http://www.webcpa.com/article.cfm?ARTICLEID=29962
IRS Lowers Deductible Mileage Rates
Washington, D.C. (Nov. 25, 2008)
By WebCPA staff
The Internal Revenue Service has reduced the 2009 optional standard mileage rates used to calculate the deductible costs of operating an automobile, citing lower gas prices.
Beginning on Jan. 1, 2009, the standard mileage rates for the use of a car, van, pickup or panel truck will be 55 cents per mile for business miles driven, 24 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.
The new rates for business, medical and moving purposes are slightly lower than rates for the second half of 2008 that were raised by a special adjustment mid-year in response to a spike in gasoline prices. The rate for charitable purposes is set by law and is unchanged from 2008.
The business mileage rate was 50.5 cents in the first half of 2008 and 58.5 cents in the second half. The medical and moving rate was 19 cents in the first half and 27 cents in the second half.
The mileage rates for 2009 reflect generally higher transportation costs compared to a year ago, but the rates also factor in the recent reversal of rising gasoline prices. While gasoline is a significant factor in the mileage rate, other fixed and variable costs, such as depreciation, enter the calculation.
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 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 also have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
For more, see http://www.irs.gov/newsroom/article/0,,id=200505,00.html.
Tuesday, November 25, 2008
Thursday, November 20, 2008
Obama tax plan
http://public.deloitte.com/media/0163/us_tax_decisionsaheadobama110508.pdf
The international accounting firm of Deloitte and Touche predicts what Obama will do in terms of taxes, among other things.
Obama campaigned on promises to keep some tax cuts for married couples earning less than $250,000 and singles earning less than $200,000 which under the present law are set to expire at the end of 2010.
He has said he will:
* Reinstate the top two individual income tax rates (currently 33 and 35 percent) to their pre-2001 levels of 36 and 39.6 percent while maintaining the existing 10, 15, 25, and 28 percent tax brackets;
* Increase the capital gains rate to 20 percent for taxpayers in the top two tax brackets;
* Continue to apply the same tax rates to qualified dividends as capital gains; and
* Reinstate for high-income taxpayers the personal exemption phase-out and itemized deduction limitation, which are scheduled to be fully phased out starting in 2010.
In effect, the Obama plan would raise the top income tax rate, considering these phase-outs, to 40.79 percent from its 2008 level of 35.35 percent.
Alternative Minimum Tax
President-elect Obama has proposed extending and indexing the temporary increase in the AMT exemption amount enacted for 2008. This would prevent a dramatic increase in the number of AMT taxpayers. His increases in ordinary tax rates also would remove some high-income taxpayers from AMT by increasing the amount of their regular tax liability.
Estate tax
The estate tax, which is set to drop to zero for 2010 only, will be reinstated in 2011 at the significantly higher rates and significantly lower exemption amounts that were in effect in 2000. This will mean an increase in the exemption level to $3.5 million per person ($7 million per couple) and will increase the top rate to 45 percent.
Other individual tax proposals
Many of Obama's individual income tax proposals already exist in draft form in legislation that has been vetted by Congress. But new proposals would:
* Eliminate all income taxes for seniors (age 65 and over) earning under $50,000 a year.
* Create a refundable Making Work Pay Credit equal to 6.2 percent of up to $8,100 in earnings for those making less than $75,000 a year (maximum $500 credit per spouse).
* Create a refundable 10 percent Universal Mortgage Credit for nonitemizers (up to a maximum of $800).
* Replace existing Hope credit with a refundable American Opportunity Tax Credit, providing up to $4,000 per year for qualifying higher education expenses.
* Expand the earned income tax credit program.
* Mandate automatic employee enrollment in 401(k) plans where employers offer retirement plans. Require employers that don't offer retirement plans to provide employees with access to automatic IRAs.
* Expand Savers Credit and make it refundable. For working families earning under $75,000, government would match $500 of first $1,000 saved and deposit into account.
* Increase child care dependent maximum credit rate to 50 percent and increase phase-out threshold to $30,000.
