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Hot Topics for 2008 & 2009
Below are some of the law changes
and issues that have arisen in 2008 and 2009 that will affect many of our clients.
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Effective with the July 2009 filing of the Combined
Excise Tax Returns monthly filers will no longer be allowed to file paper
returns. |
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For the month of July 2009 and all months following
Monthly state excise tax return must be filed and paid electronically.
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| Because of stock market declines new legislation has waived the 2009
Minimum Required Distribution for individuals who otherwise would be
required to take distributions from qualified plans or IRAs. |
| The exclusion of gain from the sale of a principal residence ($500,000
for married couples; $250,000 for singles), has been amended by 2008
legislation. The excludable gain will be reduced for any
"nonqualified" use of the house that occurs after 2008. |
| Once again, at the last minute, congress has extended the higher
exemption amount applied to the Alternative Minimum Tax computation for one
year. The exemption amount for 2008 is $69,950 (Married Filing
Jointly) and $46,200 (Single). However, in spite of the "fix" we
are finding that more clients are subject to the unpleasant surprise each
year. |
| Long term capital gains continue generally to be taxed at a maximum rate
of 15%. With a new administration taking office in January 2009,
however, it is impossible to predict whether or not that rate will apply to
all of 2009. |
| With increased write-downs of mortgage and credit card debt expected
certain individuals may find themselves in receipt of taxable income from
cancellation of debt. Legislation was enacted in 2007 to provide some
relief for this problem. However, in some circumstances, it will be
taxable. |
| Remember that, effective with 2006, the "Kiddie Tax" under which a
child's unearned (i.e. investment) income is taxed at the parents'
highest rate, applies to children under age 18. Starting with 2008
this tax will apply to children under 19 (24 if they are a full-time
student). |
| The home mortgage interest deduction is not unlimited. It is, in
fact, limited to interest paid on debt of up to $1 million in connection
with the acquisition of a maximum of two residences. In
addition a deduction can be taken for interest paid on up to $100,000 of
home equity loans in excess of the acquisition debt. There are
considerable complexities in this area that require analysis in individual
circumstances. |
| To be allowed a deduction for the business use of a personal auto an
auto log must be maintained. |
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The IRS has also begun to target S Corporations in
certain circumstances. When an S Corporation (1) shows a profit, (2) pays
no salary (/W-2 wages) to its owners, but (3) does pay
distributions to the owners, IRS has promised that it will seek social
security and medicare (with penalties) tax on “reasonable” compensation. It
is highly likely that a business owner’s definition of “reasonable” will
considerably differ from that of IRS! |
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Legislation
passed in 2006 impacts the deduction for charitable contributions.
The elements are reviewed here:
CASH – No deduction will be allowed for any contribution of
cash, check or other monetary gifts unless the donor can show a bank record
or a written communication from the charity. This eliminates any deduction
for cash dropped into the Salvation Army stations or put into the
collection plate at church.
NONCASH – No deduction will be allowed for clothing and
household items unless the items are in “good or better condition.” As
usual the burden is on the taxpayer to document the condition of the goods.
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| The deduction for state sales tax has been extended
through 2008. |
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