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Latest News For You | For Agency Professionals
Stimulus Plan Offers Direct Benefits
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (often referred to as the Stimulus Package or Plan.) This new law offers significant financial benefits to many eligible New Jersey citizens who are struggling to make ends meet. Since its inception, some portions of the Act have been ammended to provide further assistance. Below is a brief description of how different portions of the plan provide savings as well as links that will take you to Web pages where more detailed information can be found. We will update this page as new benefits become available.
Tax Credits
Making Work Pay Credit
For 2009 and 2010, the Making Work Pay provision of ARRA will provide a refundable tax credit of up to $400 for working individuals and $800 for married taxpayers filing joint returns. This tax credit will be calculated at a rate of 6.2 percent of earned income and will phase out for taxpayers with adjusted gross income in excess of $75,000, or $150,000 for married couples filing jointly.
For taxpayers who receive a paycheck and are subject to income tax withholding, the benefit of the credit will typically be received through an automated reduction of income tax withholding by the employer, beginning in early Spring. IRS has issued updated withholding tables (revised Publication 15-T) to implement these withholding adjustments. These changes may result in an increase in take-home pay. However, the amount of the credit still must be claimed on the employee’s income tax return (e.g., on the 2009 return filed in 2010). Taxpayers who do not have taxes withheld by an employer during the year can claim the credit on their tax return.
Caution: Employees do not have to submit a Form W-4, Employee Withholding Certificate, to get the automatic withholding change. However, some employees may not want their withholding reduced. Taxpayers who have more than one job or married couples whose combined income place them in a higher tax bracket may elect to submit a revised Form W-4 to make sure they have enough income tax withheld.
First-time Homebuyer Credit Offers Extended Savings
Homebuyers who purchased a home in 2008, 2009 or 2010 may be able to take advantage of the first-time homebuyer credit. The credit:
- Applies only to homes used as a taxpayer's principal residence
- Reduces a taxpayer's tax bill or increases his or her refund, dollar for dollar
- Is fully refundable, meaning the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax owed.
The credit is claimed using Form 5405 which you file with your original or amended tax return. Different regulations apply depending upon when the home was purchased, but savings or credits are available to those who purchased a home in 2008, 2009, or 2010. Learn more >>
Sales Tax For Purchase of a New Vehicle
For 2009 there will be an additional deduction for state and local sales and excise tax on the purchase of certain new vehicles. A qualified motor vehicle must be new (original use must commence with taxpayer) and includes a passenger automobile or light truck, a motorcycle, or a motor home. Purchases before Feb. 17, 2009, are not eligible for this special deduction.
Deductible sales and excise taxes cannot exceed the portion of the tax attributable to the first $49,500 of the purchase price on any one vehicle and the deduction phases out with income of $125,000 ($250,000 on a joint return). The deduction is allowed for nonitemizers.
Other Programs that May Help You Through Tax Season
The economic downturn may be having a serious effect on your ability to pay your taxes. The IRS has programs in place that address many different life altering situations. Get the facts >>
Other Provisions of ARRA
The following are highlights of some of the other provisions of this new law. To learn more go to the ARRA Information Center on the IRS Web site.
- Temporary increase in earned income credit.
- Temporary increase in refundable portion of child tax credit.
- American Opportunity Tax Credit which makes temporary changes to the education credits (also known as Hope Credit). A portion will be refundable.
- A portion of unemployment compensation ($2,400) can be excluded on a taxpayer’s 2009 tax return.
- Energy conservation incentives
- Alternative Minimum Tax (AMT) relief extended for 2009
- A 65 percent subsidy for COBRA continuation coverage for up to nine months for certain workers who are involuntarily terminated from their jobs
Health Benefits for the Recently Unemployed
Stimulus Plan Makes COBRA and Similar Health Plans More Affordable - December 2009 Amendment Extends Benefits!
The American Recovery and Reinvestment Act of 2009 (ARRA), was amended on December 19, 2009 and now provides COBRA benefits for up to 15 months after employment has been involuntarily terminated. The termination period was also extended in this amendment and now must occur during the period that began September 1, 2008 and ends on February 28, 2010. Under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA, eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. Learn more.
New Jersey employees who worked for employers that are not subject to COBRA because the employer employs fewer than 20 employees are benefitted by this legislation as well. New Jersey law (N.J.S.A. 17B:27A-27) provides for continuation that is comparable to COBRA and thus the ARRA applies to employees of New Jersey small employers too. Learn more.
If you have questions about the resources discussed on any of our Web pages, or need personal assistance, please dial 2-1-1 any time of the day or night. Other resources pages are also found in the Help in Hard Times resource section at this web site.
Reference Sources Include:
http://www.irs.gov/newsroom/article/0,,id=186831,00.html
http://www.irs.gov/newsroom/article/0,,id=206038,00.html
http://www.irs.gov/newsroom/article/0,,id=204335,00.html
http://www.dol.gov/ebsa/cobra.html
Page modified on 1.12.09
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