Long term payroll tax increase
To address long-term problems with Social Security and Medicare, Obama has said that he would propose an additional payroll tax to take effect 10 years or more in the future. This tax would be at a rate of between 2 and 4 percent (split between employer and employee) and would apply to income above $250,000.
Economic recovery and timing of tax legislation
The authors of Tax policy decisions ahead say that they expect the new administration will adopt new tax policies as events unfold:
* First, some tax relief will be proposed early in the new administration as part of economic recovery legislation.
* Second, later in the year as Congress and the White House confront the need to extend a variety of expiring individual and business tax provisions as well as another year of AMT relief, the ballooning deficit projections that have accompanied the current economic crisis and recovery efforts will make Obama and Democratic lawmakers much less sympathetic to pleas that these provisions be extended without offsetting tax increases.
* Third, by 2011, Obama and the Democratic Congress are very likely to have succeeded in their desire to raise ordinary income tax rates, as well as capital gains and dividend rates on the highest income individuals.
Taxpayers will have some time to prepare for changes, because the introduction of new tax rates on both business and individuals will be affected both by the economic situation and the President-elect's strategy for governing.
Source: http://www.accountingweb.com/cgi-bin/item.cgi?id=106468&d=883&h=884&f=882&dateformat=%o%20%B%20%Y
The international accounting firm of Deloitte and Touche predicts what Obama will do in terms of taxes, among other things.
Obama campaigned on promises to keep some tax cuts for married couples earning less than $250,000 and singles earning less than $200,000 which under the present law are set to expire at the end of 2010.
He has said he will:
* Reinstate the top two individual income tax rates (currently 33 and 35 percent) to their pre-2001 levels of 36 and 39.6 percent while maintaining the existing 10, 15, 25, and 28 percent tax brackets;
* Increase the capital gains rate to 20 percent for taxpayers in the top two tax brackets;
* Continue to apply the same tax rates to qualified dividends as capital gains; and
* Reinstate for high-income taxpayers the personal exemption phase-out and itemized deduction limitation, which are scheduled to be fully phased out starting in 2010.
In effect, the Obama plan would raise the top income tax rate, considering these phase-outs, to 40.79 percent from its 2008 level of 35.35 percent.
Alternative Minimum Tax
President-elect Obama has proposed extending and indexing the temporary increase in the AMT exemption amount enacted for 2008. This would prevent a dramatic increase in the number of AMT taxpayers. His increases in ordinary tax rates also would remove some high-income taxpayers from AMT by increasing the amount of their regular tax liability.
Estate tax
The estate tax, which is set to drop to zero for 2010 only, will be reinstated in 2011 at the significantly higher rates and significantly lower exemption amounts that were in effect in 2000. This will mean an increase in the exemption level to $3.5 million per person ($7 million per couple) and will increase the top rate to 45 percent.
Other individual tax proposals
Many of Obama's individual income tax proposals already exist in draft form in legislation that has been vetted by Congress. But new proposals would:
* Eliminate all income taxes for seniors (age 65 and over) earning under $50,000 a year.
* Create a refundable Making Work Pay Credit equal to 6.2 percent of up to $8,100 in earnings for those making less than $75,000 a year (maximum $500 credit per spouse).
* Create a refundable 10 percent Universal Mortgage Credit for nonitemizers (up to a maximum of $800).
* Replace existing Hope credit with a refundable American Opportunity Tax Credit, providing up to $4,000 per year for qualifying higher education expenses.
* Expand the earned income tax credit program.
* Mandate automatic employee enrollment in 401(k) plans where employers offer retirement plans. Require employers that don't offer retirement plans to provide employees with access to automatic IRAs.
* Expand Savers Credit and make it refundable. For working families earning under $75,000, government would match $500 of first $1,000 saved and deposit into account.
* Increase child care dependent maximum credit rate to 50 percent and increase phase-out threshold to $30,000.
