The very popular homebuyer credit has been extended until September 30, 2010, helping thousands of qualified first time and repeat buyers experience the American Dream. HR 5623, recently signed into law by President Barrack Obama, allows qualified first time and repeat buyers tax credits of $8,000 and $6,500 respectively, when purchasing a new house.

Under prior law, both the regular Code 36 first-time homebuyer credit of $8,000 and the reduced credit of $6,500 for long-term residents generally expired for homes purchased after Apr. 30, 2010. However, if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit could be claimed if the purchase closed before July 1, 2010.

The Act amends Code Sec. 36(h)(2) to provide that if a written binding contract to purchase a principal residence was entered into before May 1, 2010, the credit may be claimed if the purchase is closed before Oct. 1, 2010. Thus, this extension allows homebuyers who signed a contract no later than the April 30th deadline to complete their closing by the end of September.

The three-month extension of the closing date provides tax relief for those who couldn’t close on time because of backlogs at lenders and federal programs involved in homebuyer loans. In the words of the Act’s supporters, the three-month extension “will give time for all the new mortgages to be processed and not punish those homeowners who have been delayed through no fault of their own.”

The cost of the three-month closing reprieve is fully offset with revenue raisers, including these tax changes: expanding the bad check penalty under Code Sec. 6657 to cover electronic payments, effective for instruments tendered after the enactment date; and providing for disclosure of prisoner return information under Code Sec. 6103(k)(10) to state prisons, effective for disclosures after the enactment date.

The Senate acted separately on the tax credit extension after another bill that included both the homebuyer’s measure and an extension of jobless benefits for the long-term unemployed was blocked by Republicans.

The jobless aid bill fell one vote short of the 60 needed to overcome procedural hurdles in the 100-member Senate. Republicans objected to the $34 billion cost of the bill.

The Democrat-backed bill would have extended the federal jobless aid program through November. Senate Republican Leader Mitch McConnell offered a two month extension that was paid for by using unspent money from last year’s economic stimulus program, which the Democrats objected.

New Jersey Governor Chris Christie has approved the state budget for 2010 which effectively suspends the popular Homestead Property Tax Rebates. The budget, signed into law on June 29, however, appropriates funding for the Senior and Disabled Citizens’ Freeze and for the homestead property tax credit program.

The budget also includes the following tax measures:

Reduction of state earned income credit program benefit from 25% to 20% of the federal credit beginning in the 2010 tax year.

Reduction of the annual cap on corporate business tax benefit certificate transfer program for certain technology and biotechnology companies and temporarily suspends tax credits for certain film and digital media content production expenses.

Approval of up to $100 million in tax credits for the development of qualified wind energy facilities in wind energy zones. The budget also supplements the Urban Transit Hub Tax Credit Act of 2007 by establishing the offshore wind renewable energy certificate program.

Reduction of the tax levy cap for school districts, counties, municipalities, fire districts, and solid waste collection districts from the currently permitted 4% annual increase to a 2.9% permitted annual increase.

The budget also establishes the tax levy cap as a permanent mechanism for the calculation of the maximum allowable increase in the tax levy for local units and school districts that may occur between budget years.

Democrats expect to be hit hard with the suspension of the Homestead Property Tax Rebate are the state’s older residents and the working poor. However, State Treasurer Andrew Eristoff called the suspension of rebates the “loss of a benefit” and said the earned income tax credit change would mean a smaller refund for the working poor, not an additional tax.

The Office of Legislative Services released its revenue outlook projecting tax collections could be slightly weaker over the next 15 months. Their analysis showed that tax revenues could be off by $82 million for the final three months of this fiscal year, and down about $168 million from what the governor projected in his budget for the upcoming fiscal year.

Republicans, meanwhile, say the new governor is taking the necessary and overdue steps to curb New Jersey’s reckless spending habit.

In connection with the HIRE Act enacted on March 19, 2010, the Internal Revenue Service has released a revised form to help employers hiring workers who were previously unemployed or only working part time claim their tax breaks. The form and instructions can be found at www.irs.gov/pub/irs-pdf/f8846.pdf . The exemption applies to the employer’s share of Social Security tax on wages paid to qualified employees after 3/18/10. The instructions direct employers to check the box on line 4 of Form 8846 and attach a separate computation showing the amount of tips subject to only the Medicare tax rate of 1.45%.

Designed to encourage employers to hire and retain new workers, the payroll tax exemption and the related new hire retention credit were created by the Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18.

In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their income tax return. Further details on both the tax credit and the payroll tax exemption can be found in a recently-expanded list of answers to frequently-asked questions about the new law now.

The reduced tax withholding will have no effect on the employee’s future Social Security benefits, and employers would still need to withhold the employee’s 6.2-percent share of Social Security taxes, as well as income taxes. The employer and employee’s shares of Medicare taxes would also still apply to these wages.

Meanwhile, the IRS has also issued temporary and proposed regulations ( TD 9486 ) addressing the new excise tax on indoor tanning services imposed by the Affordable Care Act. The liability for the 10% tax under IRC Sec. 5000B originates at the time of payment for the services. The regulations address several common situations in determining the amount paid for tanning services, including:

(1) the sale of other goods and services with tanning services,

(2) payments made with gift certificates and gift cards,

(3) sales of bundled services,

(4) payment of membership fees to a qualified physical fitness facility that includes indoor tanning services, and

(5) services purchased for another person. The provider must collect the tax and make quarterly payments on Form 720 (Quarterly Federal Excise Tax Return). The tax applies to amounts paid after6/30/10. Temp. Reg. 49.5000B-1T.

