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December letter to clients
Dear Clients and Friends,
Schlenner Wenner & Co. would like to wish you a Merry Christmas and a Happy New Year. May all your dreams and wishes come true in 2010.
FIRST TIME HOMEBUYER CREDIT EXTENDED AND IMPROVED
As usual at year end Congress is pushing hard to clean up some loose ends and pass legislation that will hopefully stimulate the economy. One piece of legislation that has proven to stimulate the economy is the First Time Homebuyers Credit. The Congress passed and the President sign into law The Worker, Homeownership and Business Assistance Act of 2009 on November 6th. This Act extended the time that the first time homebuyers had to purchase a home and also provided a new credit for “long-time residents.”
The date for purchasing a home for the First Time Homebuyers credit was extended from November 30, 2009 to April 30, 2010. If the buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010 to settle the purchase. Remember the First Time Homebuyer credit is $8,000 and can only be claimed by taxpayers who have not owned a home during the three years up to the date of purchase.
The Act also provides a “long term resident” credit of up to $6,500 to taxpayers who have owned and used the same home as a principal residence for at least five consecutive years of the eight year period ending on the date of purchase of a new home as a primary residence. Basically, this credit allows many existing homeowners a credit for purchasing a new home.
Income Limits
As always there are income limits. For homes purchased before Nov, 6th, the income limits remain the same. Single taxpayers will receive the full credit if there modified adjusted income is under $75,000 and for joint filers the limit is $150,000. The credit phases out for single filers with income between $75,000 and $95,000. The phase out for joint filers is $150,000 and $170,000. Those with higher incomes do not qualify.
Homes purchased after November 6th have increased limits. Single filers receive the entire credit if income is below $125,000 and $225,000 for joint filers. The credit phases out for single filers with income between $125,000 and $145,000 and for joint filers between $225,000 and $245,000.
New requirements
The new law has several new restrictions for homes acquired after November 6.
• Dependents are not eligible for the credit
• No credit if the purchase price is more than $800,000
• Purchaser must be at least 18 years of age on the date of purchase.
Members of the Military
Members of the military and certain federal employees serving outside the U.S. have an extra year to buy a residence in the U.S. and quality for the credit.
UPDATE REGARDING MINNESOTA SALES TAX AUDITS
With the state of Minnesota looking for additional revenues, sales tax audits are on the rise. It is almost getting to the point that if you have been audited, you will probably get audited again and if you haven’t been audited, it won’t be long before you are.
Information Needed
When you get audited, there are a couple of things that auditors will look for in your business. They will look at your purchases, specifically looking for items where sales tax was not charged or use tax not paid. This usually occurs with out-of-state purchases where the seller is not required to charge sales tax but you would be responsible for use tax. Auditors are also looking at your equipment purchases. They will ask for a depreciation schedule and make sure you have paid sales or use tax on all items that were purchased during the audit period. And of course they will look at all your sales to determine if you have been properly charging sales tax, including the appropriate local taxes.
What Can Be Done
What can you do to minimize the tax liability of a sales tax audit? First of all, make sure you understand your business and what is subject to sales or use tax. The Minnesota Revenue website is a good place to start. You can visit their website at www.taxes.state.mn.us . Once there, click on Sales and Use tax located in the left-hand column, scroll down and click on Fact sheets in English and check for your industry. Also, if you sell products for resale or to tax-exempt organizations, make sure you have a form ST-3 on file for every customer. If you do not have this form on file, that customer is subject to sales tax. In some situations the form ST-3 is not enough, and you may need to be named a purchasing agent of the tax exempt organization.
What can Schlenner Wenner & Co. do for you? At Schlenner Wenner & Co., our professionals can assist before, during and after an audit. Before you ever get audited, we can help you analyze your business to see if you are compliant and also check if you are due any refunds. During an audit, we can assist you by being the contact person and meet with the auditor, we can look over the audit reports to see if there are any errors and we can assist you if you disagree with the auditors findings. Finally, after an audit, we can help you implement any changes that are necessary to minimize the tax liability that may come on the next sales tax audit.
MAKE YOUR CHILD OR GRANDCHILD A MILLIONAIRE?
If your teenage child or grandchild is working a part time job they could contribute to a Roth IRA. The contribution would not be deductible but at a child’s tax bracket it really doesn’t matter.
Let's say the child would contribute $2,000 a year from age 16 to 21 and not ever make another contribution. If these funds could earn 10% a year, they would have $1,022,521 at age 65. All tax free. You may not be able to earn 10% per year, but the idea is to start saving early in their career and let compounding work for them.
If you have any questions about the items in this month’s letter, please give any of our offices a call and they will be happy to help you. Thank you for letting Schlenner Wenner and Co. be of service to you.
Sincerely,
SCHLENNER WENNER & CO.
Certified Public Accountants
& Business Consultants
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