Breaking News Archive
Renewal Community Map as of March 9, 2006
Questions and Answers about the Renewal Community Wage Credit (RCWC)
Tax Credit Related to Hybrid Vehicles
If you are thinking about buying or leasing a Toyota hybrid, here is something you should know about the tax credit that has been allowed for purchases of qualified hybrid vehicles.
The IRS makes available an alternative motor vehicle income tax credit (claimed on your individual return) for qualified hybrid motor vehicles and qualified alternative fuel motor vehicles purchased after 2005. The full credit is allowed on each type of hybrid until the manufacturer has sold a specific number of the qualifying vehicle. After that time, the credit lessens and will ultimately disappear.
Toyota has exceeded the number of sales of their hybrids and, therefore, the credit has lessened for vehicles bought or leased on or after Oct. 1, 2006, and on or before March 31, 2007, to 50% of the otherwise allowable credit amount. Taxpayers buying or leasing vehicles on or before September 30, 2007, will only be eligible for 25% of the credit, and there is no hybrid credit available for Toyota vehicles bought or leased on or after October 1, 2007.
The credit amounts available for the model year vehicles listed below bought between April 1, 2007 through September 30, 2007, are:
2005, 2006, 2007 Toyota Prius – $787.50
2006 and 2007 Toyota Highlander Hybrid 2WD and 4WD - $650.00
2007 Toyota Camry Hybrid - $650.00
2006 and 2007 Lexus RX 400h 2WD and 4WD – $550.00
2007 Lexus GS450h - $387.50
IMPORTANT UPDATE ABOUT MILWAUKEE RENEWAL COMMUNITY INITIATIVE:
Renewal Community Wage Credit - Update March 9, 2006
The federal government established an employment “Renewal Community” in 2002. The purpose was to incentivize employers with federal tax credits, both for having their business in an area that needed financial renewal and for employing residents within the community. The original Renewal Community was geographically very small and did not include many commercial districts. Therefore, eligibility and participation was low.
The federal government recently agreed that the City of Milwaukee needed to expand the area that is classified as a Renewal Community, which means the government decided that this area needs incentives to create jobs and assistance for businesses in these areas. This change that was finalized in December 2005 was made retroactive to 2002. This is a great opportunity for business owners to apply for significant tax refunds for prior years. Unfortunately, for most employers, the time frame for which to claim a refund for 2002 expires on March 15, 2006. Most employers have much longer to apply for refunds for 2003-2005. Additionally, employers who are sole proprietors, partnerships, LLC’s or fiscal year businesses will have different deadlines.
The definition of the Renewal Community is based on census tracts. Since there are over 200 census tracts in the City of Milwaukee alone, we recommend you contact us to review your specific eligibility. If your business is within the census tract areas that are eligible for the credit, you likely can receive tax incentives based on wages you paid to employees who lived and worked in the Renewal Community. Please see the following map that shows the prior Renewal Community and the expanded eligible area.
The potential benefits are a tax credit equal to 15% of an each employee’s wages up to $10,000. There is no limit on number of employees, only the amount of wages that is used for the calculation. For example if I had 4 employees that live and work in the Renewal Community and each made $20,000, I would be able to claim a credit for $6,000 ($40,000 *15%).
This credit has been available since 2002; however, the area has recently expanded (retroactively to 2002), which may create some opportunities for significant refunds. Even if your company has utilized the credit in the past, this recent expansion may allow you to include more employees and claim a larger credit.
Since time is of the essence for the 2002 tax year, please contact us at 414-271-3966, Dan Glomski Ext 263) or Michael Burzynski (Ext 230), to determine eligibility.
Update to Phone Excise Tax Refunds - September 27, 2006
Earlier this year, the IRS announced that it will stop collecting the 3% federal excise tax on long-distance telephone services as well as refund back excise tax paid since March 2003. The IRS has now announced the safe harbor refunds which will allow you to request the refund without digging through old phone bills.
$30 for a person filing with 1 exemption $40 for a person filing with 2 exemptions
$50 for a person filing with 3 exemptions $60 for a person filing with 4 or more exemptions
For most people, this amount will be similar to or even greater than the actual amount, but you can still chose not to use the safe harbor amount, but you then must be able to substantiate your refund amount.
The IRS is also looking at making the refund process easier for businesses and nonprofits. Though they are required to request a refund based upon actual amounts paid, the IRS is considering estimate methods that businesses and nonprofits can use. We will keep you informed as things change.
Pension Protection Act – August 17, 2006
On August 17th, the Pension Protection Act of 2006 was signed into law. The bulk of the new law is a pension reform bill designed to strengthen traditional pension plans. The bill also makes permanent many of the enhanced retirement plan provisions which were set to expire in a few years, including Roth 401(k) and 403(b) plans, higher dollar amounts for IRA and retirement plan contributions, permanent catch-up contributions for persons age 50 and over, start-up credits for new employer retirement plans, and a savers credit for lower and middle-income taxpayers making retirement plan contributions. Other important provisions include permanent tax-free qualified withdrawals from Section 529 college savings plans, the ability through 12/31/2007 to make up to $100,000 annual tax-free distributions from an IRA for charitable purposes (distributions satisfy your minimum distribution requirements and are not subject to the early withdrawal penalty), and a new requirement that all charitable contributions, no matter the amount, need to substantiated by bank record or written communication from the charity.This is just a quick highlight of the new law. A more in depth article will appear in the next issue of the Tax Beat. As always, if you have questions, please email or give us a call.
Florida’s Intangible Personal Property Tax Repealed
Florida residents and entities doing business in Florida have been subject to Florida’s Intangible Personal Property Tax. This tax has been repealed effective January 1st, 2007. 2006 returns, which were due on June 30th, 2006, will be the final year returns will be required.
End to the Long-distance telephone excise tax - May 25, 2006
After repeated losses in court, the IRS has finally conceded its battle to keep collecting the federal excise tax on long distance telephone services. Beginning July 31, consumers will stop paying a 3% excise tax on long-distance and bundled services. Not only will the tax cease going forward, but by using their 2006 federal income tax return, consumers can request a refund for back excise tax paid since March 2003 and interest will be paid on the refund. To request a refund, individuals and businesses will have to substantiate the amount being requested, but the IRS will refund individuals a “safe harbor” amount (to be announced) which will not require any documentation. No “safe harbor” amount is proposed for businesses; therefore, they will be required to substantiate the amount of their refund request. The federal excise tax on local telephone service is still in place, but signs point to it also being repealed, this time through congressional action.
Due to the suddenness of this news, many of the details are still being worked out by the IRS as well as by the phone companies. Our recommendation is to review your phone bills and make sure that after July 31 you are no longer being charged this excise tax. Be sure to save your old bills to use in the calculation and substantiation of the refund amount you will request even though we believe that the majority of individuals will opt for the “safe harbor” refund amount once all the details are worked out.
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Komisar Brady & Co., LLP
633 West Wisconsin Avenue - Suite 900
Milwaukee, Wisconsin 53203-1907
Telephone: (414)271-3966
Fax: (414)271-3502