Long term payroll tax increase
To address long-term problems with Social Security and Medicare, Obama has said that he would propose an additional payroll tax to take effect 10 years or more in the future. This tax would be at a rate of between 2 and 4 percent (split between employer and employee) and would apply to income above $250,000.
Economic recovery and timing of tax legislation
The authors of Tax policy decisions ahead say that they expect the new administration will adopt new tax policies as events unfold:
* First, some tax relief will be proposed early in the new administration as part of economic recovery legislation.
* Second, later in the year as Congress and the White House confront the need to extend a variety of expiring individual and business tax provisions as well as another year of AMT relief, the ballooning deficit projections that have accompanied the current economic crisis and recovery efforts will make Obama and Democratic lawmakers much less sympathetic to pleas that these provisions be extended without offsetting tax increases.
* Third, by 2011, Obama and the Democratic Congress are very likely to have succeeded in their desire to raise ordinary income tax rates, as well as capital gains and dividend rates on the highest income individuals.
Taxpayers will have some time to prepare for changes, because the introduction of new tax rates on both business and individuals will be affected both by the economic situation and the President-elect's strategy for governing.
Source: http://www.accountingweb.com/cgi-bin/item.cgi?id=106468&d=883&h=884&f=882&dateformat=%o%20%B%20%Y
Tuesday, November 18, 2008
Money managers prepare for Obama's tax policies
http://pittsburgh.bizjournals.com/pittsburgh/stories/2008/11/17/story1.html?b=1226898000^1732986
Friday, November 14, 2008 | Modified: Monday, November 17, 2008 - 6:00 AM
Money managers prepare for Obama's tax policies
Pittsburgh Business Times - by Patty Tascarella
President-elect Barack Obama vowed during the campaign that he would cut taxes for the middle class but raise them for the affluent.
With roughly six weeks left in the year to come up with strategies for clients’ 2008 tax filings, financial professionals are scrambling to guess what changes are likely to be enacted once Obama takes office in January.
They don’t doubt there will be changes. Obama outlined a comprehensive plan that raises capital gains and estate taxes, rewards corporate R&D and job creation efforts stateside, and repeals special breaks for oil and gas companies and those who create jobs overseas at the expense of employment in the United States.
But many believe the roller coaster spins and turns of the stock market over the past couple months will impact the new president’s agenda.
“The economy is the wild card,” said Douglas Kreps, managing director at Fort Pitt Capital Group, Green Tree. “It seems like the rhetoric coming out of the Obama transition team has softened on taxes. The economy is in a fragile state, and they don’t want to be seen as raising taxes and further damaging the economy.”
David B. Root Jr., CEO of Downtown-based D.B. Root & Co., isn’t sure “how much room (Obama) is going to have to increase marginal tax rates in the way he communicated during his campaign because we’re in a recession and have no idea” how long it will last.
“We’re encouraging our clients not to overreact,” Root said. “However, at the same time, we’re suggesting it makes sense to be aware that certain tax items or tax rates may and probably will go up, namely capital gains and possibly dividend rates.”
BEST GUESSES
Root believes it’s “more than likely” the new president will take “some steps” with capital gains, specifically raising the rates from the current 15 percent to 20 percent for those in the upper income brackets.
“In which case, from an investment standpoint, anything we can do to enable our clients’ portfolios to become more tax efficient going into next year will only help,” Root said. “That may mean possibly harvesting capital gains this year and offsetting those with losses that may have occurred over the past two or three months.”
He’ll make sure clients are “maxing out on retirement plans” and taking advantage of over-50 catchup contributions, which aren’t taxed until the investor cashes out.
“A lot of times, those get overlooked,” he said.
Smithfield Trust Co. CEO Robert Kopf is counseling clients to concentrate on their overall game plan.
“I have heard because of the problems in the economy that those tax increases in capital gains may be delayed or deferred, so we’re not getting too worked up,” Kopf said. “What we are doing is counseling customers to harvest losses they may have realized in this bear market and use those losses to offset earlier gains occurred in 2008. They can carry forward losses that would offset capital gain liability in 2009.”
