If you have prepared your tax return truthfully and have saved receipts to back up your deductions, notice of an IRS audit should not make you unduly nervous. IRS employees, after all, are only doing the job we pay them to do.

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IRS audits fewer businesses, more people

Researchers say the numbers show a flaw in the war on corporate scofflaws. The IRS says that ignores the reasons.

By Associated Press Published April 12, 2004 Firms  

WASHINGTON - The Internal Revenue Service audited fewer corporations, small businesses and partnerships last year but more individual taxpayers, according to a study of government data.

Syracuse University's Transactional Records Access Clearinghouse, in its analysis of IRS data made available Sunday, concluded that the audit rate for businesses of all sizes slid slightly last year to 2.1 audits for every 1,000 businesses, from 2.2 audits per 1,000 businesses the previous year.

At the same time, the IRS audited 14 percent more individual tax returns. The audit rate for individuals increased last year to 6.5 audits for every 1,000 taxpayers.

Official audit rates released by the IRS last month show a similar trend.

Researchers said the declining audits of businesses exposes a flaw in the administration's tough stance against corporate wrongdoing.

"These and a number of other measures - documented by the agency's own data - indicate that the actual performance of the IRS differs in significant ways from some of the Bush administration claims when it comes to cracking down on corporate scofflaws," the report said.

Researchers point specifically to declining audits of the largest corporations and a type of business organization that passes income and taxes on to its shareholders or partners - an arrangement found to have been improperly used in some corporate accounting scandals.

IRS commissioner Mark Everson said in an interview that the agency's broad attack on corporate tax evasion does not show up in the audit numbers.

"Am I satisfied with the numbers? No. I want to see them go up," he said. "I'm not surprised that that's lagging the other indicators. And while I think it's an important indicator, it doesn't tell the whole story."

Some advocates said the trend appears troubling.

"What struck me first was the commissioner earlier this week said that they'd increased enforcement and then I look at these numbers and say, "What is he talking about?"' said David Keating, senior counselor for the National Taxpayers Union. "It really opens up a credibility gap."

In a detailed written response, the IRS said the study ignores the reasons for the decline in corporate audits and other enforcement actions taken against businesses.

The IRS said the decline can be attributed partly to the explosive growth in tax shelters, which make audits more intricate and time-consuming. Tax collectors worked more than 2,200 corporate tax shelter returns in 2003. Each takes an average 71/2 months longer than other corporate returns, and their number is growing.

The agency's work force has shrunk while its workload has grown, the IRS said.

The agency has been criticized for shifting money from tax enforcement to pay for other administrative costs. Everson said he has reversed that practice and expects the agency will have hired 250 more agents by autumn. If the agency gets the budget requested by the president, it will hire an additional 600 agents by the same time next year, he said.

Audits and other enforcement activities declined sharply in the late 1990s when Congress mandated that tax collectors pay more attention to customer service.

The Syracuse University study concludes that audits of individuals increased last year. Much of the increase occurred in correspondence audits, not face-to-face meetings between revenue agents and taxpayers.

Researchers said the audits "by their very nature are comparatively superficial."

The IRS said correspondence audits are faster and cheaper than traditional audits. The average additional tax assessed in a correspondence audit was $3,338 last year.

[Last modified April 12, 2004, 01:05:27] Firms  

NEW YORK (CNN/Money) - The IRS announced Thursday that the number of tax-return audits in 2005 increased by over 20 percent, to 1.22 million, the highest number in seven years.

In addition, increased audits led to a 10 percent growth in "enforcement revenues," to $47.3 billion.

IRS Commissioner Mark W. Everson said the better enforcement stemmed from increased efforts to train employees to comply with the 1998 IRS reform act.

"Part of the increases comes from improved procedures and part from a new emphasis on enforcement," he said.

Audits of high-income individuals -- with salaries more than $100,000 -- reached their highest level in 10 years, at 221,000.

Everson said he felt that the coverage in this category was still low compared to his goals, with only 1 in 63 high-income individuals being audited.

After several years of decline, audits of small corporations more than doubled, to almost 18,000.

And audits of corporations with assets of over $10 million increased 14 percent, to nearly 11,000.

Everson also noted that audit rates were still below their mid-1990s highs, but had increased dramatically from just a few years ago.

"We do not have overall audit targets. We have certain priorities -- high-income individuals and corporations who might use tax shelters, for instance," he said. "Our goal is to make sure that fairness resonates throughout the system. The average American needs to know that when they pay, their neighbors and competitors are doing the same."

The agency also reported that levies and liens had recovered to levels last seen in 1998, and that seizures were up slightly from 2004.

The IRS budget for fiscal year 2005 was $10.2 billion, and President Bush has recommended an increase to $10.7 billion for 2006.

Types of Audits There are many ways the Internal Revenue Service determines if an audit is going to occur on your tax return. Some of them are as follows:

1. The Differential Income Factor (DIF) Method

Each tax return that is submitted to the Internal Revenue Service is given a score based on the amount of income you report and the deductions you claim on your tax return. If the score your tax return receives exceeds a particular threshold for your income, then the Internal Revenue Service could select your return for audit. For instance, if you earn approximately $50,000 and you have medical expenses in excess of $7,000, this would give you a higher DIF score than someone who has medical expenses of only $4,000.

Further, if you report home mortgage interest of approximately $15,000 and your income is $35,000 then your DIF score is higher than someone with the same income showing only $7,000 in home mortgage interest. The higher the expenses relative to the income, the higher the DIF score.

2. The Information Returns Factor Method

All W-2s and 1099s are submitted to the Internal Revenue Service every year. Then the Internal Revenue Service records the social security numbers from these documents and matches them to the social security numbers on the tax returns that are submitted. If you have received a 1099 INT (Interest Income) showing $1,000 from a bank or credit union but only report $500 worth of interest income on your tax return, the Internal Revenue Service will catch this. They will match the 1099 INT against your tax return, based on your social security number, and they will see that you underreported your interest income by $500. This will select your tax return for audit.

3. The Random Selection Method

All tax returns are submitted into a computer random number generator. The tax returns with the high DIF scores and non-matched information are taken out. A certain number of tax returns are picked at random to make sure the needed four million tax returns are audited on an annual basis.

These are some of the methods the Internal Revenue Service uses to determine who is being audited. Once these tax returns are selected for audit, they are assigned to Internal Revenue Agents and Revenue Officers. This is known as assigning cases or inventory to the auditor.

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Find out what the IRS knows about you

When your tax return is selected for audit, it is given a certain transaction code (TC). The code identifies it as being selected for audit. Each of us who submits tax returns to the Internal Revenue Service has a record that is kept by the IRS for many years. These records are known as our INDIVIDUAL MASTER FILE (IMF).

Since 1974 the Freedom of Information Act has allowed us to access this IMF. The IMF will give information on a computer generated report about each taxpayer the IRS has on record. For instance, if you have been selected for audit, the IMF will tell you. It will also tell you if your tax return has been received by the IRS, if additional taxes have been assessed, and what the final collection date is for the tax return and many other codes that are interrupted from the IMF.

Since cases (inventory) are assigned to agents up to six months before the taxpayer is even notified of an audit, a copy of your IMF, can tell you whether or not your tax return has been selected for audit.

What to do if you get a notice from the IRS

If you receive a notice from the IRS, don't ignore it. You can rest assured that the IRS will not just go away. All contacts by the IRS should be handled promptly. Unless you are an accomplished IRS "fighter," you would be wise to seek professional assistance from the very first correspondence.

If you are contacted by any government agency concerning your tax matters, your first call should be to our firms. Our firm will take care of it so that you can get on with your business.

IRS Wage Garnishments

A wage garnishment stays in effect until the tax is fully paid or until the IRS agrees to release the wage garnishment. IRS frequently uses wage garnishments to collect taxes owed through your employer. Once a wage garnishment is filed, the employer is required to collect a percentage of each paycheck. IRS wage garnishment requires that a large percentage of taxpayer's wages be turned over directly to the IRS.

