UPDATE by liuqingyan


									                              UPDATE                 an in-house publication of

                                     Kaufman, Osit, & Vasquez, P.C.
                                     C ERTIF IED            P UBLIC            A CCOU NTANTS

                                                                                                    December 2009 Volume 11, Issue 1

Will the new tax saving incentives put more money in
your pocket in 2009 or 2010?
The latest enhancements to The Ameri-             More generous HOPE Scholarship                    Buying a new car ? There’s a NEW
can Recovery and Reinvestment Act of              Tax Credit                                        deduction for Sales and Excise
2009 provide lucrative incentives for                                                               Taxes imposed on the purchase of a
many taxpayers. We’ve highlighted a                                                                 New (not used) Motor Vehicle after Feb-
few changes below in the hope that                The HOPE Scholarship Tax Credit is tem-           ruary 16, 2009 and before January 1,
                                                  porarily expanded for 2009 and 2010. This         2010.
you’ll be able to benefit from these tax
                                                  education tax break now allows the tax-
breaks.                                                                                             The amount of tax you are able to deduct
                                                  payer up to a $ 2,500 tax credit per stu-
                                                                                                    is limited to the tax that is imposed on the
                                                  dent per year for qualified higher educa-
                                                                                                    first $ 49,500 of the purchase price of the
Homebuyer Tax Credits                             tion expenses paid during the first four
                                                                                                    vehicle. Phase out rules apply when modi-
                                                  years of post-secondary education. You,
First-Time Homebuyer                                                                                fied adjusted gross income exceeds
                                                  your spouse, or dependent must be en-
                                                                                                    $ 125,000 ($ 250,000 married filing
A first-time homebuyer (buyer who has not         rolled at least half-time in an eligible educa-
owned a principal residence during the            tion institution. Qualifying expenses now
three-year period prior to                        include course materials, in addition to tui-     You can either increase the amount of
purchase) may be eligible                         tion and fees. Now up to 40% of the               your standard deduction or you can take it
for up to an $ 8,000 refund-                      amount of the tax credit may be refundable        as an itemized deduction (if you are NOT
able tax credit. The tax-                         to the taxpayer (maximum $ 1,000 per stu-         electing to take the state and local general
payer must buy or enter                           dent). The HOPE Scholarship Credit is             sales tax deduction).
into a binding contract to                        calculated on a per student basis. There-
buy a principal residence                         fore, if a family has multiple students that
with a purchase price of $ 800,000 or less,       meet the requirements, then multiple HOPE
                                                                                                     Tax Law Changes                       Page 1
on or before April 30, 2010 and close by          Scholarship credits can be claimed. Eligibil-
June 30, 2010. Vacation homes and rental          ity is completely phased out when your             Energy Credits                        Page 2
property purchases do not qualify. Income         adjusted gross income reaches $ 180,000.           FDIC Insurance Limits
limits apply.

                                                  Lifetime Learning Credit                           Social Security Earnings Limits       Page 3
Existing Homeowner                                                                                   Checklist

An existing homeowner who has been resid-         The Lifetime Learning Credit is still avail-
ing in their principal residence for five con-                                                       Estimated Tax Payment Info            Page 4
                                                  able with no changes. It is a tax credit for
secutive years out of the last eight and is                                                          Unemployment Benefit Extension
                                                  any person who takes college classes,
purchasing a replacement principal resi-          even if you take only one class. It provides
dence (“repeat buyer”), may also claim a          a tax credit of up to $ 2,000 on the first $       Roth Conversions for 2010             Page 5
homebuyer credit of up to $ 6,500. The eligi-     10,000 of college tuition and fees. You can
bility period for this credit is for homes pur-   claim the Lifetime Learning Credit on your         Employer Payroll Tax Update           Page 6
chased after November 6, 2009 and before          tax return if you, your spouse, or dependent
May 1, 2010 (provided closing occurs prior        are enrolled at an eligible education institu-     Standard Mileage Rates                Page 7
to July 1, 2010).                                 tion and you are responsible for paying            2009/2010 Retirement Contribution
These two tax credits do not have to be re-       college expenses. Eligibility is completely        Limits
paid unless the home owner sells at a gain        phased out when your adjusted gross in-
or stops using the home as their principal        come reaches $ 120,000.                            “Thank you”                           Page 8
residence within three years after the pur-
chase. Income limits apply.
 Energy Efficient Home Improvement Cred-
                        Bigger & Better

