The Health Coverage Tax Credit (HCTC) pays 80 percent of health insurance premiums for eligible taxpayers and their qualified family members. However, many people who could be receiving this valuable credit don’t know about it, and are missing out on big savings that can help them and their families keep their health insurance.

Here are some of the more important things to know about the HCTC:

1. The HCTC pays 80 percent of an eligible taxpayer’s health insurance premiums.
2. The HCTC is a refundable credit, which means it not only reduces a taxpayer’s tax liability but also may result in cash back in his or her pocket at the end of the year.
3. Taxpayers can receive the HCTC monthly—when their health plan premiums are due—or as a yearly tax credit.
4. Nationwide, thousands of people are eligible for the HCTC.
5. You may be eligible for the HCTC if you receive Trade Readjustment Allowances—or unemployment insurance in lieu of TRA—through one of the Trade Adjustment Assistance programs.
6. You also may be eligible for the HCTC if you are a Pension Benefit Guaranty Corporation payee and are 55 years old or older.
7. The most common types of health plans that qualify for the HCTC include COBRA, state-qualified health plans, and spousal coverage. In some cases, non-group/individual plans and health plans associated with Voluntary Employee Benefit Associations established in lieu of COBRA plans also qualify.
8. HCTC candidates receive the HCTC Program Kit by mail. The Kit explains the tax credit and provides a simple checklist to determine eligibility. Also included in the Kit is the HCTC Registration Form.

For more information on the HCTC and how it may benefit you, contact your professional tax advisor or call the HCTC Customer Contact Center toll free at 866-628-HCTC (4282). For those with a hearing impairment, you can call toll free at 866-626-4282 (TTY). You also can visit the HCTC online at www.IRS.gov/hctc (The Health Coverage Tax Credit (HCTC) Program).

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 this month.

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 the date of enactment. 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.

It is hoped that these tax breaks will offer a much-needed boost to employers willing to expand their payrolls. Businesses and nonprofits should keep these benefits in mind as they plan for the year ahead. 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 which certifies that he or she was unemployed during the 60 days before beginning work or, alternatively, worked fewer than a total of 40 hours for someone else 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 the IRS website at www.IRS.gov likely during the next few weeks.  For further information, consult your professional tax preparer or tax advisor.

In the wake of the recent economic and housing crisis, many taxpayers have found themselves forced to renegotiate or abandon their mortgage debt obligations.  The good news is that if your mortgage debt is partly or entirely forgiven during tax years 2007 through 2012, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 important tax facts you should know about Mortgage Debt Forgiveness.

1. Normally, debt forgiveness results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.
2. The limit is $1 million for a married person filing a separate return.
3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.
4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.
5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.
6. Proceeds of refinanced debt used for other purposes—for example, to pay off credit card debt—do not qualify for the exclusion.
7. If you qualify, you can claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.
8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions—such as insolvency—may be applicable. IRS Form 982 provides more details about these provisions.
9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.
10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

For more information about the Mortgage Forgiveness Debt Relief Act of 2007, consult your professional tax professional or tax preparer, or visit the official IRS website at www.IRS.gov. Another good resource is IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments. Taxpayers may obtain a copy of this publication and Form 982 either by downloading them from IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Perhaps one of the most confusing things for individual tax filers to deal with each year at tax filing time is the Alternative Minimum Tax, or AMT.  In the most simple terms, the AMT is an alternate tax that was implemented over four decades ago to ensure that high-earning individuals who benefit from certain tax advantages still pay at least some minimum amount of tax.

Originally, the AMT was intended to mostly affect high income individuals who were able to substantially or completely reduce their income taxes through legitimate tax deductions and credits.  However, because the AMT is not indexed to account for inflation, the AMT now impacts millions more taxpayers than likely ever was contemplated when the law originally was enacted.

Many commentators and tax critics—including many politicians—have decried the AMT as onerous and over-reaching in terms of the number of taxpayers which the law now impacts, especially the number of middle-income taxpayers which are affected.  Congress has introduced numerous proposals for legislation to overhaul the AMT in recent years, but no major revisions to the law have been passed.  Thus, unless and until Congress changes the law, the AMT is a part of the Tax Code and taxpayers should understand its impact.

Here are some facts to know about the AMT and changes to this special tax for 2009:

1. Tax laws provide tax benefits for certain kinds of income and allow special deductions and credits for certain expenses. These benefits can drastically reduce some taxpayers’ tax obligations. Congress created the AMT in 1969, targeting taxpayers who could claim so many deductions that they owed little or no income tax. (Under the AMT, many deductions and credits available to reduce ordinary income tax are not available to reduce the AMT.)

2. Since the AMT is not indexed for inflation, a growing number of middle-income taxpayers are discovering they are subject to the AMT.

3. You may have to pay the AMT if your taxable income for regular tax purposes plus any adjustments and preference items that apply to you are more than the AMT exemption amount.

4. The AMT exemption amounts are set by law for each filing status.

5. For tax year 2009, Congress raised the AMT exemption amounts to the following levels:

• $70,950 for a married couple filing a joint return and qualifying widows and widowers;
• $46,700 for singles and heads of household;
• $35,475 for a married person filing separately.

6. The minimum AMT exemption amount for a child whose unearned income is taxed at the parents’ tax rate has increased to $6,700 for 2009.

7. If you claim a regular tax deduction on your 2009 tax return for any state or local sales or excise tax on the purchase of a new motor vehicle, that tax also is allowed as a deduction for the AMT.

The IRS has made available on its website an electronic version of what it calls the AMT Assistant for Individuals to help individual taxpayers determine whether they may be subject to the AMT. (The AMT Assistant is an electronic version of the AMT Worksheet found in the Instructions to IRS Form 1040, called the “Worksheet to See if You Should Fill in Form 6251 – Line 45.”)  The AMT Assistant is intended to provide a simple test for taxpayers who fill out their tax returns without using software to determine whether they may be subject to the AMT.

For further information, or for additional help to determine if and how the AMT impacts your individual tax filing, consult your professional tax advisor or tax preparer, or visit the IRS web site at IRS.gov.

Most businesses now may use losses incurred during the recent economic downturn to reduce income from prior tax years, under an IRS revenue procedure issued in late 2009 which implements relief provided by the Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA). The relief provided under the WHBAA differs from similar relief issued earlier in 2009 under The American Recovery and Reinvestment Act (ARRA) in that the previous relief was limited to small businesses. (See link, Questions and Answers on WHBAA NOL provisions.) The current relief is applicable to any taxpayer with business losses, except those that received payments under the Troubled Asset Relief Program (TARP). The relief also applies to a loss from operations of a life insurance company.

Taxpayers under the revenue procedure may elect to carry back a net operating loss (NOL) for a period of three, four or five years, or a loss from operations for four or five years, to offset taxable income in those preceding taxable years. An NOL or loss from operations carried back five years may offset no more than 50 percent of a taxpayer’s taxable income in that fifth preceding year. This limitation does not apply to the fourth or third preceding year.

The revenue procedure applies to taxpayers that incurred an NOL or a loss from operations for a taxable year ending after Dec. 31, 2007, and beginning before Jan. 1, 2010.  For more information, consult your professional tax advisor or tax preparer.