Below are the sections from the IRS Internal Revenue Manual that deal with IRS levies and wage garnishments.

5.11.5.1 (05-05-1998) Introduction

An individual's wages, salary, and other income can be levied. Wages and salary include payment for personal services in a work relationship.

5.11.5.2 (05-05-1998) Employer Threatens to Fire Taxpayer Because of a Levy

Sometimes an employer threatens to fire an employee to avoid handling a levy. This might be a violation of 15 USC 1674.

If the employer fires the taxpayer because of this, the employer might be fined 00. There may also be a one year prison term.

Refer the taxpayer to the Wage and Hour Division of the Department of Labor (DOL). DOL, not IRS, must decide if the employer violated the law.

5.11.5.3 (09-04-1998) Continuous Effect of Levy

Unlike other levies, a levy on wages and salary has a continuous effect. It attaches future paychecks, until the levy is released. Wages and salary include fees, bonuses, and commissions. All other levies only attach property and rights to property that exist when the levy is served.

Example: If a bank account is levied, it only reaches money in the account when the levy is served. It does not affect money deposited later.

When other income is levied, the levy only reaches money the taxpayer has a fixed and determinable right to. Also see 6.1, about retirement and benefit income.

Example: A levy is served to take an author's royalties. The author has a fixed and determinable right to royalties for books that have already been published. The levy reaches royalties for sales of those books in the future. The levy does not reach royalties for books that are written and published later. A new levy must be served to take those royalties.

Also, see 6.11.1 when a levy is served on a non-liable spouse in a community property state.

5.11.5.4 (05-05-1998) Exempt Amount

Part of the taxpayer's wages, salary, and other income is exempt from levy.

The weekly exempt amount is:

The total of the taxpayer's standard deduction and the amount deductible for exemptions on an income tax return for the year the levy is served.

Then, this total is divided by 52.

Income that is not paid weekly is prorated, so the same amount is exempt.

In addition, the amount the taxpayer needs to pay court ordered child support is exempt. However, the order must be before the date of the levy.

Note: The support order can be from a court or administrative process under the laws and procedures of a state, territory or possession.

Reminder: If support is allowed, the same child can not be claimed as an exemption for figuring the exempt amount. See (2)a.

If the taxpayer has already shown proof of the required child support payment.

Then write, "Under section 6334(a)(8) of the Internal Revenue Code, $ ____________________ is exempt from this levy."

If the taxpayer shows proof of the child support after the levy is served.

Then release enough of the levy, so the support can be paid.

The taxpayer is not entitled to the support exemption, unless the support is being paid.

Consider getting the taxpayer to have the payment withheld and sent directly to the person with custody.

Instead, the taxpayer may make the payment through the Service, which will forward the payment. When there is no open assignment, have the payments sent through Case Processing Support. This may happen if the payments are being monitored in the service center.

5.11.5.4.1 (05-05-1998) Claiming the Exempt Amount

The Notice of Levy on Wages, Salary, and Other Income includes a Statement of Exemptions and Filing Status. The employer gives this to the taxpayer to complete and return within three days. If it is not received by then, the amount is figured as if the person is married filing separate with one exemption. The taxpayer can give the statement to the employer later to change the exempt amount.

Note: The employer needs to use this Statement rather than the employee's W-4. Taxpayers may claim different exemptions for withholding from those claimed on their return.

Publication 1494 is sent with the levy to help figure the exempt amount.

The taxpayer can give a new statement to the employer later to have the exempt amount computed again.

Example: The taxpayer's filing status or personal exemptions may change.

Example: There may be a change in exempt rates in a new year.

The statement is completed under penalty of perjury. Generally, accept the information on the statement, unless there is reason to question it. If it is disallowed, notify the employer and the taxpayer in writing. The taxpayer can show evidence that the statement is right and ask for a manager's review.

5.11.5.4.2 (05-05-1998) Employers with Centralized Payrolls

Some employers have a centralized payroll, so the payroll is not handled where most employees work.

Consider mailing the statement of exemptions and filing status directly to the taxpayer. This avoids the delay of the employer remailing it.

Send Part 1 of the levy and Notice 484 to the employer.

Send the other parts of the levy and Notice 483 to the taxpayer.

5.11.5.4.3 (05-05-1998) Joint Liabilities

For joint liabilities, generally, levy the income of the spouse with the larger income.

Levy both incomes only in flagrant cases of neglect or refusal to pay. Get manager's approval to do this. If taxpayers are separated, consider collecting from the second spouse before allowing the entire amount to be paid by levy on one person's income.

IF the taxpayers are filing as married filing jointly & both taxpayers' incomes are levied

Then only one of them can claim the standard deduction for figuring the exempt amount.

If the taxpayers are filing with any other filing status & both taxpayers' incomes are levied

Then both can claim the standard deductions for their filing status.

If the taxpayers are remarried and filing as married filing jointly with the new spouses & both taxpayers' incomes are levied

Then both can claim the standard deductions for their filing status.

When both spouses' incomes are levied, neither spouse can claim the other one as a personal exemption.

5.11.5.4.4 (05-05-1998) Taxpayers with More Than One Source of Income

Consider income from all sources when a taxpayer has more than one source.

If the taxpayer is getting the exempt amount from one source of income that is levied & another source of income is levied, too.

Then include Letter 1697(P) with the second levy to tell the employer not to allow any exempt amount.

If the taxpayer has a source of income that is not levied & that source of income is at least as much as the exempt amount.

Letter 1697(P) can be included with a levy on another source of income to tell the employer not to allow the exempt amount.

See Exhibit 5.11.5-1, for a copy of Letter 1697(P).

5.11.5.4.5 (05-05-1998) Taxpayer's Payroll Deductions

A levy legally attaches the taxpayer's gross income minus the exempt amount. However, see Policy P-5-29. By policy, a levy only attaches the taxpayer's usual take home pay.

Exception: Voluntary deductions can be disallowed, if they are so large they defeat the levy.

Generally, allow the taxpayer to maintain deductions they already have when the levy is served. Notify the employer and the taxpayer of deductions that must stop while the levy is in effect. The taxpayer can ask for a manager's review of this.

Example: The taxpayer has a deduction used to buy shares in a mutual fund.

Generally, employer's should not allow new voluntary deductions after receiving the levy. Exceptions can be allowed on a case by case basis, with the Service's approval.

Example: The taxpayer can not join the company insurance plan, until he is on the job six months. The levy is served before then. The amount of the premium is not unreasonable.

The method that the taxpayer is paid is not relevant to take home pay. Direct deposit is not a payroll deduction.

5.11.5.4.6 (07-26-2002) Severance Pay

The taxpayer may leave a job and get severance pay.

If severance pay is attributable to pay for a period of time.

Then the exempt amount is based on that time period.

If severance pay is not attributable to pay for a period of time.

Then the amount exempt for one pay period is used.

Example: Severance pay is one week's pay for each year on the job. A taxpayer on the job for ten years gets ten weeks' severance pay. The taxpayer gets a paycheck every two weeks for ten weeks. Two weeks' exempt amount is subtracted from each check, just like the person was still working for ten weeks.

Example: The same facts as above, but the taxpayer gets the amount in one payment. The payment is attributable to ten weeks' pay. The employer is just making an "advance" payment, instead of writing a series of checks. The taxpayer gets ten weeks' exempt amount.

Example: A taxpayer gets a lump sum that is not attributable to a period of time. This could be, for example, an incentive payment to retire early. The exempt amount is based on the taxpayer's regular pay period. If there is no regular pay period, use one week's exempt amount. Similarly, if the taxpayer gets 00 for each year on the job, this is not attributable to pay periods. A person getting ,000 for being on the job ten years does NOT get ten years' exempt amount.