Providers of indoor tanning services will collect the tax at the time the purchaser pays for the tanning services. This means the Tanning tax will be passed on to the consumers. The tanning service provider the have to pay over these amounts to the government (IRS) quarterly, along with IRS Form 720, Quarterly Federal Excise Tax Return.

However, the tanning service does not apply to phototherapy services performed by a licensed medical practitioner in his or her premises. It also exempts certain physical fitness facilities incidentally offering tanning services to members without additional fees.

The Internal Revenue Service has recently proposed to require businesses with more than $10 million in assets to disclose with their tax returns certain details about each uncertain tax position, defined as a position for which the taxpayer or a related entity has recorded a reserve in its financial statements under FASB Interpretation no. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, or other accounting standards. With this announcement, The Service is developing a schedule that will require certain filers to provide information about their uncertain tax positions that affect their United States federal income tax liability. This schedule will be filed with the Form 1120, U.S. Corporation Income Tax Return, or other business tax returns. The schedule will require:

A. a concise description of each uncertain tax position for which the taxpayer or a related entity has recorded a reserve in its financial statements, and

B. the maximum amount of potential federal tax liability attributable to each uncertain tax position (determined without regard to the taxpayer’s risk analysis regarding its likelihood of prevailing on the merits).

The Service requires taxpayers to disclose the following information:

1. list the statutory provisions potentially implicated by the position
2. the tax years affected
3. whether the positions involves an item of income, gain, loss, deduction or credit
4. whether it involves the valuation of any property or right, and
5. and whether it involves the computation of basis

In addition, the schedule will require a taxpayer to specify for each uncertain tax position the entire amount of United States federal income tax that would be due if the position were disallowed in its entirety on audit. This amount is the maximum tax adjustment for the position reflecting all changes to items of income, gain, loss, deduction, or credit if the position is not sustained.

Except as described in this Announcement, the Service intends to retain the existing policy of restraint for requesting tax accrual workpapers during the course of examinations described in IRM 4.10.20. The Service will continue to review the policy and to consider additional modifications, however, as appropriate or necessary to ensure it obtains complete and accurate information regarding a taxpayer’s uncertain tax positions on a timely basis.

Given the importance of these issues to both the Service and taxpayers, the Service intends to publish the new schedule as quickly as possible and therefore invites the public to submit comments on the proposal described in this Announcement by March 29, 2010. The Service intends to mandate that the new schedule for uncertain tax positions be filed with returns filed after release of the schedule. The Service is particularly interested in comments regarding:

1. How the maximum tax adjustment should be reflected on the schedule so that it provides the Service with an objective and quantifiable measure of each reported tax position (e.g., specific dollar amount or by appropriate dollar ranges);

2. What alternative methods of disclosure of the amount at issue would allow the Service to identify the relative importance of the uncertain tax positions;

3. Whether the calculation of the maximum tax adjustment should relate solely to the tax period for which the return is filed or to all tax periods to which the position relates, and whether net operating losses or excess credits should be taken into account in determining the maximum tax adjustment;

4. How the related entity rules should be applied;

5. Whether the scope of the Announcement should be modified regarding the uncertain tax positions for which information is required to be reported (e.g., positions for which no tax reserve has been established because the taxpayer determined the Service has a general administrative practice not to examine the position);

6. Whether transition rules should be used or criteria modified to either include or exclude certain businesses taxpayers (e.g., the proposed threshold of $10 million total assets);

7. How the new schedule should address taxpayers that initially did not record a reserve for an issue, but in later years do record a reserve; and

8. Whether the list of information proposed to be included should be modified, including whether certain information should be requested in some circumstances upon examination rather than with tax return.

Comments are accepted until June 1.

If you are making contributions to a savings plan, whether employer-sponsored or to an individual retirement arrangement, you maybe eligible to a tax credit. This tax credit is designed for low-to-moderate income earners saving for their retirement. Depending on your income and filing status, you could get up to 50% of your savings for your retirement and could be claimed in addition to deductions to your Individual Retirement Account. Up to $2000 may be claimed by couples filing jointly or $1000 if filing individually.

The IRS has issued the following six things you need to know about the Retirement Savings Contributions Credit:

1. Income Limits

The Savers Credit, formally known as the Retirement Savings Contributions Credit, applies to individuals with a filing status and income of:

• Single, married filing separately, or qualifying widow(er), with  income up to $27,750
• Head of Household, with income up to $41,625
• Married Filing Jointly, with income up to $55,500

2. Eligibility requirements

To be eligible for the credit you must have been born before January 2, 1992, you cannot have been a full-time student during the calendar year and cannot be claimed as a dependent on another person’s return.

3. Credit amount

If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.

4. Distributions

When figuring this credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date – including extensions – for filing the return for the credit year.

5. Other tax benefits

The Retirement Savings Contributions Credit is in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA. Contributions to a regular 401(k) plan are not subject to income tax until withdrawn from the plan.

6. Forms to use

To claim the credit use Form 8880, Credit for Qualified Retirement Savings Contributions.

For more information, review IRS Publication 590, Individual Retirement Arrangements (IRAs), Publication 4703, Retirement Savings Contributions Credit, and Form 8880. Publications and forms can be downloaded at IRS.gov or ordered by calling 800-TAX-FORM (800-829-3676).