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Read Current or Back Issues of our Monthly Newsletter, Client Line
CHANGE IN COBRA LAWS
Congress recently enacted a new law dealing with COBRA benefits. The new law allows an individual who is involuntarily separated from employment between September 1, 2008 and January 1, 2010, to elect to pay 35% of his/her COBRA coverage and have it be treated as paying the full amount.
The former employer will be required to pay the remaining 65% but, in effect, will be reimbursed by crediting those amounts against income tax withholding and payroll taxes it is otherwise required to remit to the federal government. Income and other limitations on COBRA coverage apply.
Hopefully there will be additional guidance issued by the government. Remember also that these rules apply only to companies subject to the COBRA provisions.
To find more information on the COBRA provisions, go to: http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML
What a bookkeeping nightmare this is going to be.
EMPLOYING ILLEGAL ALIENS IN MISSOURI
Business entities and employers are prohibited from knowingly employing, hiring, or continuing to employ illegal aliens to perform work in Missouri. Knowingly employing an illegal alien will result in the suspension of a company's applicable local licenses, permits, and exemptions for 14 days. A second violation will result in a suspension for one year. A third violation will result in permanent suspension.
A violation of the prohibition against employing illegal aliens by a business entity awarded a state contract or grant or state-administered tax credit, tax abatement, or loan from the state will result in the termination of the contract and the suspension of the business entity from doing business in Missouri for a period of three years. Subsequent violations will result in the termination of the contract and the permanent suspension of the business entity from doing business in Missouri
Consult legal counsel to determine if/how this law change effects your business. Make sure you comply with Federal Government regulations regarding documentation to be maintained regarding proof of United States citizenship for your workers. To view the legislation in its entirety, go to: HB1549
IDENTITY THEFT/CREDIT CARD FRAUD
No one wants to deal with identity theft, credit card fraud or repairing credit history because someone stole a pre-approved credit card application. OptOutPrescreen.com is a source for reducing pre-approved credit card offers. Make sure you check out the very informative frequently asked questions link. If you prefer not to use the web, you can call 1-888-567-8688.
CHANGES IN FEDERAL TAX LAW
Changes to Rules Regarding Conversions of Traditional to Roth IRAs
Beginning in 2010, taxpayers will be able to convert their traditional IRA to a Roth IRA, regardless of their income level or filing status. What's more, the tax on the taxable income generated from a 2010 conversion may be taxed in 2010 or, at the taxpayer's election, deferred until 2011 and 2012 at rates in effect for those two years. It is important to understand that an IRA conversion is treated as a taxable distribution, taxed as ordinary income at your marginal tax rate. This in effect accelerates the taxable income that you would eventually pay on distributions from a traditional IRA once you retire, but does so in exchange for never taxing (under today's laws) any future appreciation in the value of your account from what it is today. Unlike a withdrawal from an IRA, a conversion does not trigger any 10 percent early withdrawal penalty. For some taxpayers, their tax rate may rise after 2010 even if their income does not. President Obama has proposed, and Congress is expected to enact, legislation to restore the top two pre-2001 marginal income tax rates after 2010. This means that the top two brackets will be 39.6 percent and 36 percent after 2010. If you don't want to take the chance that tax rates on your conversion in 2011 and 2012 will be higher than in 2010, you may want to elect to pay the full tax on the conversion in 2010 at 2010 rates. If your traditional IRA contains any non-deductible contributions, the calculations can become tricky. Please contact us in this situation before making any conversions.
Credit for First-Time Home Buyers
Under The Housing Assistance Tax Act of 2008, first-time home buyers may be eligible for a tax credit of $7,500 or 10% of the home's purchase price, whichever is less. The credit is available for homes purchased between April 8, 2008 and before July 1, 2009. You don't necessarily have to be buying a principal residence for the first time to qualify. You are considered a first-time home buyer if you and your spouse have not owned a principal residence for the three year period prior to purchasing your home. Income limits apply. This credit has a catch. It must be PAID BACK over 15 years starting the second year after the purchase. Effectively, the credit is an interest free loan.
A Reduced Benefit for Some Home Sellers
If you sell a home after 2008 that was not your principal residence for the entire time you owned it, you may lose the full benefit of the $250,000 ($500,000 on a joint return) capital gain exclusion
Change in Federal Mileage Rates for 2010
The Internal Revenue Service has issued the 2010 optional standard mileage rates used to calculate deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning January 1, 2010 the standard mileage rates for the use of a car, van, pickup, or panel truck will be 50 cents per mile for business miles driven, 16.5 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.
Change in Required Minimum Distributions Rules for 2009
For2009, the required minimum distribution rules do not apply to any defined contribution (e.g. profit-sharing or pension) plan, qualified annuity plan, tax sheltered annuity plan, a qualifying plan of a governmental employer, or any traditional IRA or inherited Roth IRA. These new rules do NOT apply to any required distributions for 2008 that are taken in 2009. The new rules are complex so please contact us with any questions before you take any action.
Changes in the Kiddie Tax
Under old law, unearned income of certain children under age 14 was subject to tax at their parents' marginal rate. In 2006, the age increased to children under age 18. Starting in 2008, the provision expands the kiddie tax to apply to children who are:
a) 18 years old, or
b) Full time students over age 18 but under age 24
The expanded provision applies only to children whose earned income does not exceed one-half of their support. Children under age 18 who are self-supporting are still subject to the kiddie tax regardless of the source of their income.
IRS Circular 230 Disclosure:
To ensure compliance with requirements imposed by the IRS in Circular 230, we inform you that, unless we expressly state otherwise in this communication (including any attachments), any tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or other matter addressed herein.