This assumes the person is not already getting the exempt amount for a pay period at the same time. If both are being received, the taxpayer does not get the exempt amount twice.

Example: The taxpayer is paid for both the last pay period worked and severance on the last pay day. The taxpayer only gets the exempt amount once.

5.11.5.5 (07-26-2002) Levy Payments

Credit levy payments on the date they are received. Apply the money in the most advantageous way to the government. Generally, apply it to the oldest assessment, first. The taxpayer can not designate how to apply the money, because this is not a voluntary payment.

Use designated payment code (DPC) 05 for levy payments. Use DPC 15 for other payments caused by a levy, if they are not levy proceeds.

Example: A wage levy prompts the taxpayer to pay the amount owed, to get the levy released. Code this payment with DPC 15.

Payments for these levies may be small. Decide if the amount owed should be paid from the levy proceeds. When the payments are small compared to the amount owed, though, consider other enforced collection.

If Payments are being monitored in CFf & one more payment is expected to pay off the amount owed.

Then use Form 668-D to give the employer a payoff figure and release the levy after that is paid.

If at least two payments are received & no additional collection is warranted.

Then consider transferring the case to the service center for monitoring. Get management approval, first. See 2.4.9 and 4.3.3.5 of IRM 105.1 Collecting Contact Handbook.

Section 7216 Frequently Asked Questions

These Frequently Asked Questions (FAQs) present introductory information about revised regulations and a new revenue procedure for complying with Internal Revenue Code Section (IRC §) 7216. It is intended to alert tax return preparers and other persons who work with preparers and taxpayers that important new rules and regulations apply to them and the way they do business. Readers should not rely solely on this Q&A to answer questions. Instead please refer to the recently revised Treasury Regulations, Treas. Reg. §301.7216, and recently enacted Revenue Procedure 2008-35  for complete authoritative information.  If you have other questions, please seek the advice of counsel.

Q1 What is §7216 and why is it an issue now? A1  Internal Revenue Code §7216 is a criminal provision enacted by the U.S. Congress in the 1971 that prohibits preparers of tax returns from knowingly or recklessly disclosing or using tax return information.  A convicted preparer may be fined not more than $1,000 or imprisoned not more than one year or both, for each violation.  The Secretary of Treasury is permitted to grant exceptions to this general prohibition by issuing regulations.  Treas. Reg. §301.7216 had been  substantially unchanged for over 30 years and did not address the modern return preparation marketplace, particularly electronic filing and the cross-marketing of financial and commercial products and services during the return preparation experience.  After a long process that included many public suggestions and comments, updated regulations were published on January 7 and July 2, 2008 and apply to uses and disclosures beginning on January 1, 2009.

Q2 How are civil penalties applicable to the disclosure of tax return information? A2 Internal Revenue Code §6713 imposes a civil penalty of $250 on any person who is engaged in the business of preparing, or providing services in connection with the preparation of returns of tax, or any person who for compensation prepares a return for another person, and who

Discloses any information furnished to him for, or in connection with, the preparation of any such return, or Uses any such information for any purpose other than to prepare, or assist in preparing, any such return.  Imposition of the penalty under Internal Revenue Code §6713 does not require that the disclosure be knowing or reckless as it does under Internal Revenue Code §7216.

Q3 What is a “tax return preparer?” A3 Tax return preparers are persons that participate in the preparation of tax returns for taxpayers, including but not limited to:

Return preparers that are in business or hold themselves out as preparers* Casual preparers that are compensated Electronic return originators** Electronic return transmitters** Intermediate Service Providers** Software Developers** Reporting Agents**

The definition also extends to those that assist others in preparing returns or performing auxiliary services in connection with preparing returns, or are employed by preparers and perform auxiliary services in connection with the preparation of tax returns.

NOTE: *   This includes volunteer preparers that participate in programs like VITA       and TCE. ** These persons are part of the electronic filing arena and are collectively      known as e-file providers (see also Revenue Procedure 2007-40).

Q4 Have the new regulations changed the definition of tax return preparer? A4 The new regulations clarify that e-file providers are considered tax return preparers and persons that perform auxiliary services for e-file providers in connection with tax return preparation are covered by the statute and regulations.  The regulations also clarify that contractors receiving tax return information (See 5 below) from tax return preparers are considered tax return preparers subject to the same provisions and penalties.   Tax return preparers that engage contractors and disclose tax return information to them are required to inform contractors of the rules and consequences in a written notice.  (See also questions 12-17 below).

Q5 What is “tax return information?” A5  Tax return information is all the information tax return preparers obtain from taxpayers or other sources in any form or manner that is used to prepare tax returns or is obtained in connection with the preparation of returns.  It also includes all computations, worksheets, and printouts preparers create; correspondence from IRS during the preparation, filing and correction of returns; statistical compilations of tax return information; and tax return preparation software registration information. All tax return information is protected by §7216 and the regulations.

Q6 What are “disclosures” of tax return information? A6  Disclosure of tax return information is the act of making tax return information known to any person in any manner whatsoever.  The regulations authorize two types of disclosures:

Certain permissible disclosures without taxpayer consent Disclosures requiring taxpayer consent

The regulations provide exceptions allowing tax return preparers to disclose tax return information without a taxpayer’s prior written consent under certain circumstances: e.g., disclosures to the IRS, other taxing jurisdictions or the courts; disclosures to other U.S.-based tax return preparers that assist in preparing the return; and disclosures for the purpose of obtaining legal advice.  These and other exceptions can be found in Treas. Reg. §301.7216-2.

All other disclosures not specifically authorized require tax return preparers to secure from taxpayers advance signed consents (see 7 below) authorizing the disclosures.

Q7 What are “consents to disclose tax return information?” A7 Consents to disclose tax return information are paper or electronic documents that contain certain specific information including the names of the tax return preparer and the taxpayer and that specify the nature of the disclosure(s), to whom the disclosures will be made, and details on the data to be disclosed.  Consents are valid only if they are a made by the taxpayer knowingly and voluntarily and are signed and dated by the taxpayer in pen-and-ink or electronically.  Consent forms must include certain language and warnings.  Refer to Treas. Reg. §301.7216-3(a)(3) and Revenue Procedure 2008-35 for complete information.

Q8 When and how does a tax return preparer obtain consent to disclose tax return information? A8 Tax return preparers must obtain consent to disclose tax return information before returns are provided to the taxpayer for signature and before tax return information is disclosed.  The rules for obtaining consents are found in Treas. Reg. 301.7216-3 and Revenue Procedure 2008-35.

Q9 What are “uses” of tax return information? A9 Uses of tax return information are occurrences where tax return preparers refer to, or rely on, tax return information as the basis to take or permit actions.  The regulations authorize two types of uses:

Certain permissible uses without taxpayer consent Uses requiring taxpayer “consent to use tax return information”

The regulations authorize tax return preparers to use specified tax return information without a taxpayer’s prior written consent under certain circumstances: e.g., to create lists for solicitation of tax return business; to produce statistical information in connection with tax return preparation business.  These and other exceptions can be found in Treas. Reg. §301.7216-2.

All other uses not specifically authorized require tax return preparers to secure from taxpayers advance signed consents (see 10 below) authorizing the uses. 

Q10 What are “consents to use tax return information?” A10 Consents to use tax return information are paper or electronic documents that contain certain specific information including the names of the tax return preparer and the taxpayer and that describe the particular use authorized, identify the product or service for which the tax return information will be used, and detail the data to be used.  Consents are valid only if they are made by the taxpayer knowingly and voluntarily and are signed and dated by the taxpayer in pen-and-ink or electronically.  Consent forms must include certain language and warnings.  Refer to Treas. Reg. §301.7216-3(a)(3) and Revenue Procedure 2008-35 for complete information.

Q11 When and how does a tax return preparer obtain consent to use tax return information? A11 Tax return preparers must obtain consent to use tax return information before tax return information is used and before returns are provided to the taxpayer for signature.  The rules for obtaining consents are found in Treas. Reg. §301.7216-3(b) and Revenue Procedure 2008-35.

