Read the Latest News

  



June letter to clients

Dear Clients and Friends

Red Flag Rule Update
Last month, we discussed the Red Flag Rule. The Federal Trade Commission (FTC) wanted businesses and organizations to implement a written identity prevention program designed to detect the warning signs or “Red Flags” of identity theft in their day to day operations. This program was to be in place by June 1st, 2010.

On May 28th, the FTC announced it is delaying the enforcement of the “Red Flag” rule until December 31, 2010. This action was in response to a request from Congress while they consider legislation that would affect the scope of entities covered by the rule. We will keep you posted on any new developments regarding this legislation.

Expiring Rates, Deductions and Credits
Each piece of tax legislation seems to have various phase in and outs and the new rates, deduction and credits all have different expirations dates. This month we would like to recap some of the more important tax items that have expired as of 12-31-09 and those expiring on 12-31-10.

Individual Tax Rates
The following tax rates are set to expire on 12-31-10:

-          Reduced capital gain rates and dividends taxed at capital gain rates. After 2010, capital gains rates will revert to 20% and dividends will be taxed at ordinary income rates.
-          10% tax bracket for individuals. After 2010, the lowest tax bracket is scheduled to revert back to 15%
-          Reduced rates for the top four individual income tax brackets. After 2010, the current 25%, 28%, 33% and 35% rate brackets are scheduled to revert back to 28%, 31%, 36% and 39.6% respectively
-          Expanded 15% tax bracket for married filing joint taxpayers. After 2010, the taxable income at which the 15% tax bracket ends for MFJ is scheduled to revert from 200%to 167% of the amount applicable to single taxpayers
 
Individual Deductions
The following deductions have expired as of 12-31-09:
 
-          Above the line deduction for certain expenses of elementary and secondary school teachers
-          Additional standard deduction, up to $500 ($1,000 if MFJ) for state and local property taxes
-          Election to deduct state and local general sales tax instead of state income tax
-          Deduction for sales and excise tax on the purchase of a qualified motor vehicle
 
The following deductions will expire on 12-31-10:
 
-          Expanded standard deduction for MFJ. After 2010, the standard deduction for MFJ is schedule to revert from 200% to 167% of the standard deduction for single taxpayers
-          Repeal of the overall limitation on itemized deductions. There is no limitation in 2010. After 2010, itemized deductions will be reduced by 3% of the amount of the taxpayers income exceeding applicable income levels
-          Repeal of phase –out of personal exemptions. For 2010, the phase out is repealed. After 2010, the full phase-out is scheduled to apply
 
Education Tax Benefits
The above the line deduction for qualified tuition and related expenses has expired as of 12-31-09.

The following education tax benefits will expire on 12-31-10:
 
-          After 2010, the American Opportunity credit will expire but the Hope credit will be reinstated
-          Student loan interest deduction will be modified
-          Computer technology and equipment will no longer be treated as a qualified expense for Section 529 plans after 2010.
-          2010 Coverdell Education Savings Account contribution limit is $2,000, It will revert back to $500
 
Tax Credits
The following tax credits will expire on 12-31-10:
 
-          Qualified dependent care expenses for the dependent care credit are $3,000 ($6,000 for 2 or more children) for 2010. After 2010, the limits will be $2,400 and $4,800 respectively
-          The child tax credit of $1000 per child in 2010 will decrease to $500 after 2010
-          Personal energy property credit of $1,500 will expire after 12-31-10
 
As we all know, any of these expired or expiring provisions can be returned to law depending upon the action of Congress and our President. If you have any questions about how this may affect your individual tax situations, feel free to give any of our offices a call.

Sincerely,

SCHLENNER WENNER & CO.
Certified Public Accountants
   & Business Consultants

< return to all news

Client Portal Login: