Each year, so many tax law changes come about that it's nearly impossible to keep track of all of them. While many of the changes can be minor, there are some that warrant special attention. Below is a summary of some of the more important developments that have occurred recently that may have a significant impact on your particular situation.
2010 is a pivotal year for retirement planning because it is the first year taxpayers may rollover funds in their traditional IRAs (or qualified plan funds) to Roth IRAs regardless of their income level. Such a conversion may be desirable because distributions from a Roth IRA are tax-free, if certain conditions are met; also Roth IRAs are not subject to the lifetime minimum distribution requirements. There is a “catch” that could mean this isn't for you. Assuming the rollover is being made with pre-tax dollars, the rollover will be fully taxable. There is, however, an opportunity to defer the tax until 2011 and 2012 on rollovers made in 2010. There are reasons why you may not want to rollover your funds or even defer the tax burden. Your WNC tax professional can help you understand the benefits or consequences of such a rollover and whether or not it's right for you.
On November 6, 2009, the Worker, Homeownership and Business Assistance Act of 2009 (the “Act”) was signed into law. Before the Act, the first-time homebuyer credit was to have expired for homes purchased after November 30, 2009. The Act extended the credit to principal residence purchases before May 1, 2010. The Act also expands the credit to existing homeowners meeting certain requirements. Additionally, the Act has special rules for military personnel which may extend the credit for a purchase occurring before May 10, 2011. Your WNC tax professional can advise you on the availability of the credit based on your particular situation.
Another key provision of the Act was the expansion of the net operating loss (“NOL”) carryback provisions. The Act allows businesses (regardless of the amount of their gross receipts) to carryback an NOL arising in either 2008 or 2009 (but not both years) for three, four, or five years instead of only two years as the current law allows. To put it simply, this allows businesses to claim larger refunds from the IRS for prior years' tax payments, which they can then reinvest in their ongoing business operations. Like most tax law, there are nuances that your WNC tax professional can assist you with.
The end of 2009 came to a close without Congress passing legislation dealing with the estate tax. Although it is still true that there is no estate tax for those who die in 2010 under current law, President Obama and congressional leaders have called for a prompt extension of the 2009 estate tax law. It is expected that any such extension will be retroactive to January 1, 2010. We'll keep you posted as developments transpire. In the meantime, estate planning shouldn't wait. Your WNC tax professional is here to assist in this planning; please give us a call to set up your estate planning appointment.
Each of these developments provides opportunities to save taxes. Take the time early to meet with your tax professional here at WNC to make sure you are on the right side of each of these tax areas. Email our offices at info@whitenelson.com or feel free to give us a call. We're ready to help.
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