Q12 Do consents to disclose or use tax return information have expiration dates? A12 Yes.  The taxpayer and tax return preparer may agree to specify the period of time the consent will be effective and include the period in the consent form.  If no period is specified the regulations state that the consent will be effective for a period of one year from the date the taxpayer signed the consent.

Q13 Have the rules changed for obtaining consents to disclose or use tax return information? A13  Yes. The basic rules are still provided by Treas. Reg. §301.7216-3, while additional rules can be found in Revenue Procedure 2008-35. These rules include the following notable changes:

Multiple consents to disclose are permitted on one consent form Multiple consents to use are permitted on one consent form Consent form format requirements have changed Certain prescribed language and warnings are now required Electronic consent forms are expressly permitted Electronic signatures on consent forms are expressly permitted Disclosure of social security numbers outside the U.S. must satisfy special requirements.

Refer to Treas. Reg. §301.7216-3 and Revenue Procedure 2008-35 for other changes and complete information.

Q14 What are the special rules for disclosing tax return information outside the United States? A14 Disclosing tax return information to another tax return preparer that is assisting in the preparation of the return or providing auxiliary services in connection with preparing the return generally does not require the consent of the taxpayer.  However, if the other tax return preparer is located outside the United States or any territory or possession of the United States, the taxpayer must agree and sign a form consenting to the disclosure.  See Revenue Procedure 2008-35, section 4.04(1)(e) for specific language that must be included in the consent form.  If the tax return information to be disclosed includes social security numbers, (See Q3).

Q15 What are the special rules for disclosing social security numbers outside the United States? A15 Generally, tax return preparers may not obtain consents to disclose social security numbers to tax return preparers located outside the United States or any territory or possession of the United States.  If social security numbers are included in documents for which the tax return preparer has obtained the consent of the taxpayer to disclose the tax return preparer must redact or mask any social security number before disclosing the tax return information to a return preparer outside the United States.  There is an exception.  Social security numbers may be disclosed to tax return preparers located outside the United States if taxpayer consent is obtained and both the sending and receiving tax return preparers maintain adequate data protection safeguards defined in Revenue Procedure 2008-35, section 4.07.  See also Revenue Procedure 2008-35, section 4.04(1)(e)(ii) for specific language that must be included in the consent form.

Q16 Are the staffs of banks and credit unions that receive copies of tax returns in connection with applications for mortgages included within the definition of tax return preparers?  A16 No.  They are ordinarily not covered because they ordinarily are not preparing a taxpayer’s return, providing auxiliary services in connection with the preparation of tax returns, being compensated for preparing tax returns, or employed by a tax return preparer.   Q17 Are the people who prepare Medicaid applications deemed subject to the regulations because they use tax return data in preparing Medicaid applications? A17 No.  (See A16).   Q18 Are the members of co-op boards of directors subject to the regulations because they require a tax return in the package of documents that must be included when seeking approval to purchase a co-op?  A18 No.  (See A16).   Q19 Is a fee-based financial planner subject to the regulations because they review copies of tax return in order to create a financial plan? A19 No.  (See A16).   Q20 Are financial aid advisors included because they utilize tax return data? A20 No.  (See A16).

 == First-Time Homebuyer Credit Extended to April 30, 2010; Some Current Homeowners Now Also Qualify ==

IR-2009-108

WASHINGTON — A new law that went into effect Nov. 6 extends the first-time homebuyer credit five months and expands the eligibility requirements for purchasers.

The Worker, Homeownership, and Business Assistance Act of 2009 extends the deadline for qualifying home purchases from Nov. 30, 2009, to April 30, 2010. Additionally, if a buyer enters into a binding contract by April 30, 2010, the buyer has until June 30, 2010, to settle on the purchase.

The maximum credit amount remains at $8,000 for a first-time homebuyer –– that is, a buyer who has not owned a primary residence during the three years up to the date of purchase.

But the new law also provides a “long-time resident” credit of up to $6,500 to others who do not qualify as “first-time homebuyers.” To qualify this way, a buyer must have owned and used the same home as a principal or primary residence for at least five consecutive years of the eight-year period ending on the date of purchase of a new home as a primary residence.

For all qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 tax returns.

A new version of Form 5405, First-Time Homebuyer Credit, will be available in the next few weeks. A taxpayer who purchases a home after Nov. 6 must use this new version of the form to claim the credit. Likewise, taxpayers claiming the credit on their 2009 returns, no matter when the house was purchased, must also use the new version of Form 5405. Taxpayers who claim the credit on their 2009 tax return will not be able to file electronically but instead will need to file a paper return.

A taxpayer who purchased a home on or before Nov. 6 and chooses to claim the credit on an original or amended 2008 return may continue to use the current version of Form 5405.

'''Income Limits Rise'''

The new law raises the income limits for people who purchase homes after Nov. 6. The full credit will be available to taxpayers with modified adjusted gross incomes (MAGI) up to $125,000, or $225,000 for joint filers. Those with MAGI between $125,000 and $145,000, or $225,000 and $245,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

For homes purchased prior to Nov. 7, 2009, existing MAGI limits remain in place. The full credit is available to taxpayers with MAGI up to $75,000, or $150,000 for joint filers. Those with MAGI between $75,000 and $95,000, or $150,000 and $170,000 for joint filers, are eligible for a reduced credit. Those with higher incomes do not qualify.

'''New Requirements'''

Several new restrictions on purchases that occur after Nov. 6 go into effect with the new law:

* Dependents are not eligible to claim the credit.
* No credit is available if the purchase price of a home is more than $800,000.
* A purchaser must be at least 18 years of age on the date of purchase.

'''For Members of the Military'''

Members of the Armed Forces and certain federal employees serving outside the U.S. have an extra year to buy a principal residence in the U.S. and still qualify for the credit. An eligible taxpayer must buy or enter into a binding contract to buy a home by April 30, 2011, and settle on the purchase by June 30, 2011. Return to top

T read Sec 11 of the Act Click Here

AMENDMENT NO.llll Calendar No.lll

Referred to the Committee on llllllllll and

AMENDMENT IN THE NATURE OF A SUBSTITUTE intended

to be proposed by lllllll

1 Strike all after the enacting clause and insert the fol2

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Worker, Homeowner5

6 SEC. 2. REVISIONS TO SECOND-TIER BENEFITS.

7 (a) IN GENERAL.—Section 4002(c) of the Supple8

9 26 U.S.C. 3304 note) is amended—

1 (1) in paragraph (1)—

2 (A) in the matter preceding subparagraph

3 (A), by striking ‘‘If’’ and all that follows

4 through ‘‘paragraph (2))’’ and inserting ‘‘At

5 the time that the amount established in an indi6

vidual’s account under subsection (b)(1) is ex7

8 (B) in subparagraph (A), by striking ‘‘50

9 percent’’ and inserting ‘‘54 percent’’; and

10 (C) in subparagraph (B), by striking ‘‘13’’

11 and inserting ‘‘14’’;

12 (2) by striking paragraph (2); and

13 (3) by redesignating paragraph (3) as para14

15 (b) EFFECTIVE DATE.—The amendments made by

16 this section shall apply as if included in the enactment

17 of the Supplemental Appropriations Act, 2008, except that

18 no amount shall be payable by virtue of such amendments

19 with respect to any week of unemployment commencing

20 before the date of the enactment of this Act.

