Worker, Retiree, and Employer Recovery Act of 2008 [HR 7327]

On December 23, 2008, President Bush signed into law, the Worker, Retiree, and Employer Recovery Act of 2008. The new law contains several provisions designed to ease requirements for pension plans and individuals stressed by the current economic crisis. Most notably, the new law contains a waiver of the minimum required distributions from IRAs, 401(k), and similar plans for retirees for 2009 only. In addition, there are several provisions that apply specifically to plan administrators and deal with funding rules. This summary will only address the issues that are most critical for your clients.

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Worker, Retiree, and Employer Recovery Act of 2008

American Recovery and Reinvestment Act of 2009 [H.R. 1]

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009, referring to the bill as “the most sweeping economic recovery package in the nation’s history.” The $789 billion price tag is divided fairly evenly among tax cuts, additional spending programs, and aid to the states, students, schools, the unemployed, and communities. This summary will focus primarily on the tax cuts portion of the Act and how it will affect taxpayers. There are alternative energy provisions that offer incentives for businesses that produce or use alternative energy that are not discussed in this summary. The changes to the energy incentives available to individual taxpayers are included.

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American Recovery and Reinvestment Act of 2009 [H.R. 1]

Emergency Economic Stabilization Act of 2008, Energy Improvement and Extension Act of 2008 and Tax Extenders and Alternative Minimum Tax Relief Act of 2008 [HR 1424]

On October 3, 2008, President Bush signed H.R. 1424 that contains multiple pieces of legislation aimed at improving the economy and providing relief to taxpayers. Included in the bill are the Emergency Economic Stabilization Act of 2008, Energy Improvement and Extension Act of 2008, and Tax Extenders and Alternative Minimum Tax Relief Act of 2008. The new law includes many important tax changes, including alternative minimum tax (AMT) relief, extensions of expired and expiring business and individual tax provisions, energy incentives, disaster relief, and revenue raisers. This summary will focus on the tax provisions contained in the Tax Extenders and Alternative Minimum Tax Relief Act of 2008.

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Tax Extenders and Alternative Minimum Tax Relief Act of 2008

Don’t Pay More Than You Owe

Miscellaneous itemized deductions are often the most difficult to remember at tax time. Plus, in most cases, only your miscellaneous deductions that exceed two percent of your adjusted gross income are deductible. Did you incur any of the following expenses in 2008?

• Depreciation on a self-owned computer or cell phone required to do your job.
• Dues to chambers of commerce, professional societies, and unions.
• Education that is employment-related.
• Home office or part of your home used regularly and exclusively in your work.
• Job-search expenses in your present occupation.
• Legal fees related to doing or keeping your job, and protecting or collecting taxable income.
• Licenses and regulatory fees, as well as occupational taxes.
• Malpractice insurance premiums.
• Medical examinations required by an employer.
• Passport for a business trip.
• Subscriptions to professional journals and trade magazines related to your work.
• Tools and supplies used in your work.
• Travel, transportation, entertainment, and gift expenses related to your work.
• Work clothes and uniforms and their upkeep costs.
• Tax preparation fees.
• Union dues.
• Safety equipment used for your work.
• Safe deposit box.

If you incurred any of these expenses, be sure to notify your tax professional so he or she can determine if they are deductible. Once you get past the two-percent limit, these deductions can really add up!

Understanding New Tax Changes Can Yield Big Benefits

If you haven’t used a tax professional in the past, this just might be the year to start. The first half of 2008 has seen a number of laws, rate changes, and deductions that can favorably impact your tax bottom line. That is, if you know about them.

New mileage rates effective July 1, 2008.

Most recently, the IRS announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard mileage rates to calculate the deductible costs of operating an automobile for business, charitable, medical, or moving purposes.

The rate will increase to 58.5 cents per business mile beginning July 1, 2008 through December 31, 2008. This is an increase from the 50.5 cents per mile that has been in effect for the first six months of 2008. The optional rate for medical or moving miles increases to 27 cents per mile. The rate for charity remains at 14 cents per mile.

Incentives for businesses to stimulate the economy in 2008.

The same Stimulus Act that delivered many taxpaying Americans some extra cash this spring also included a provision to encourage businesses to make economy-stimulating purchases in 2008 in an effort to help out the current slump. The Act increases the deduction under Section 179 to $250,000 for purchases of business assets that are placed in service in 2008. This deduction applies only if you elect the deduction. These incentives can provide a significant tax savings for taxpayers, but it is not automatic – you must elect to take it.

These incentives also include a special 50-percent depreciation allowance for 2008 purchases for tax years beginning in 2008. As defined by the IRS, depreciation is an income tax deduction that allows a taxpayer to recover the cost or other basis of certain property over several years. “This year is unique,” explained Hockenberry. “This 50-percent depreciation allowance only applies to new items purchased and placed in service in 2008. The benefit expires on December 31, 2008.”

Military members and their families receive tax relief.

The Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART) was signed into law, providing targeted tax relief for members of the military and their families. Some highlights of the Act include:

o A clarification that those in the active military who file a joint tax return are eligible for the stimulus rebate payment, even if one spouse does not have a social security number.

o A permanent exception that permits qualified mortgage bonds to be issued to finance mortgages for qualified veterans who served in the active military without regard to the first-time homebuyer requirement.

o The ability to include combat pay as earned income for purposes of the Earned Income Tax Credit.

o A new requirement that tax-qualified retirement plans must provide that if a participant dies while performing qualified military service, his or her survivors would be entitled to any additional benefits that would have been provided had the participant resumed employment and then terminated employment on the account of death.

The Heroes Act also includes many other provisions to consider for military members and their families.

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