Qualifying products purchased in 2009 and 2010 are eligible for a tax           Extension of FDIC
credit equal to 30 percent of the product cost. The maximum amount of
homeowner credit for all improvements combined is $1,500 during 2009           DEPOSIT INSURANCE
and 2010. Be sure to obtain an itemized invoice from your retailer or in-
staller.                                                                        COVERAGE LIMITS
Residential Energy Property Credit
                                                                            Congress has extended the increase in FDIC de-
                                                                            posit insurance from $100,000 to $250,000 for
Tax credits are available at 30% of the cost, up to $1,500, in 2009 &
                                                                            each depositor, per insured bank, through De-
2010 (for existing homes only) for purchases including:
                                                                            cember 31, 2013. On January 1, 2014, the stan-
•   Windows and Doors                                                       dard insurance amount will return to $ 100,000 per
                                                                            depositor for all categories except for IRAs and
•   Insulation                                                              other certain retirement accounts which will re-
                                                                            main at $ 250,000.
•   Roofs (Metal and Specific Asphalt)
•   HVAC                                                                    The FDIC defines coverage for different account
                                                                            holders by some common "ownership" types as
•   Furnace / Boilers (Must meet certain efficiency ratings)                follows:
•   Water Heaters (non-solar)
                                                                            Single accounts—deposit accounts (e.g., check-
•   Biomass Stoves                                                          ing, savings) owned by one person. FDIC insur-
                                                                            ance covers up to $250,000 per owner for all sin-
                                                                            gle accounts at each bank.
The credit limits per improvement vary. Some additional examples of
qualifying improvements include: main air circulating fans, natural gas,
                                                                            Joint accounts—deposit accounts owned by two
propane, oil furnaces or hot water boilers, etc.
                                                                            or more people. FDIC insurance covers up to
                                                                            $250,000 per co-owner for all joint accounts at
                                                                            each bank.
Residential Energy Efficient Property Credit
                                                                            Certain retirement accounts—accounts such as
                                                                            IRAs and self-directed defined contribution plans.
Tax credits are available at 30% of the cost, with no upper limit           FDIC insurance covers up to $250,000 for all de-
through 2016 (for existing homes & new construction) for pur-               posits in such retirement accounts at each bank.
chases of energy efficient property, including:
•   Geothermal Heat Pumps
•   Solar Panels
•   Solar Hot Water Heaters
•   Small Wind Energy Systems
•   Fuel Cells (Must meet certain efficiency ratings)

     Page 2
               2010 Social Security Earnings Limitations
                                                No change—same as 2009
                               There will be no cost of living increase for SSA recipients in 2010

                 Age                        Earnings Limit                        Reduction Rate

    Age 62 to “full retirement age”           $ 14,160                    Benefits reduced $ 1 for every $ 2 over the limit
    “full retirement age” and above            Unlimited                  No reduction in benefits

    Note : One dollar will be withheld for every $ 3 in earnings above the limit of $ 37,680 in the year an individual reaches
    full retirement age. This rule only applies to earnings for the months prior to attaining full retirement age.

    Fu l l R et i r e ment Ag e v a r i es and is b as ed up on t h e y ea r you we r e b o rn . To d et e r min e yo u r
                                        “ fu l l r et i r e men t ag e ” v i si t w ww .s s a.g ov

    Think you give a
    lot to Uncle Sam
        today? Just be                                                                  Checklist
    thankful you weren’t
   paying income tax in
 1945, when the coun-
                                                            Here are 7 common pieces of information missing when per-
        try’ s top earners
     doled 94 percent of                                    sonal tax data is submitted to us:
    their salaries over to
         the government,
        mostly to recoup                                        Real Estate Taxes paid
      costs incurred from
                                                                Personal Property Taxes (Car Taxes) paid
    the war effort. Taxa-
 tion rates for the high-                                       Charitable Contributions with Receipts
    est income brackets
   hovered between 82                                           Childcare Expenses, Address and Federal ID# of provider
     and 92 percent until                                       1098’s Mortgage Interest Paid
   1963. Source : Yahoo Use-
                    ful Tax Facts                               HUD-1’s (if you purchased or sold a home)
                                                                Energy Efficient Home Improvements

                                                            Double check to include all necessary information when send-
                                                            ing or bringing in your paperwork.

Volume 11 , Issue 1                                                                            Page 3
 IMPORTANT 4                        th
                         Quarter Income Tax
 Estimated Payment Information for Individuals                                            Did you know that …..