Kreps pointed out that many investors’ gains “have evaporated” with the plummeting stock market.
“The tax planning needs to be revisited this quarter,” he said. “Investors need to come back to the fundamentals with the investments they own and worry a little less about taxes. If your portfolio makes sense long-term, let’s try not to make a short-term decision based on gambling with the tax system when we don’t know what will happen.”
Kreps said the capital gains tax increases likely won’t occur in the current year, but could be implemented in 2009 or 2010.
“Congress and the president-elect will have way more important issues to address with regard to the economy than trying to change the tax code right out of the gates,” Kreps said. “The guy’s boxed in.”
David Hunter, chairman of Hunter Associates Inc. and a former chairman of the National Association of Securities Dealers, is less concerned over the new administration’s potential tax changes than in nudging clients back into the stock market.
“We’ve been more conservative for over a year now than we normally would be, but we’ve got to buy stocks to restore the equity portion of (clients’) portfolios,” Hunter said. “The truth is, they don’t want us to at the moment, and we do this slowly, but stock prices are down a lot more than earnings will be down at many good companies. We’ve got to buy stocks when they’re at these levels if we’re going to be winners long-term.”
The Obama Plan
President-elect Barack Obama’s proposed tax changes include:
The creation of a new “Making Work Pay” tax credit of up to $500 per person or $1,000 per working family
No tax increases for any family making less than $250,000
Repealing a portion of the Bush tax cuts for families making more than $250,000
Returning the top two income tax brackets to their 1990s levels of 36 percent and 39.6 percent
Creating a new top capital gains rate of 20 percent for those in the top two income tax brackets.
Eliminating all capital gains taxes on startup and small businesses to encourage innovation and job creation
Cutting corporate taxes for firms that invest in jobs in the United States
Making the R&D tax credit permanent
Eliminating special tax breaks for oil and gas companies
Repealing tax loopholes that reward corporations that retain their earnings overseas
Source: www.BarackObama.com
ptascarella@bizjournals.com | (412) 208-3832
Friday, November 14, 2008 | Modified: Monday, November 17, 2008 - 6:00 AM
Money managers prepare for Obama's tax policies
Pittsburgh Business Times - by Patty Tascarella
President-elect Barack Obama vowed during the campaign that he would cut taxes for the middle class but raise them for the affluent.
With roughly six weeks left in the year to come up with strategies for clients’ 2008 tax filings, financial professionals are scrambling to guess what changes are likely to be enacted once Obama takes office in January.
They don’t doubt there will be changes. Obama outlined a comprehensive plan that raises capital gains and estate taxes, rewards corporate R&D and job creation efforts stateside, and repeals special breaks for oil and gas companies and those who create jobs overseas at the expense of employment in the United States.
But many believe the roller coaster spins and turns of the stock market over the past couple months will impact the new president’s agenda.
“The economy is the wild card,” said Douglas Kreps, managing director at Fort Pitt Capital Group, Green Tree. “It seems like the rhetoric coming out of the Obama transition team has softened on taxes. The economy is in a fragile state, and they don’t want to be seen as raising taxes and further damaging the economy.”
David B. Root Jr., CEO of Downtown-based D.B. Root & Co., isn’t sure “how much room (Obama) is going to have to increase marginal tax rates in the way he communicated during his campaign because we’re in a recession and have no idea” how long it will last.
“We’re encouraging our clients not to overreact,” Root said. “However, at the same time, we’re suggesting it makes sense to be aware that certain tax items or tax rates may and probably will go up, namely capital gains and possibly dividend rates.”
BEST GUESSES
Root believes it’s “more than likely” the new president will take “some steps” with capital gains, specifically raising the rates from the current 15 percent to 20 percent for those in the upper income brackets.
“In which case, from an investment standpoint, anything we can do to enable our clients’ portfolios to become more tax efficient going into next year will only help,” Root said. “That may mean possibly harvesting capital gains this year and offsetting those with losses that may have occurred over the past two or three months.”
