the appropriate Schedule B along with the notice to the IRS as soon as possible to avoid additional erroneous notices.<br><br> First-Time Homebuyer 9s Credit Extended President Obama signed the Worker, Pro,essional 9s Corner continued >rom page 12 15 Fall 2009 Homeownership and Business Tax Act o> 2009. The provision o> most interest is the extension o> the $8,000 home buyer tax credit until April 30, 2010 >or purchases under contract and June 30, 2010 >or sale closing. The bene ts have expanded to include a $6,500 credit >or all home buyers and a higher income phase-out amount.<br><br> The bill includes some new restrictions, mostly aimed at preventing >raud. The bill also includes an expansion o> the carryback o> operating losses >or 2008 or 2009 (removing the size restriction). The bill increases the >ailure-to- le penalties >or S corporations and partnerships and delays the e>>ective date >or the worldwide interest allocation bene t.<br><br> Military Spouses Residency Relie, Act On Veterans Day, President Obama signed the Military Spouses Residency Relie> Act (S. 475), which will a>>ect how the income and property o> some spouses o> military personnel are taxed. The Act amends the Servicemember Civil Relie> Act (hereina>ter, cSCRA d) to provide that a spouse shall neither lose nor acquire domicile or residence in a state when the spouse is present in the state solely to be with the servicemember in compliance with the servicemember 9s military orders i> the residence or domicile is the same >or both the servicemember and spouse.<br><br> New York Posts Tax Preparer Registration In,ormation The New York State Department o> Taxation and Finance has posted in>ormation on its Web site about its new tax return preparer registration requirements at: http://www.tax.state. ny.us/tp/tpreg.htm Only New York-licensed CPAs and attorneys are exempt >rom this law. You can see a list o> who else is exempt at http://www.tax.state.ny.us/tp/ tpregmore.htm There will be online registration available soon, according to the site.<br><br> A bill (A9028) to repeal the law was passed in the Assembly during the summer, but a>ter it was re>erred to the Senate Rules Committee, no action has been taken. PSPA will continue to update the membership o> >uture developments. IRS Provides Additional Clari cation (Frequently Asked Questions) Regarding 7216 The 0ollowing questions (number 21-25) have recently been posted by the IRS.<br><br> Questions 1-20 were 0ormerly posted on the IRS website and can be obtained by going to: www.irs.gov. Q21. o6 <0- C76s-6< <7 us-, d7 b7<0 <0- <)@8)y-: )6d s87=s- 0)>- <7 s1/6 b-.7:- ) 8:)c<1<176-: c)6 b-/16 <0- :-<=:6 )6d d1sc=ss ) b)63 8:7d=c< w1<0 <0-m?<br><br> M)6y <1m-s, 76- s87=s- c7m-s by, d7-s <0- :-<=:6 )6d <0-6 <0- 7<0-: c7m-s by )6d s1/6s 4)<-:. a.21. I> it 9s a joint return, yes.<br><br> Q22. is ) <)@ 8:)c<1<176-: :-q=1:-d <7 7b<)16 ) d1sc47s=:- c76s-6< .7: f6)6c1)4 84)6616/ )d>1c- w0-6 <0- 8:)c<1<176-: 1s b7<0 <0- <)@ 8:-8):-: )6d <0- f6)6c1)4 )d>1s7: .7: <0- c41-6<. a.22.<br><br> In this case the preparer is required to obtain a signed consent to use tax return in>ormation i> the nancial planning advice will be based on in>ormation obtained in connection with the preparation o> a tax return. A separate signed consent >orm to disclose tax return in>ormation would be required in order >or the taxpayer to authorize the preparer to share tax return in>ormation with another person >or a purpose other than tax return preparation, e.g., to obtain nancial advice, products or services. Re>er to Treasury Regulation section 301.7216-3(b) regarding timing requirements and limitations >or soliciting consents.<br><br> http://www.irs.gov/irb/2008-05_IRB/ar07.html Q23. is ) 8:)c<1<176-: :-q=1:-d <7 /-< w:1<<-6 d1sc47s=:- c76s-6< .:7m <0-1: c41-6< <7 d1sc47s- <)@ :-<=:6 16.7:m)<176 1. <0- c41-6< 9s <)@ :-<=:6 16.7:m)<176 1s <7 b- =s-d .7: f6)6c1)4 84)6616/ 8=:87s-s by <0- 8:)c<1<176-: w07 8:-8):-d <0- :-<=:6?<br><br> a.23. In this case the preparer is required to obtain a signed consent to use tax return in>ormation i> the nancial planning analysis will be based on in>ormation obtained in connection with the preparation o> a tax return. A separate signed consent >orm to disclose tax return in>ormation would be required in order >or the taxpa<br><br>

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