21 SEC. 3. THIRD-TIER EMERGENCY UNEMPLOYMENT COM22

23 (a) IN GENERAL.—Section 4002 of the Supplemental

24 Appropriations Act, 2008 (Public Law 110–252; 26

1 U.S.C. 3304 note) is amended by adding at the end the

2 following new subsection:

3 ‘‘(d) THIRD-TIER EMERGENCY UNEMPLOYMENT

4 COMPENSATION.—

5 ‘‘(1) IN GENERAL.—If, at the time that the

6 amount added to an individual’s account under sub7

8 unemployment compensation’) is exhausted or at any

9 time thereafter, such individual’s State is in an ex10

tended benefit period (as determined under para11

12 by an amount (hereinafter ‘third-tier emergency un13

14 ‘‘(A) 50 percent of the total amount of

15 regular compensation (including dependents’ al16

17 individual’s benefit year under the State law; or

18 ‘‘(B) 13 times the individual’s average

19 weekly benefit amount (as determined under

20 subsection (b)(2)) for the benefit year.

21 ‘‘(2) EXTENDED BENEFIT PERIOD.—For pur22

23 to be in an extended benefit period, as of any given

24 time, if—

1 ‘‘(A) such a period would then be in effect

2 for such State under such Act if section 203(d)

3 of such Act—

4 ‘‘(i) were applied by substituting ‘4’

5 for ‘5’ each place it appears; and

6 ‘‘(ii) did not include the requirement

7 under paragraph (1)(A) thereof; or

8 ‘‘(B) such a period would then be in effect

9 for such State under such Act if—

10 ‘‘(i) section 203(f) of such Act were

11 applied to such State (regardless of wheth12

13 application); and

14 ‘‘(ii) such section 203(f)—

15 ‘‘(I) were applied by substituting

16 ‘6.0’ for ‘6.5’ in paragraph (1)(A)(i)

17 thereof; and

18 ‘‘(II) did not include the require19

20 thereof.

21 ‘‘(3) LIMITATION.—The account of an indi22

23 this subsection.’’.

24 (b) CONFORMING AMENDMENT TO NON-AUGMENTA25

TION RULE.—Section 4007(b)(2) of the Supplemental Ap5

1 propriations Act, 2008 (Public Law 110–252; 26 U.S.C.

2 3304 note) is amended—

3 (1) by striking ‘‘then section 4002(c)’’ and in4

5 4002’’; and

6 (2) by striking ‘‘paragraph (2) of such section)’’

7 and inserting ‘‘paragraph (2) of such subsection (c)

8 or (d) (as the case may be))’’.

9 (c) EFFECTIVE DATE.—The amendments made by

10 this section shall apply as if included in the enactment

11 of the Supplemental Appropriations Act, 2008, except that

12 no amount shall be payable by virtue of such amendments

13 with respect to any week of unemployment commencing

14 before the date of the enactment of this Act.

15 SEC. 4. FOURTH-TIER EMERGENCY UNEMPLOYMENT COM16

17 (a) IN GENERAL.—Section 4002 of the Supplemental

18 Appropriations Act, 2008 (Public Law 110–252; 26

19 U.S.C. 3304 note), as amended by section 3(a), is amend20

21 ‘‘(e) FOURTH-TIER EMERGENCY UNEMPLOYMENT

22 COMPENSATION.—

23 ‘‘(1) IN GENERAL.—If, at the time that the

24 amount added to an individual’s account under sub25

1 compensation) is exhausted or at any time there2

after, such individual’s State is in an extended ben3

4 such account shall be further augmented by an

5 amount (hereinafter ‘fourth-tier emergency unem6

7 ‘‘(A) 24 percent of the total amount of

8 regular compensation (including dependents’ al9

10 individual’s benefit year under the State law; or

11 ‘‘(B) 6 times the individual’s average week12

ly benefit amount (as determined under sub13

14 ‘‘(2) EXTENDED BENEFIT PERIOD.—For pur15

16 to be in an extended benefit period, as of any given

17 time, if—

18 ‘‘(A) such a period would then be in effect

19 for such State under such Act if section 203(d)

20 of such Act—

21 ‘‘(i) were applied by substituting ‘6’

22 for ‘5’ each place it appears; and

23 ‘‘(ii) did not include the requirement

24 under paragraph (1)(A) thereof; or

1 ‘‘(B) such a period would then be in effect

2 for such State under such Act if—

3 ‘‘(i) section 203(f) of such Act were

4 applied to such State (regardless of wheth5

6 application); and

7 ‘‘(ii) such section 203(f)—

8 ‘‘(I) were applied by substituting

9 ‘8.5’ for ‘6.5’ in paragraph (1)(A)(i)

10 thereof; and

11 ‘‘(II) did not include the require12

13 thereof.

14 ‘‘(3) LIMITATION.—The account of an indi15

16 this subsection.’’.

17 (b) CONFORMING AMENDMENT TO NON-AUGMENTA18

TION RULE.—Section 4007(b)(2) of the Supplemental Ap19

20 3304 note), as amended by section 3(b), is amended—

21 (1) by striking ‘‘and (d)’’ and inserting ‘‘, (d),

22 and (e) of section 4002’’; and

23 (2) by striking ‘‘or (d)’’ and inserting ‘‘, (d), or

24 (e) (as the case may be))’’.

1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply as if included in the enactment

3 of the Supplemental Appropriations Act, 2008, except that

4 no amount shall be payable by virtue of such amendments

5 with respect to any week of unemployment commencing

6 before the date of the enactment of this Act.

7 SEC. 5. COORDINATION.

8 Section 4002 of the Supplemental Appropriations

9 Act, 2008 (Public Law 110–252; 26 U.S.C. 3304 note),

10 as amended by section 4, is amended by adding at the

11 end the following new subsection:

12 ‘‘(f) COORDINATION RULES.—

13 ‘‘(1) COORDINATION WITH EXTENDED COM14

PENSATION.—Notwithstanding an election under

15 section 4001(e) by a State to provide for the pay16

17 prior to extended compensation, such State may pay

18 extended compensation to an otherwise eligible indi19

vidual prior to any emergency unemployment com20

21 of the amendments made by sections 2, 3, and 4 of

22 the Worker, Homeownership, and Business Assist23

ance Act of 2009), if such individual claimed ex24

tended compensation for at least 1 week of unem25

1 ployment compensation under subsection (b) (as

2 such subsection was in effect on the day before the

3 date of the enactment of this subsection).

4 ‘‘(2) COORDINATION WITH TIERS II, III, AND

5 IV.—If a State determines that implementation of

6 the increased entitlement to second-tier emergency

7 unemployment compensation by reason of the

8 amendments made by section 2 of the Worker,

9 Homeownership, and Business Assistance Act of

10 2009 would unduly delay the prompt payment of

11 emergency unemployment compensation under this

12 title by reason of the amendments made by such

13 Act, such State may elect to pay third-tier emer14

gency unemployment compensation prior to the pay15

ment of such increased second-tier emergency unem16

17 State determines that such increased second-tier

18 emergency unemployment compensation may be paid

19 without such undue delay. If a State makes the elec20

tion under the preceding sentence, then, for pur21

22 augmented for fourth-tier emergency unemployment

23 compensation under subsection (e), such State shall

24 treat the date of exhaustion of such increased sec25

1 the date of exhaustion of third-tier emergency unem2

3 the date of exhaustion of the third-tier emergency

4 unemployment compensation.’’.

5 SEC. 6. TRANSFER OF FUNDS.

6 Section 4004(e)(1) of the Supplemental Appropria7

8 note) is amended by striking ‘‘Act;’’ and inserting ‘‘Act

9 and sections 2, 3, and 4 of the Worker, Homeownership,

10 and Business Assistance Act of 2009;’’.

11 SEC. 7. EXPANSION OF MODERNIZATION GRANTS FOR UN12

EMPLOYMENT RESULTING FROM COMPEL13

14 (a) IN GENERAL.—Clause (i) of section 903(f)(3)(B)

15 of the Social Security Act (42 U.S.C. 1103(f)(3)(B)) is

16 amended to read as follows:

17 ‘‘(i) One or both of the following of18

19 making such selection, the resulting

20 change in the State law shall not supercede

21 any other provision of law relating to un22

23 such other provision provides broader ac24

25 of such selected offense or offenses:

1 ‘‘(I) Domestic violence, verified

2 by such reasonable and confidential

3 documentation as the State law may

4 require, which causes the individual

5 reasonably to believe that such indi6

7 jeopardize the safety of the individual

8 or of any member of the individual’s

9 immediate family (as defined by the

10 Secretary of Labor); and

11 ‘‘(II) Sexual assault, verified by

12 such reasonable and confidential docu13

mentation as the State law may re14

quire, which causes the individual rea15

sonably to believe that such individ16

17 jeopardize the safety of the individual

18 or of any member of the individual’s

19 immediate family (as defined by the

20 Secretary of Labor).’’.

21 (b) EFFECTIVE DATE.—The amendment made by

22 this section shall apply with respect to State applications

23 submitted on and after January 1, 2010.

1 SEC. 8. TREATMENT OF ADDITIONAL REGULAR COMPENSA2

3 The monthly equivalent of any additional compensa4

5 Unemployed Workers and Struggling Families Act, as

6 contained in Public Law 111–5 (26 U.S.C. 3304 note; 123

7 Stat. 438) shall be disregarded after the date of the enact8

9 assets of an individual for purposes of determining such

10 individual’s eligibility for, or amount of, benefits under the

11 Supplemental Nutrition Assistance Program (SNAP).

12 SEC. 9. ADDITIONAL EXTENDED UNEMPLOYMENT BENE13

FITS UNDER THE RAILROAD UNEMPLOY14

15 (a) BENEFITS.—Section 2(c)(2)(D) of the Railroad

16 Unemployment Insurance Act, as added by section 2006

17 of the American Recovery and Reinvestment Act of 2009

18 (Public Law 111–5), is amended—

19 (1) in clause (iii)—

20 (A) by striking ‘‘June 30, 2009’’ and in21

22 (B) by striking ‘‘December 31, 2009’’ and

23 inserting ‘‘December 31, 2010’’; and

24 (2) by adding at the end of clause (iv) the fol25

26 the preceding sentence, out of any funds in the

1 Treasury not otherwise appropriated, there are ap2

propriated $175,000,000 to cover the cost of addi3

4 under this subparagraph, to remain available until

5 expended.’’.

6 (b) ADMINISTRATIVE EXPENSES.—Section 2006 of

7 division B of the American Recovery and Reinvestment

8 Act of 2009 (Public Law 111–5; 123 Stat. 445) is amend9

10 ‘‘In addition to funds appropriated by the preceding sen11

tence, out of any funds in the Treasury not otherwise ap12

propriated, there are appropriated to the Railroad Retire13

ment Board $807,000 to cover the administrative ex14

15 unemployment benefits under section 2(c)(2)(D) of the

16 Railroad Unemployment Insurance Act, to remain avail17

18 SEC. 10. 0.2 PERCENT FUTA SURTAX.

19 (a) IN GENERAL.—Section 3301 of the Internal Rev20

21 (1) by striking ‘‘through 2009’’ in paragraph

22 (1) and inserting ‘‘through 2010 and the first 6

23 months of calendar year 2011’’,

1 (2) by striking ‘‘calendar year 2010’’ in para2

3 year 2011’’, and

4 (3) by inserting ‘‘(or portion of the calendar

5 year)’’ after ‘‘during the calendar year’’.

6 (b) EFFECTIVE DATE.—The amendments made by

7 this section shall apply to wages paid after December 31,

8 2009.

9 SEC. 11. EXTENSION AND MODIFICATION OF FIRST-TIME

10 HOMEBUYER TAX CREDIT.

11 (a) EXTENSION OF APPLICATION PERIOD.—

12 (1) IN GENERAL.—Subsection (h) of section 36

13 of the Internal Revenue Code of 1986 is amended—

14 (A) by striking ‘‘December 1, 2009’’ and

15 inserting ‘‘May 1, 2010’’,

16 (B) by striking ‘‘SECTION.—This section’’

17 and inserting ‘‘SECTION.—

18 ‘‘(1) IN GENERAL.—This section’’, and

19 (C) by adding at the end the following new

20 paragraph:

21 ‘‘(2) EXCEPTION IN CASE OF BINDING CON22

TRACT.—In the case of any taxpayer who enters into

23 a written binding contract before May 1, 2010, to

24 close on the purchase of a principal residence before

1 July 1, 2010, paragraph (1) shall be applied by sub2

3 (2) WAIVER OF RECAPTURE.—

4 (A) IN GENERAL.—Subparagraph (D) of

5 section 36(f)(4) of such Code is amended by

6 striking ‘‘, and before December 1, 2009’’.

7 (B) CONFORMING AMENDMENT.—The

8 heading of such subparagraph (D) is amended

9 by inserting ‘‘AND 2010’’ after ‘‘2009’’.

10 (3) ELECTION TO TREAT PURCHASE IN PRIOR

11 YEAR.—Subsection (g) of section 36 of such Code is

12 amended to read as follows:

13 ‘‘(g) ELECTION TO TREAT PURCHASE IN PRIOR

14 YEAR.—In the case of a purchase of a principal residence

15 after December 31, 2008, a taxpayer may elect to treat

16 such purchase as made on December 31 of the calendar

17 year preceding such purchase for purposes of this section

18 (other than subsections (c), (f)(4)(D), and (h)).’’.

19 (b) SPECIAL RULE FOR LONG-TIME RESIDENTS OF

20 SAME PRINCIPAL RESIDENCE.—Subsection (c) of section

21 36 of the Internal Revenue Code of 1986 is amended by

22 adding at the end the following new paragraph:

23 ‘‘(6) EXCEPTION FOR LONG-TIME RESIDENTS

24 OF SAME PRINCIPAL RESIDENCE.—In the case of an

25 individual (and, if married, such individual’s spouse)

1 who has owned and used the same residence as such

2 individual’s principal residence for any 5-consecu3

4 the date of the purchase of a subsequent principal

5 residence, such individual shall be treated as a first6

time homebuyer for purposes of this section with re7

spect to the purchase of such subsequent resi8

9 (c) MODIFICATION OF DOLLAR AND INCOME LIMITA10

TIONS.—

11 (1) DOLLAR LIMITATION.—Subsection (b)(1) of

12 section 36 of the Internal Revenue Code of 1986 is

13 amended by adding at the end the following new

14 subparagraph:

15 ‘‘(D) SPECIAL RULE FOR LONG-TIME RESI16

DENTS OF SAME PRINCIPAL RESIDENCE.—In

17 the case of a taxpayer to whom a credit under

18 subsection (a) is allowed by reason of sub19

20 shall be applied by substituting ‘$6,500’ for

21 ‘$8,000’ and ‘$3,250’ for ‘$4,000’.’’.

22 (2) INCOME LIMITATION.—Subsection

23 (b)(2)(A)(i)(II) of section 36 of such Code is amend24

25 ‘‘$125,000 ($225,000’’.

1 (d) LIMITATION ON PURCHASE PRICE OF RESI2

DENCE.—Subsection (b) of section 36 of the Internal Rev3

4 following new paragraph:

5 ‘‘(3) LIMITATION BASED ON PURCHASE

6 PRICE.—No credit shall be allowed under subsection

7 (a) for the purchase of any residence if the purchase

8 price of such residence exceeds $800,000.’’.

9 (e) WAIVER OF RECAPTURE OF FIRST-TIME HOME10

BUYER CREDIT FOR INDIVIDUALS ON QUALIFIED OFFI11

CIAL EXTENDED DUTY.—Paragraph (4) of section 36(f)

12 of the Internal Revenue Code of 1986 is amended by add13

14 ‘‘(E) SPECIAL RULE FOR MEMBERS OF

15 THE ARMED FORCES, ETC.—

16 ‘‘(i) IN GENERAL.—In the case of the

17 disposition of a principal residence by an

18 individual (or a cessation referred to in

19 paragraph (2)) after December 31, 2008,

20 in connection with Government orders re21

ceived by such individual, or such individ22

23 duty service—

1 ‘‘(I) paragraph (2) and sub2

3 disposition (or cessation), and

4 ‘‘(II) if such residence was ac5

quired before January 1, 2009, para6

graph (1) shall not apply to the tax7

8 cessation) occurs or any subsequent

9 taxable year.

