In the news... A new tax break for 2009 - Suspension of the mandatory withdrawal rules pertaining to pensions and IRA's. Just before Christmas, President Bush signed a bill which waived the required minimum distribution payouts from pension plans and IRA's for the calendar year of 2009. As this new law has drawn many questions, here are answers to those questions: Do I have to make up the waived 2009 distribution the following year? No! You will not have to add any skipped payout to what you have to withdraw for 2010. Your 2010 payout will be based on your age then and your December 31, 2009 account balance. What if I turned 70 1/2 in 2008 and delayed a payout until 2009? You must still take your distribution by April 1, 2009. That is because the distribution you elected to defer is for the 2008 tax year. The good news is that you don't need to take another distribution in 2009. Will I qualify for relief if I inherited an IRA? Yes! Heirs of inherited IRA's do not need to take withdrawals from them in 2009. A similar rule applies to heirs who were subject to the mandatory 5 year pay-out period, such as when an estate is named as the beneficiary of a plan or IRA. In that case, the five year period is determined without regard to 2009. So now heirs of inherited IRA's have an extra year to withdraw all of the funds. Does the waiver apply to 401(k) and 403(b) plans also? Yes! The new law is not limited to just IRA's. And there may be an added bonus if you waive the 2009 payout from your pension plan. If avoiding a withdrawal from a 401(k) or 403(b) plan holds your income below the $100,000 cap on Roth conversions, you can convert your regular IRA to a Roth IRA in 2009. And if your IRA was hit by the market's decline, you'll owe less tax on the conversion. Is my 2009 withdrawal still waived if my IRA balance increased in 2008? Yes! Even though the reason Congress decided not to require withdrawls for this year was to avoid making people take funds from depleted accounts, the waiver wasn't tied to account performance. So if your IRA account was spared from the stock market's precipitous drop, you can still skip the 2009 withdrawal. Congress is considering another economic stimulus package which President Obama wants lawmakers to approve quickly in order to jump-start the economy. A new tax credit for up to $500 of payroll tax paid by workers Many details still need to be worked out, including denying the credit to upper-income earners and how to get it into the taxpayer's hands quickly. Rather than issue rebate checks again, the IRS may be required to adjust payroll withholding tables to add the money to worker's paychecks. Additional proposals may allow more low-income earners to claim the $1,000 child tax credit and receive an increase in the earned income credit. Business will also benefit The 50% bonus depreciation which lapsed at the end of 2008 would be reinstated for all of 2009 and possibly 2010. The same would be true for the $250,000 ceiling on expensing assets. And businesses with losses in 2008 and 2009 may be allowed to carry them back five years to offset taxes paid. Additional information President Obama won't push to increase income tax rates on upper-income earners in 2009. That will be delayed to 2010 or 2011 when the economy recovers. In light of the economic downturn, IRS agents have been given the authority to suspend collection activities when financial hardship exists. Collection staff can also allow taxpayers in hardship cases to skip an installment payment of back taxes or make only a partial payment without triggering the full payment of all tax due. The IRS will also expedite requests by financially strapped taxpayers to subordinate liens on their homes to their lender's liens in cases where those homeowners need to refinance the debt. The IRS can also release liens when a home is sold for less than the mortgage. (Information obtained from Kiplinger Tax Letter Vol. 84, No. 1) Click for previous articles including: What does the FDIC cover? 
| 1. Employee reimbursement plans EMPLOYEE REIMBURSEMENT PLANS CAN SAVE YOU MONEY AND PROVIDE A BENEFIT TO YOUR EMPLOYEES! Expense reimbursement for employees remains a great tax savings vehicle for both employers and employees. Here is how it works:
IRS and State regulation require that taxes be withheld from expense allowances. Remember employees cannot receive both a 1099 and a W-2 form from the same employer for the same time period. All employees and employers must pay payroll taxes on auto or expense allowances. The expense allowance amount would be included in wages and taxes withheld. However, if you set up a qualified reimbursement plan, none of the reimbursed expenses are reported on the employee’s or officer’s W-2 or 1099 form as income. The employee/officer will receive the total amount of the reimbursement for auto, travel or other expenses tax-free! In addition, the company will be able to deduct the amount of the reimbursement from taxable income. If you would like information on how employee reimbursement plans can save you taxes, please call our office at 951-681-2784.
2. Flex Plan or Section 125 Benefit Package BOTH THE EMPLOYEES AND THE EMPLOYER KEEP MORE MONEY! Increases Employees’ Benefits and Take Home Pay Employees who are participants in the Flexible Compensation Plan are reimbursed for eligible expenses with pre-taxed dollars. The tax savings provide increased benefits and the employee takes home a larger paycheck. It’s a great employee benefit.
CONTINUED »
Some Transactions Deserve Special Treatment
Passage of the Tax Reform Act of 1997 is cause to look closer at your tax returns
It’s a good idea to invest a little extra time if you have had the following transactions: Sales of stock and other property »
Gifted or inherited property »
Reinvested dividends »
Sale of home or property »
Car expenses »
Charitable donations »
Estimated tax payments »
Other general suggestions to consider for your appointment »
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