He’ll make sure clients are “maxing out on retirement plans” and taking advantage of over-50 catchup contributions, which aren’t taxed until the investor cashes out.
“A lot of times, those get overlooked,” he said.
Smithfield Trust Co. CEO Robert Kopf is counseling clients to concentrate on their overall game plan.
“I have heard because of the problems in the economy that those tax increases in capital gains may be delayed or deferred, so we’re not getting too worked up,” Kopf said. “What we are doing is counseling customers to harvest losses they may have realized in this bear market and use those losses to offset earlier gains occurred in 2008. They can carry forward losses that would offset capital gain liability in 2009.”
Kreps pointed out that many investors’ gains “have evaporated” with the plummeting stock market.
“The tax planning needs to be revisited this quarter,” he said. “Investors need to come back to the fundamentals with the investments they own and worry a little less about taxes. If your portfolio makes sense long-term, let’s try not to make a short-term decision based on gambling with the tax system when we don’t know what will happen.”
Kreps said the capital gains tax increases likely won’t occur in the current year, but could be implemented in 2009 or 2010.
“Congress and the president-elect will have way more important issues to address with regard to the economy than trying to change the tax code right out of the gates,” Kreps said. “The guy’s boxed in.”
David Hunter, chairman of Hunter Associates Inc. and a former chairman of the National Association of Securities Dealers, is less concerned over the new administration’s potential tax changes than in nudging clients back into the stock market.
“We’ve been more conservative for over a year now than we normally would be, but we’ve got to buy stocks to restore the equity portion of (clients’) portfolios,” Hunter said. “The truth is, they don’t want us to at the moment, and we do this slowly, but stock prices are down a lot more than earnings will be down at many good companies. We’ve got to buy stocks when they’re at these levels if we’re going to be winners long-term.”
The Obama Plan
President-elect Barack Obama’s proposed tax changes include:
The creation of a new “Making Work Pay” tax credit of up to $500 per person or $1,000 per working family
No tax increases for any family making less than $250,000
Repealing a portion of the Bush tax cuts for families making more than $250,000
Returning the top two income tax brackets to their 1990s levels of 36 percent and 39.6 percent
Creating a new top capital gains rate of 20 percent for those in the top two income tax brackets.
Eliminating all capital gains taxes on startup and small businesses to encourage innovation and job creation
Cutting corporate taxes for firms that invest in jobs in the United States
Making the R&D tax credit permanent
Eliminating special tax breaks for oil and gas companies
Repealing tax loopholes that reward corporations that retain their earnings overseas
Source: www.BarackObama.com
ptascarella@bizjournals.com | (412) 208-3832
Tuesday, November 11, 2008
Worldwide corporate tax rate cut
http://www.webcpa.com/article.cfm?articleid=29805
Countries Worldwide are Cutting Corporate Tax Rates
Washington, D.C. (Nov. 11, 2008)
By WebCPA staff
Nations around the world are reducing corporate taxes, according to a report by PricewaterhouseCoopers.
The report found that 21 economies have cut their corporate income tax rates. Eight economies have reduced the number of taxes paid by businesses. Thirty-six economies have made it easier to pay taxes, with the Dominican Republic leading the way in this respect, followed by Malaysia. Twelve have improved their electronic filing and payments systems efficiency.
Among the 30 industrialized countries in the Organization for Economic Cooperation and Development, the U.S. has the second highest corporate tax rate. The U.S. has a combined federal, state and local corporate tax rate of approximately 39.3 percent, or 50 percent higher than the 26.2 percent average for the other 29 OECD member countries. However, this figure does not take into account the many deductions that corporations typically take. Other studies have found that many U.S. corporations pay no income taxes.
The PwC report noted that the high U.S. statutory corporate tax rate is partially offset by the 6 percent federal Domestic Production Activities Deduction, which reduces the effective federal corporate income tax rate on qualified income from 35 percent to 32.9 percent for qualified income.
The report also found that for small and midsized companies, the U.S. compares favorably with other countries in terms of ease of compliance. Widespread availability of electronic filing is an important factor in the favorable U.S. ranking in terms of the number of annual tax payments.
Countries Worldwide are Cutting Corporate Tax Rates
Washington, D.C. (Nov. 11, 2008)
By WebCPA staff
Nations around the world are reducing corporate taxes, according to a report by PricewaterhouseCoopers.
The report found that 21 economies have cut their corporate income tax rates. Eight economies have reduced the number of taxes paid by businesses. Thirty-six economies have made it easier to pay taxes, with the Dominican Republic leading the way in this respect, followed by Malaysia. Twelve have improved their electronic filing and payments systems efficiency.
Among the 30 industrialized countries in the Organization for Economic Cooperation and Development, the U.S. has the second highest corporate tax rate. The U.S. has a combined federal, state and local corporate tax rate of approximately 39.3 percent, or 50 percent higher than the 26.2 percent average for the other 29 OECD member countries. However, this figure does not take into account the many deductions that corporations typically take. Other studies have found that many U.S. corporations pay no income taxes.
The PwC report noted that the high U.S. statutory corporate tax rate is partially offset by the 6 percent federal Domestic Production Activities Deduction, which reduces the effective federal corporate income tax rate on qualified income from 35 percent to 32.9 percent for qualified income.
The report also found that for small and midsized companies, the U.S. compares favorably with other countries in terms of ease of compliance. Widespread availability of electronic filing is an important factor in the favorable U.S. ranking in terms of the number of annual tax payments.
Tuesday, November 4, 2008
CA 2008 Tax Tables
California has released its 2008 income tax table:
http://www.ftb.ca.gov/professionals/taxnews/2008/1108/1108_9att.pdf
The standard deduction will increase for single or married filing separate taxpayers from $3,516 to $3,692. For joint, surviving spouse, or head of household taxpayers, the standard deduction increases from $7,032 to $7,384. The personal exemption credit amount for single, separate, and head of household taxpayers will increase from $94 to $99 and for joint or surviving spouse from $188 to $198. The dependent exemption credit increases from $294 to $309 for each dependent. Renter's credit is available for single filers with adjusted gross income of $34,936 or less and joint filers with adjusted gross income of $69,872 or less.
In addition, the Franchise Tax Board (FTB) provides minimum filing requirement thresholds to ensure that most people who will not owe taxes are not required to file a tax return. FTB adjusts these tables each year to include the added senior exemption and the dependent exemption credits. The tax threshold, the amount of income reached where a tax liability is incurred, has risen to an adjusted gross income of $12,226 for single or married filing separate taxpayers, and to $24,452 for joint, surviving spouse, and unmarried head of household filers.
For 2009, SDI will be withheld at 1.1%, up to $90,669, for a total of $997.36. The maximum 2008 SDI withholding was $693.58.
http://www.ftb.ca.gov/professionals/taxnews/2008/1108/1108_9att.pdf
The standard deduction will increase for single or married filing separate taxpayers from $3,516 to $3,692. For joint, surviving spouse, or head of household taxpayers, the standard deduction increases from $7,032 to $7,384. The personal exemption credit amount for single, separate, and head of household taxpayers will increase from $94 to $99 and for joint or surviving spouse from $188 to $198. The dependent exemption credit increases from $294 to $309 for each dependent. Renter's credit is available for single filers with adjusted gross income of $34,936 or less and joint filers with adjusted gross income of $69,872 or less.
In addition, the Franchise Tax Board (FTB) provides minimum filing requirement thresholds to ensure that most people who will not owe taxes are not required to file a tax return. FTB adjusts these tables each year to include the added senior exemption and the dependent exemption credits. The tax threshold, the amount of income reached where a tax liability is incurred, has risen to an adjusted gross income of $12,226 for single or married filing separate taxpayers, and to $24,452 for joint, surviving spouse, and unmarried head of household filers.
For 2009, SDI will be withheld at 1.1%, up to $90,669, for a total of $997.36. The maximum 2008 SDI withholding was $693.58.
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