10 ‘‘(ii) QUALIFIED OFFICIAL EXTENDED

11 DUTY SERVICE.—For purposes of this sec12

13 duty service’ means service on qualified of14

15 ‘‘(I) a member of the uniformed

16 services,

17 ‘‘(II) a member of the Foreign

18 Service of the United States, or

19 ‘‘(III) an employee of the intel20

21 ‘‘(iii) DEFINITIONS.—Any term used

22 in this subparagraph which is also used in

23 paragraph (9) of section 121(d) shall have

24 the same meaning as when used in such

25 paragraph.’’.

1 (f) EXTENSION OF FIRST-TIME HOMEBUYER CREDIT

2 FOR INDIVIDUALS ON QUALIFIED OFFICIAL EXTENDED

3 DUTY OUTSIDE THE UNITED STATES.—

4 (1) IN GENERAL.—Subsection (h) of section 36

5 of the Internal Revenue Code of 1986, as amended

6 by subsection (a), is amended by adding at the end

7 the following:

8 ‘‘(3) SPECIAL RULE FOR INDIVIDUALS ON

9 QUALIFIED OFFICIAL EXTENDED DUTY OUTSIDE

10 THE UNITED STATES.—In the case of any individual

11 who serves on qualified official extended duty service

12 (as defined in section 121(d)(9)(C)(i)) outside the

13 United States for at least 90 days during the period

14 beginning after December 31, 2008, and ending be15

16 spouse—

17 ‘‘(A) paragraphs (1) and (2) shall each be

18 applied by substituting ‘May 1, 2011’ for ‘May

19 1, 2010’, and

20 ‘‘(B) paragraph (2) shall be applied by

21 substituting ‘July 1, 2011’ for ‘July 1, 2010’.’’.

22 (g) DEPENDENTS INELIGIBLE FOR CREDIT.—Sub23

24 1986 is amended by striking ‘‘or’’ at the end of paragraph

25 (1), by striking the period at the end of paragraph (2)

1 and inserting ‘‘, or’’, and by adding at the end the fol2

3 ‘‘(3) a deduction under section 151 with respect

4 to such taxpayer is allowable to another taxpayer for

5 such taxable year.’’.

6 (h) IRS MATHEMATICAL ERROR AUTHORITY.—Para7

8 of 1986 is amended—

9 (1) by striking ‘‘and’’ at the end of subpara10

11 (2) by striking the period at the end of sub12

13 (3) by inserting after subparagraph (N) the fol14

15 ‘‘(O) an omission of any increase required

16 under section 36(f) with respect to the recap17

18 (i) COORDINATION WITH FIRST-TIME HOMEBUYER

19 CREDIT FOR DISTRICT OF COLUMBIA.—Paragraph (4) of

20 section 1400C(e) of the Internal Revenue Code of 1986

21 is amended by striking ‘‘and before December 1, 2009,’’.

22 (j) EFFECTIVE DATES.—

23 (1) IN GENERAL.—The amendments made by

24 subsections (b), (c), (d), and (g) shall apply to resi21

1 dences purchased after the date of the enactment of

2 this Act.

3 (2) EXTENSIONS.—The amendments made by

4 subsections (a), (f), and (i) shall apply to residences

5 purchased after November 30, 2009.

6 (3) WAIVER OF RECAPTURE.—The amendment

7 made by subsection (e) shall apply to dispositions

8 and cessations after December 31, 2008.

9 (4) MATHEMATICAL ERROR AUTHORITY.—The

10 amendments made by subsection (h) shall apply to

11 returns for taxable years ending on or after April 9,

12 2008.

13 SEC. 12. PROVISIONS TO ENHANCE THE ADMINISTRATION

14 OF THE FIRST-TIME HOMEBUYER TAX CRED15

16 (a) AGE LIMITATION.—

17 (1) IN GENERAL.—Subsection (b) of section 36

18 of the Internal Revenue Code of 1986, as amended

19 by this Act, is amended by adding at the end the fol20

21 ‘‘(4) AGE LIMITATION.—No credit shall be al22

lowed under subsection (a) with respect to the pur23

chase of any residence unless the taxpayer has at24

25 the case of any taxpayer who is married (within the

1 meaning of section 7703), the taxpayer shall be

2 treated as meeting the age requirement of the pre3

4 spouse meets such age requirement.’’.

5 (2) CONFORMING AMENDMENT.—Subsection (g)

6 of section 36 of such Code, as amended by this Act,

7 is amended by inserting ‘‘(b)(4),’’ before ‘‘(c)’’.

8 (b) DOCUMENTATION REQUIREMENT.—Subsection

9 (d) of section 36 of the Internal Revenue Code of 1986,

10 as amended by this Act, is amended by striking ‘‘or’’ at

11 the end of paragraph (2), by striking the period at the

12 end of paragraph (3) and inserting ‘‘, or’’, and by adding

13 at the end the following new paragraph:

14 ‘‘(4) the taxpayer fails to attach to the return

15 of tax for such taxable year a properly executed copy

16 of the settlement statement used to complete such

17 purchase.’’.

18 (c) RESTRICTION ON MARRIED INDIVIDUAL ACQUIR19

ING RESIDENCE FROM FAMILY OF SPOUSE.—Clause (i)

20 of section 36(c)(3)(A) of the Internal Revenue Code of

21 1986 is amended by inserting ‘‘(or, if married, such indi22

23 (d) CERTAIN ERRORS WITH RESPECT TO THE

24 FIRST-TIME HOMEBUYER TAX CREDIT TREATED AS

25 MATHEMATICAL OR CLERICAL ERRORS.—Paragraph (2)

1 of section 6213(g) the Internal Revenue Code of 1986,

2 as amended by this Act, is amended by striking ‘‘and’’

3 at the end of subparagraph (N), by striking the period

4 at the end of subparagraph (O) and inserting ‘‘, and’’,

5 and by inserting after subparagraph (O) the following new

6 subparagraph:

7 ‘‘(P) an entry on a return claiming the

8 credit under section 36 if—

9 ‘‘(i) the Secretary obtains information

10 from the person issuing the TIN of the

11 taxpayer that indicates that the taxpayer

12 does not meet the age requirement of sec13

14 ‘‘(ii) information provided to the Sec15

16 return for at least one of the 2 preceding

17 taxable years is inconsistent with eligibility

18 for such credit, or

19 ‘‘(iii) the taxpayer fails to attach to

20 the return the form described in section

21 36(d)(4).’’.

22 (e) EFFECTIVE DATE.—

23 (1) IN GENERAL.—Except as otherwise pro24

1 this section shall apply to purchases after the date

2 of the enactment of this Act.

3 (2) DOCUMENTATION REQUIREMENT.—The

4 amendments made by subsection (b) shall apply to

5 returns for taxable years ending after the date of the

6 enactment of this Act.

7 (3) TREATMENT AS MATHEMATICAL AND CLER8

ICAL ERRORS.—The amendments made by sub9

10 ending on or after April 9, 2008.

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11 SEC. 13. 5-YEAR CARRYBACK OF OPERATING LOSSES.

12 (a) IN GENERAL.—Subparagraph (H) of section

13 172(b)(1) of the Internal Revenue Code of 1986 is amend14

15 ‘‘(H) CARRYBACK FOR 2008 OR 2009 NET

16 OPERATING LOSSES.—

17 ‘‘(i) IN GENERAL.—In the case of an

18 applicable net operating loss with respect

19 to which the taxpayer has elected the ap20

21 ‘‘(I) subparagraph (A)(i) shall be

22 applied by substituting any whole

23 number elected by the taxpayer which

24 is more than 2 and less than 6 for ‘2’,

1 ‘‘(II) subparagraph (E)(ii) shall

2 be applied by substituting the whole

3 number which is one less than the

4 whole number substituted under sub5

6 ‘‘(III) subparagraph (F) shall not

7 apply.

