IRS to Require Small Businesses to Pay Taxes Electronically in 2011

Prior to 2011, businesses with less than $200,000 of aggregate federal income tax, employment tax, excise tax, and etc. could pay their taxes to the government by depositing a check with a commercial bank using the Federal Tax Deposit paper coupon, Form 8109.  Beginning in 2011, all businesses (except those with less than $2,500 of quarterly tax deposits) must pay their taxes using the Electronic Federal Tax Payment System (EFTPS).  Registration with the EFTPS is required, and can take several weeks to complete.  Businesses that are currently using the paper deposit method should register at www.eftps.gov before the end of 2010 so that there is no delay in making tax deposits and incurring substantial penalties.  Failure to use EFTPS when required results in a "failure-to-deposit" penalty of up to 15% of the amount required to be electronically deposited, even if the taxes are timely paid by paper.  Payments made using the EFTPS must be scheduled by 8:00 p.m. ET at least one calendar day prior to the tax due date.  The payment is made by debiting the business' bank account registered with EFTPS.  I have found the EFTPS to be convenient and that its use helps reduce errors on the part of the government when processing tax payments.  If you are not already using EFTPS, you should consider using it for the balance of 2010.

June 30, 2010 New Home Purchase Credit Deadline Extended to September 30, 2010

Original Post
The first-time homebuyer or long-term-owner tax credits of up to $8,000 or $6,500 respectively expired generally on April 30, 2010.  The actual amount of the credit depends on several factors, including a phase-out based upon modified adjusted gross income.  However, a transition rule allows the credit to those who had a written binding contract to purchase or construct a new principal residence by April 30, 2010, and who close on the purchase or receive their certificate of occupancy by June 30, 2010.  Immediate steps should be taken to ensure that the closing or issuance of the certificate of occupancy happens on time.  The credit is claimed on Form 5405 and certain documentation such as a copy of the binding contract, the settlement statement or certificate of occupancy, and other information must be attached to the form.  The credit may be claimed on either your 2009 or 2010 tax return.  Planning may be necessary to determine the best tax year in which to claim the credit.


July 1, 2010 Update
The ending date of the transition rule has been extended from June 30, 2010 to September 30, 2010.  This will give an estimated 180,000 homebuyers who would miss the earlier date more time to complete their purchase or finish constructing their new principal residence.  Congress enacted the extension on June 30th (H.R.5623) and Pres. Obama is expected to sign the legislation shortly.