Professional Tax Preparation, Bookkeeping, Financial Planning and Startup Assistance

IRA Contributions
The maximum contribution amount remains $4,000 for tax-years 2006 and 2007. The catch-up contribution increases to $1,000 (from $500) for tax-year 2006 and later years. Therefore, taxpayers age 50 and older can contribute up to $6,000 (from $5,000). The maximum contribution amount is $5,000 for tax years after December 31, 2007 (indexed for inflation after tax-year 2008).
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Elective Deferrals
The maximum deferral to 401(k) plans, 403(b) annuities, 457 deferrals, and salary reduction SEPs increases to $15,500 (from $15,000). The maximum contribution to a SIMPLE plan remains $10,000.
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Marraige Penalty Relief
As extended by the Working Families Tax Relief Act of 2004, the basic standard deduction for "Married Filing Jointly" remains 200% of the basic standard deduction for the "Single" filing status for tax years 2006 through 2010.
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IRA Deduction Phaseout
If a taxpayer is covered by a retirement plan at work, their IRA deductions may be limited if the AGI on Form 1040 is:

$85,000-$105,000 - married filing jointly or qualifying widow(er) (from $85,000-$105,000)
$53,000-$63,000 - single or head of household
$0-$10,000 - married filing separately (remains the same)

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Investment Income
If the taxpayer's investment income is over $2,950 (from $2,800), the taxpayer is not eligible for the Earned Income Credit.
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Education Credit
The maximum Hope Credit increases to $1,800 (from $1,650) per eligible student. The maximum Lifetime Learning Credit remains $2,000 per tax return. The phaseout range for Hope and Lifetime Learning Credits is $96,000 - $116,000 if married filing joinly and $48,000 - $58,000 for all other filing statuses.
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Qualified Adoption Expenses
The credit increases to $10,960 (from $10,630) for qualifying adoption expenses. A credit of $11,650 is allowed for a special needs child regardless of the amount of qualifying expenses. The credit for a special needs child is allowed for the year in which the adoption becomes final. No credit for a special needs child is allowed until the adoption becomes final. The phaseout range increases to $174,730 to $214,730 (from $164,410 to $204,410) of modified adjusted gross income.
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Social Security & SE base
$102,000 in 2008.
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Child Tax Credit
2006 Tax Year Child Tax Credit amount will remain at $1000.00 per child under age 17 (www.irs.gov). Refundable to extent 10% of taxpayer’s earned income in excess of $11,000 up to the per child credit amount, if total tax liability, minus nonrefundable credits taken.
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Amounts Subject to Social Security and Medicare Tax
The total wage limit for amounts subject to Social Security tax and railroad retirement tax (RRTA) tier 1 increases to $102,000 (from $97,500). There is no wage limit for Medicare tax. The maximum FICA tax increases to $5,840.40 (from $5,580.00).
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Income Tax Rates
The income tax rates remain 10%, 15%, 25%, 28%, 33%, and 35%.
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Expired Tax Benefits
As of December 31, 2008, the following tax benefits have been reinstated and DO apply to tax-year 2008:

The adjustment to income for educator expenses
The tuition and fees deduction
The itemized deduction for state and local general sales taxes
The District of Columbia first-time homebuyer credit (for homes purchased after December 31, 2005)

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Earned Income Credit
IRS will disallow EIC if Federal Case Registry of child Support Orders shows that taxpayer is the non-custodial parent of a child claimed as a qualifying child for EIC.
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Earned Income Credit Amounts Increase

The following paragraphs explain the changes to the credit for 2008.

Amount of credit increased. The maximum amount of the credit has increased. The most you can get is:

$2,917 if you have one qualifying child,
$4,824 if you have more than one qualifying child, or
$438 if you do not have a qualifying child.

Earned income amount increased. The maximum amount of income you can earn and still get the credit has increased for 2008. You may be able to take the credit if:

You have more than one qualifying child and you earn less than $38,646 ($41,646 if married filing jointly),
You have one qualifying child and you earn less than $33,995 ($36,995 if married filing jointly), or
You do not have a qualifying child and you earn less than $12,880 ($15,880 if married filing jointly).

The maximum amount of adjusted gross income (AGI) you can have and still get the credit also has increased. You may be able to take the credit if your AGI is less than the amount in the above list that applies to you.

Investment income amount increased. The maximum amount of investment income you can have and still get the credit has increased to $2,950 for 2008. You must have earned income.

Advance payment of the credit. If you get advance payments of the credit from your employer with your pay, the total advance payments you get during 2008 can be as much as $1,712.

Nontaxable combat pay election extended. You can elect to have your nontaxable combat pay included in earned income when you figure your earned income credit for 2007. This election was previously due to expire at the end of 2006 but has been extended through 2007. For more information about the election, see Publication 596.

No of Children	Max Credit	Maximum Income	MFJ
1	$2,917	$33,995	$36,995
2	$4,824	$38,646	$41,646
0	$438	$12,880	$15,880

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E-file ruling for corporations
1120 & 1120S returns will be eligible for e-filing for the 2008 tax year.
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Child & Dependent Care (Daycare)
*Amount is 35% of total income
*Max AGE is $15,000, up from $10,000
*Max Expense is $3,000 for one individual, and $6000 for more than one
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New Standard Deduction

Filing Status	2006	2007	2008
Single	$5,150	$5,350	$5,450
Head of Household	$7,550	$7,850	$8,000
Married Filing Joint	$10,300	$10,700	$10,900
Widow w/ Dependent	$10,300	$10,700	$10,900
Married Filing Separate	$5,150	$5,350	$5,450

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Capital Gains and Dividends
Unlike ordinary income, long-term capital gains and qualified dividends are taxed at no more than 15% through 2010.
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New exemption amount

2006	2007	2008
$3,200	$3,400	$3,500

The above amounts apply to each individual on tax return
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Deductible Mileage

Year	Business	Mail Carrier	Charity andVolunteer	Medical and Moving
2006	0.375	0.4725	0.14	0.124
2007	0.485	0.4725	0.14	0.20
2008 (1/1-6/30)	0.505	0.4725	0.14	0.19
2008 (7/1 - 12/31)	0.585	0.4725	0.14	0.27

* - Charity/Volunteer = .32 for Katrina Related
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Health Insurance Deduction for Self-employed
For 2008, 100% of amount paid for medical insurance for taxpayer and family.
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CombatPay
The Free Combat Pay is allowed to be included in income when calculating their refundable child redit and may also be used in calculating earned income for figuring earned income credit.
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ABOUT L&B TAX SERVICE, INC.

We are an IRS, Electronic File-Certified Provider, a Certified Drake Software Practitioner and a member of the National Assocation of Tax Professionals (NATP). Our staff of 25 professionals plus 15 marketing representatives offers a wide range of services from tax preparation with SuperFast Refunds (24 - 48 hours) to bookkeeping, financial planning and business startup assistance.

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ATTENTION!!! IMPORTANT
L&B TAX SERVICE, INC. UPDATES

THIS IS AMAZING, BIGGER REFUNDS FOR THIS UPCOMING TAX SEASON!!! NEW 2009 TAX CHANGES

Earned Income Credit (EIC) Increased: FIRST TIME IN HISTORY!!!
You can now get credit for 3 kids with Earned Income Credit

$3043 one child
$5028 two children
$5657 three children
$457 no child

Earned Income Amount Increase (EIC):
$35,463 ($40,463 MFJ) one child
$38,646 ($41,646 MFJ) two children
$43,279 ($48,279 MFJ) three children
$13,440 ($18,440 MFJ) no child