 Effective for taxable year 2009, the highest marginal tax rate for
 Connecticut income tax purposes has increased to 6.5% for the                            •    Taxpayers with taxable Income greater than
 following individuals:                                                                        $ 410,000 are in the top 1% of all taxpayers in the
                                                                                                    The top 1% of taxpayers pay 40% of all income
 •      Individuals whose Connecticut filing status is “Single”                                     taxes.
        or “Separately” and whose Connecticut taxable in-
        come is more than $500,000.                                                       •    Taxpayers with taxable income greater than
 •      Individuals whose Connecticut filing status is “Head of                                $ 160,000 are in the top 5% . .
        Household” and whose Connecticut taxable income is                                          The top 5% of taxpayers pay 60%.
        more than $800,000.
 •      Individuals whose Connecticut filing status is “Jointly”                          •    Taxpayers with taxable income greater than
        or “Qualifying Widow(er)” and whose Connecticut tax-                                   $ 113,000 are in the top 10%.
        able income is more than $1 million.                                                        The top 10% of taxpayers pay 71%.

                                                                                          •    Taxpayers with taxable income greater than
                                                                                               $ 66,500 are in the top 25%.
 If you are within one of the above income brackets and you are
 required to make estimated income tax payments for the 2009                                        The top 25% of taxpayers pay 86%.
 taxable year, your January 15, 2010 estimated payment must
 take into account the 6.5% rate.                                                         •    Taxpayers with taxable income greater than
                                                                                               $ 32,800 are in the top 50%.
 Please contact your tax advisor for more information.
                                                                                                    The top 50% of taxpayers pay 97%.

                       Connecticut Unemployment Benefits
    (Only the 26 weeks of regular state unemployment can be for sure. All other weeks are “possible”)

26         Weeks Regular Unemployment
20         Weeks Tier 1 EUC08
14         Weeks Tier 2 EUC08
13         Weeks Tier 3 EUC08
                                                                                                                   Effective August 1, 2009
13         Weeks State Extended Benefits (EB)
                                                                                                              Massachusetts Sales Tax = 6.25%
7          Weeks State High Extended Benefits (HEB)

93         (CT) Weeks Total available to collect unemployment benefits

Under the new law, you can exclude from your taxable income up to $ 2,400 in unemployment
compensation you receive during 2009. Amounts in excess of that remain fully taxable.

      Page 4
                Roth IRA Conversions in 2010
                   “A Golden Opportunity”

If you have funds in an individual retirement account, converting them into a ROTH IRA in 2010 pre-
sents a golden opportunity to build tax-free retirement income.

With a traditional IRA, money can be placed into an account on a pre-tax (tax-deductible) and after-
tax basis. That investment is allowed to grow on a tax-deferred basis until withdrawn in retirement.

If an individual wants to convert a traditional IRA to a ROTH IRA they have to pay federal and state income taxes on any pre-tax
contributions as well as any growth in the investment value. The converted contributions grow tax free so you don’t have to pay
any tax upon withdrawal in retirement. In addition, Roth IRAs aren’t subject to the same minimum distribution requirements as
traditional IRAs, so you don’t have to begin withdrawals from your ROTH IRA at age 70 1/2.

Pre—2010 Rules
Up until 2010, individuals who had adjusted gross incomes of more than $ 100,000, were not eligible to make such a conversion.
Plus, if you earned more than $ 120,000 ($ 176,000 married joint filers), then you were not eligible to even contribute to a Roth
IRA. These two provisions precluded upper income taxpayers from enjoying the benefits of converting their traditional IRA to a
Roth or funding one. That is until now… 2010.

Taking advantage of the 2010 Rule
For 2010, and beyond, all taxpayers will be allowed to convert from a traditional IRA to a Roth IRA. The advantage of a 2010
conversion, is that the income taxes due on the 2010 conversion can be spread over the next two years, (if elected to
do so), whereas conversions in subsequent years are included in income during the tax year in which the conversion is
Removing the Roth IRA conversion cap, however, does not mean anyone can fund a Roth IRA, but it does mean that anyone can
convert an existing IRA to a Roth IRA.

Factors to consider
                           There a few important factors to consider before making a conversion.
                                               How much time before you retire?
                                              Will you need the money converted?
How much will you owe in taxes on the conversion? And do you have the funds to pay the taxes due on the conversion?

What to do?
We highly recommend that you consult with your KOV tax professional to determine if taking advantage of this new tax provision
is right for you.

Volume 11 , Issue 1                                                                         Page 5
  Employer 2010 Payroll Tax Update

    EMPLOYER TAX                    RATE                          2010                              MAXIMUM
                                                               WAGE CAP                              AMOUNT

  SOCIAL SECURITY               6.2 %
         Kaufman, Osit & Vasquez, P.C.                .PARTNERS$ 106,800                          $6,621.60
                                                                                        .CALCULATORS      .CONTACT US
         Certified Public Accountants
  MEDICARE                     1.45 %                         NO MAXIMUM                           NO MAXIMUM

  SELF-EMPLOYMENT                  15.3 %                      $ 106,800                15.3% OF INCOME UP TO $ 106,800
                                                                                               2.9% OF THE EXCESS
  FUTA                              0.8%                         $7,000                        $ 56 PER EMPLOYEE

  CT SUTA               VARIES BETWEEN 1.9% - 6.8%              $ 15,000               AMOUNT CALCULATED PER EMPLOYER
                         (3.0% FOR NEW   EMPLOYERS)                                 BASED UPON ASSIGNED RATE AND NUMBER OF


                     Connecticut’s Minimum Wage increases to $ 8.25 per hour on January 1, 2010

  Section 179 and Bonus Depreciation

  Bonus Depreciation : Bonus Depreciation allows investments in tangible business property, computer software, or
  qualified improvements to leased property to be depreciated much faster in 2009. The first 50% of the asset’s cost may
  be written off prior to calculating the normal depreciation deduction. Used assets do not qualify for this break. Most other
  assets are eligible… those depreciable over 20 years or less.
  Bonus Depreciation was extended to include assets acquired in 2009 BUT it will no longer be available after December
  31, 2009 unless extended by law.

  Section 179 Depreciation allows businesses to expense the cost of any 2009 tangible business purchases (not
  including buildings, but including computer software), of up to $250,000 instead of depreciating them. Firms purchas-
  ing more than $ 800,000 in qualifying assets will not be eligible for this deduction, but can still use the 50% bonus de-
  preciation (at least in 2009). After December 31, 2009, the maximum amount of Section 179 Depreciation a business
  can take in any given year will be $ 134,000 unless extended by law.

  All businesses are eligible. (excludes Estates & Trusts)

Page 6
                                        Standard Mileage Rates

                     Purpose                                    Rate

                     Business Miles
                     2010……………………………………                         Not available at time of publication
                     2009……………………………………                         55 cents per mile
                     Medical & Moving Miles
                     2010 ………..…………………………                       Not available at time of publication
                     2009 …………………………………..                       24 cents per mile
                     Charity Miles
                     2010 ………..…………………………                        Not available at time of publication
                     2009 …………………………………..                        14 cents per mile

                     2009 / 2010 Retirement Plan Contribution Limits

       Account Type                              Limit Definition                         2010 Limit    2009 Limit

               IRA                     Traditional and Roth IRA Contribution Limit            $5,000      $5,000
                                                Catch-up Limit age 50+                        $1,000      $1,000

           SIMPLE IRA                            Elective Deferral Limit                     $11,500      $11,500
                                                Catch-up Limit Age 50+                        $2,500      $2,500

             SEP IRA                          Maximum SEP Contribution                       $49,000      $49,000
                                              SEP Compensation Exclusion

  401(k), SARSEP,403(b),457(b)                   Elective Deferral Limit                     $16,500      $16,500
                                                Catch-up Limit age 50+                        $5,500      $5,500
                                          Highly Compensated Employee Limit                  $110,000    $110,000

  Profit Sharing, 401(k), SEP and              Defined Contribution Limit                    $49,000      $49,000
    Money Purchase Pension               Employee Annual Compensation Limit                  $245,000    $245,000
                                      Top Heavy Plan Key Employee Compensation               $160,000    $160,000

In 2009, taxpayers 70 1/2 and older were given an exemption to the mandatory withdrawals from IRAs and plans. This
exemption will not be extended beyond 2009. In 2010, the mandatory withdrawal rules return.

Volume 11 , Issue 1                                                                        Page 7
                                          “Thank you”

                     Kaufman, Osit & Vasquez, would like to thank you for the
                     opportunity to have you as our trusted and most valuable
                     client. It continues to be our privilege to provide you with
                     professional expertise regarding your tax, financial and ac-
                     counting needs. We look forward to working with you in the
                     years ahead.

                                   Luigi G. Vasquez, CPA
                                   Steven M. Levin, CPA
                                   Raymond P. Bengtson, CPA
                                   Judith E. Pollack, CPA
                                   Christine M. Smith, CPA

Wishing you, your family and your business a very happy, healthy and successful 2010…..

                                                        Daylight Savings                       860-678-5170 fax

                                                             March 8, 2009                  860-678-5160 phone

                                                                                          Farmington, CT 06032
                                                                                    20 Waterside Drive Suite 101

                                                                           Certified Public Accountants
                                                                          Kaufman, Osit & Vasquez, P.C.

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