8 ‘‘(ii) APPLICABLE NET OPERATING

9 LOSS.—For purposes of this subparagraph,

10 the term ‘applicable net operating loss’

11 means the taxpayer’s net operating loss for

12 a taxable year ending after December 31,

13 2007, and beginning before January 1,

14 2010.

15 ‘‘(iii) ELECTION.—

16 ‘‘(I) IN GENERAL.—Any election

17 under this subparagraph may be made

18 only with respect to 1 taxable year.

19 ‘‘(II) PROCEDURE.—Any election

20 under this subparagraph shall be

21 made in such manner as may be pre22

23 made by the due date (including ex24

25 for the taxpayer’s last taxable year be26

1 ginning in 2009. Any such election,

2 once made, shall be irrevocable.

3 ‘‘(iv) LIMITATION ON AMOUNT OF

4 LOSS CARRYBACK TO 5TH PRECEDING TAX5

ABLE YEAR.—

6 ‘‘(I) IN GENERAL.—The amount

7 of any net operating loss which may

8 be carried back to the 5th taxable

9 year preceding the taxable year of

10 such loss under clause (i) shall not ex11

ceed 50 percent of the taxpayer’s tax12

13 to the net operating loss for the loss

14 year or any taxable year thereafter)

15 for such preceding taxable year.

16 ‘‘(II) CARRYBACKS AND

17 CARRYOVERS TO OTHER TAXABLE

18 YEARS.—Appropriate adjustments in

19 the application of the second sentence

20 of paragraph (2) shall be made to

21 take into account the limitation of

22 subclause (I).

23 ‘‘(III) EXCEPTION FOR 2008

24 ELECTIONS BY SMALL BUSINESSES.—

25 Subclause (I) shall not apply to any

1 loss of an eligible small business with

2 respect to any election made under

3 this subparagraph as in effect on the

4 day before the date of the enactment

5 of the Worker, Homeownership, and

6 Business Assistance Act of 2009.

7 ‘‘(v) SPECIAL RULES FOR SMALL

8 BUSINESS.—

9 ‘‘(I) IN GENERAL.—In the case

10 of an eligible small business which

11 made or makes an election under this

12 subparagraph as in effect on the day

13 before the date of the enactment of

14 the Worker, Homeownership, and

15 Business Assistance Act of 2009,

16 clause (iii)(I) shall be applied by sub17

stituting ‘2 taxable years’ for ‘1 tax18

19 ‘‘(II) ELIGIBLE SMALL BUSI20

NESS.—For purposes of this subpara21

graph, the term ‘eligible small busi22

23 term by subparagraph (F)(iii), except

24 that in applying such subparagraph,

25 section 448(c) shall be applied by sub28

1 stituting ‘$15,000,000’ for

2 ‘$5,000,000’ each place it appears.’’.

3 (b) ALTERNATIVE TAX NET OPERATING LOSS DE4

DUCTION.—Subclause (I) of section 56(d)(1)(A)(ii) of the

5 Internal Revenue Code of 1986 is amended to read as fol6

7 ‘‘(I) the amount of such deduc8

9 operating loss with respect to which

10 an election is made under section

11 172(b)(1)(H), or’’.

12 (c) LOSS FROM OPERATIONS OF LIFE INSURANCE

13 COMPANIES.—Subsection (b) of section 810 of the Inter14

15 end the following new paragraph:

16 ‘‘(4) CARRYBACK FOR 2008 OR 2009 LOSSES.—

17 ‘‘(A) IN GENERAL.—In the case of an ap18

19 which the taxpayer has elected the application

20 of this paragraph, paragraph (1)(A) shall be

21 applied by substituting any whole number elect22

23 less than 6 for ‘3’.

24 ‘‘(B) APPLICABLE LOSS FROM OPER

25

ATIONS.—For purposes of this paragraph, the

1 term ‘applicable loss from operations’ means

2 the taxpayer’s loss from operations for a tax3

4 beginning before January 1, 2010.

5 ‘‘(C) ELECTION.—

6 ‘‘(i) IN GENERAL.—Any election

7 under this paragraph may be made only

8 with respect to 1 taxable year.

9 ‘‘(ii) PROCEDURE.—Any election

10 under this paragraph shall be made in

11 such manner as may be prescribed by the

12 Secretary, and shall be made by the due

13 date (including extension of time) for filing

14 the return for the taxpayer’s last taxable

15 year beginning in 2009. Any such election,

16 once made, shall be irrevocable.

17 ‘‘(D) LIMITATION ON AMOUNT OF LOSS

18 CARRYBACK TO 5TH PRECEDING TAXABLE

19 YEAR.—

20 ‘‘(i) IN GENERAL.—The amount of

21 any loss from operations which may be

22 carried back to the 5th taxable year pre23

24 subparagraph (A) shall not exceed 50 per

25 cent of the taxpayer’s taxable income

1 (computed without regard to the loss from

2 operations for the loss year or any taxable

3 year thereafter) for such preceding taxable

4 year.

5 ‘‘(ii) CARRYBACKS AND CARRYOVERS

6 TO OTHER TAXABLE YEARS.—Appropriate

7 adjustments in the application of the sec8

9 made to take into account the limitation of

10 clause (i).’’.

11 (d) ANTI-ABUSE RULES.—The Secretary of Treasury

12 or the Secretary’s designee shall prescribe such rules as

13 are necessary to prevent the abuse of the purposes of the

14 amendments made by this section, including anti-stuffing

15 rules, anti-churning rules (including rules relating to sale16

17 1091 of the Internal Revenue Code of 1986 relating to

18 losses from wash sales.

19 (e) EFFECTIVE DATES.—

20 (1) IN GENERAL.—Except as otherwise pro21

22 this section shall apply to net operating losses aris23

24 2007.

1 (2) ALTERNATIVE TAX NET OPERATING LOSS

2 DEDUCTION.—The amendment made by subsection

3 (b) shall apply to taxable years ending after Decem4

5 (3) LOSS FROM OPERATIONS OF LIFE INSUR6

ANCE COMPANIES.—The amendment made by sub7

section (d) shall apply to losses from operations aris8

9 2007.

10 (4) TRANSITIONAL RULE.—In the case of any

11 net operating loss (or, in the case of a life insurance

12 company, any loss from operations) for a taxable

13 year ending before the date of the enactment of this

14 Act—

15 (A) any election made under section

16 172(b)(3) or 810(b)(3) of the Internal Revenue

17 Code of 1986 with respect to such loss may

18 (notwithstanding such section) be revoked be19

20 for filing the return for the taxpayer’s last tax21

22 (B) any application under section 6411(a)

23 of such Code with respect to such loss shall be

24 treated as timely filed if filed before such due

25 date.

1 (f) EXCEPTION FOR TARP RECIPIENTS.—The

2 amendments made by this section shall not apply to—

3 (1) any taxpayer if—

4 (A) the Federal Government acquired be5

6 equity interest in the taxpayer pursuant to the

7 Emergency Economic Stabilization Act of 2008,

8 (B) the Federal Government acquired be9

10 other right) to acquire any equity interest with

11 respect to the taxpayer pursuant to the Emer12

13 (C) such taxpayer receives after such date

14 of enactment funds from the Federal Govern15

16 subparagraph (A) or (B) pursuant to a pro17

18 the Emergency Economic Stabilization Act of

19 2008 (unless such taxpayer is a financial insti20

21 the funds are received pursuant to a program

22 established by the Secretary of the Treasury for

23 the stated purpose of increasing the availability

24 of credit to small businesses using funding

25 made available under such Act), or