Hope Learning Credit:
For year 2009 & 2010 the Hope Credit will change

VERY BIG: Hope Credit now 1st 4 years, also 40% of the Hope Credit is now a refundable credit. Max Credit $2500.00 but phased out at $80,000 – 90,000 ($160,000 -$180,000 MFJ)

FIRST-TIME HOME BUYER CREDIT:
$7500 (2008), Up to $8000 if you purchased your home in 2009 but only half of the amount if Married Filing Status

UNEMPLOYMENT COMPENSATION:
Each person that received unemployment compensation can be excluded from gross income up to $2400

STANDARD DEDUCTION INCREASED:

Single – $5,600
MFJ – $11,100
MFS – $5,600
HOH – $8,150
QW/WD – $11,100

NOTE: The IRS may change the below figures before the new tax season.

NEW DEDUCTION FOR SALES & EXCISE TAXES IMPOSED ON PURCHASES OF NEW MOTOR VEHICLES:

You can deduct the state or local sales and excise taxes paid on a purchased vehicle after February 16, 2009 and before 2010. A qualified motor vehicle includes a passenger auto, light truck, motorcycle or motor home that’s less that 8,500 pounds or less. You can claim up to the first $49,500 of the purchase price. The deduction is phased out over a $10,000 range that begins when AGI is more than $125,000 ($250,000 if married filing joint) No deduction if AGI is more or equal to $135,000 ($260,000 MFJ)

PERSONAL EXEMPTION AMOUNT INCREASED:
Amount increased to $3,650

REDUCTION IN EARNED INCOME NEEDED TO CLAIM ADDITIONAL CHILD TAX CREDIT:
Amount reduced to $3,000

INCOME LIMITS INCREASED FOR STUDENT LOAN INTEREST DEDUCTION:
MFJ AGI is between $120,000 - $150,000 (Phased out) all other filing statuses AGI is between $60,000 - $75,000 (Phased out)

EXPANDED DEFINITION OF QUALIFIED EXPENSES FOR QUALIFIED TUITION PROGRAMS:
Educational expenses now include purchase of computer software, any computer or related peripheral equipment, fiber optic cable for computer use & internet

STANDARD MILEAGE RATE:
Business use: 55 cents per mile
Medical & Moving Related Mileage: 24 cents per mile
Charitable Related Mileage: 14 cents per mile

INCOME LIMITS FOR ITEMIZED DEDUCTIONS:
Phased out at $166,800 ($83,400 MFS)

ADOPTION BENEFITS INCREASED:
Max amount $12,150 and phased out at $182,180 – $222,180
INCOME LIMITS FOR LIFETIME LEARNING CREDIT INCREASED:
If the AGI is between $50,000 & $60,000 ($100,000 – 120,000 MFJ)

RESIDENTIAL ENERGY CREDITS:
Reinstated at 30% for energy – efficient heat pumps, a/c’s, water heaters, windows, doors, insulation, and certain roofs. The max is $1,500 (2009 & 2010)

INVESTMENT INCOME AMOUNT INCREASED:
This amount has increased to $3,100

SOCIAL SECURITY & MEDICARE TAXES:
Max wages subject to Social Security Tax is $106,800
No limit on the amount of wages subject to Medicare

DEDUCTION FOR CREDIT OR DEBIT CARD CONVENIENCE FEES:
If you pay your income tax by credit or debit, you can deduct the convenience fee as a miscellaneous itemized deduction on line 23 of Sch A

State of GA Eligible Single Family Residence Tax Credit:
A Taxpayer is allowed the tax credit for a purchase of one eligible single-family residence made between June 1, 2009 and November 30, 2009. The credit amount is the lesser of 1.2 percent of the purchase price of the eligible single-family residence or $1,800.00. The amount of the tax credit that may be claimed and allowed in a single taxable year cannot exceed the lesser of 1/3 of the or the taxpayer's income tax liability. This means a maximum of $600 may be claimed each year. Any unused tax credit can be carried forward bu cannot back carried back.

--- End of Updates ---

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