Affetto & Company Cpas

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The American Recovery and Reinvestment Act of 2009

Information for Individuals
• Making Work Pay Tax Credit. This tax credit means more take-home pay for many Americans. To
make sure enough tax is withheld from their pay, taxpayers can use the IRS withholding calculator. See Making Work Pay for more.

• First-Time Homebuyer Credit Expands. Homebuyers who purchase in 2009 can get a credit of up to $8,000 with no payback requirement.

• Money Back for New Vehicle Purchases. Taxpayers who buy certain new vehicles in 2009 can
deduct the state and local sales taxes they paid or other taxes and fees they paid in states with no sales tax.
• Education benefits. The new American opportunity credit and enhanced benefits for 529 college savings plans help families and students find ways to pay higher education expenses.
• Enhanced Credits for Tax Years 2009, 2010. Find details on the earned income tax credit and the additional child tax credit.
• Increased Transportation Subsidy. Employer-provided benefits for transit and parking are up in 2009.

• Up to $2,400 in Unemployment Benefits Tax Free in 2009. Individuals should check their tax withholding.
• $250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment will be paid by the Social Security Administration, Department of Veterans Affairs and the
Railroad Retirement Board.

• Energy Efficiency and Renewable Energy Incentives. See what individuals can do to reap tax

• Health Coverage Tax Credit. The credit increases from 65 percent to 80 percent of qualified health
insurance premiums, and more people are eligible.
Information for Businesses
• Making Work Pay Tax Credit. Businesses should use the new withholding rates for their employees.
For pension plan administrators, new optional withholding procedures are available to supplement the February withholding tables.

• Work Opportunity tax credit. This newly-expanded credit adds returning veterans and "disconnected
youth" to the list of new hires covered by the credit that businesses may claim. Businesses have until Oct. 17 to request certification for the tax credit for some new hires.

• COBRA: Health Insurance Continuation Subsidy. The IRS has extensive guidance for employers,
including an updated Form 941, as well as information for qualifying individuals.
• Energy Efficiency and Renewable Energy Incentives. See what businesses can do to reap tax

• Net Operating Loss Carryback. Small businesses can offset losses by getting refunds on taxes paid
up to five years ago. Information on the carryback, an expanded section 179 deduction and other business-
related provisions, is now available. The Worker, Homeownership And Business Assistance Act Of 2009
(WHBAA) further expands the five-year NOL carryback to most businesses.

• Municipal Bond Programs. There are new ways to finance school construction, energy and other

WASHINGTON — The Internal Revenue Service today issued the 2010 optional standard mileage rates
used to calculate the deductible costs of operating an automobile for business, charitable, medical or

Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car (also vans, pickups or panel
trucks) will be:

50 cents per mile for business miles driven
16.5 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations
The new rates for business, medical and moving purposes are slightly lower than last year’s. The
mileage rates for 2010 reflect generally lower transportation costs compared to a year ago.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of
operating an automobile. The rate for medical and moving purposes is based on the variable costs as
determined by the same study. Independent contractor Runzheimer International conducted the study.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation
method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section
179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for any
vehicle used for hire or for more than four vehicles used simultaneously.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using
the standard mileage rates.
Revenue Procedure 2009-54 contains additional details regarding the standard mileage rates.

2010 Payroll Withholding Rates
An early release of withholding tables for employers is now available.

Two New Tax Benefits Aid Employers Who Hire and Retain Unemployed Workers
Two new tax benefits are now available to employers hiring workers who were previously unemployed
or only working part time. These provisions are part of the Hiring Incentives to Restore Employment
(HIRE) Act enacted into law today.

Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may
qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social
Security taxes on wages paid to these workers after March 18, 2010. This 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.

In addition, for each worker retained for at least a year, businesses may claim an additional general
business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

“These tax breaks offer a much-needed boost to employers willing to expand their payrolls, and
businesses and nonprofits should keep these benefits in mind as they plan for the year ahead,” said
IRS Commissioner Doug Shulman.

The two tax benefits are especially helpful to employers who are adding positions to their payrolls.
New hires filling existing positions also qualify but only if the workers they are replacing left voluntarily
or for cause. Family members and other relatives do not qualify.

In addition, the new law requires that the employer get a statement from each eligible new hire
certifying that he or she was unemployed during the 60 days before beginning work or, alternatively,
worked no more than 40 hours for anyone during the 60-day period. The IRS is currently developing a
form employees can use to make the required statement.

Businesses, agricultural employers, tax-exempt organizations and public colleges and universities all
qualify to claim the payroll tax benefit for eligible newly-hired employees. Household employers cannot
claim this new tax benefit.

Employers claim the payroll tax benefit on the federal employment tax return they file, usually quarterly,
with the IRS. Eligible employers will be able to claim the new tax incentive on their revised employment
tax form for the second quarter of 2010. Revised forms and further details on these two new tax
provisions will be posted on IRS.gov during the next few weeks.
HIRE Act: Questions and Answers for EmployersFlyer