2008 Tax Law Changes

You’ve undoubtedly heard plenty of news about how the so-called “Wall Street bailout” law will help our troubled economy. One of the provisions of this new law provides a temporary “patch” for a looming problem that could cause you and millions of other taxpayers to owe thousands in extra taxes.

Did you know …..?

Alternative Minimum Tax (AMT), introduced by the Tax Reform Act of 1969, was initially intended to target 155 high-income households that had been eligible for so many tax benefits that they owed little or no income tax under the prevailing tax code of that time. AMT contains exemptions to prevent it from hitting middle-income taxpayers; however, those exemptions had not been indexed for inflation. So, left alone, the AMT could affect taxpayers well down the income scale. To prevent that from happening this year, a new law temporarily raises the AMT exemption amounts for 2008:

For tax-year 2008, Congress raised the alternative minimum tax exemption to the following levels:

• $69,950 for a married couple filing a joint return and qualifying widows and widowers, up from $66,250 in 2007
• $34,975 for a married person filing separately, up from $33,125 and
• $46,200 for singles and heads of household, up from $44,350

Under current law, these exemption amounts will drop significantly to $45,000, $22,500 and $33,750, respectively, in 2009 (Source: www.IRS.gov.)

Choosing a Business Recordkeeping System

An accounting system provides an organized method to track all of business activities generated by each transaction and provides the information required by taxing and regulatory authorities. The system used should accomplish the following:

1. Maintain a record of all business transactions.

2. Provide financial statements (Profit and loss statement, balance sheet, cash flow statement and key financial ratios) that show operating results and the company’s financial condition.

3. Protect the assets of the business from errors, fraud and carelessness.

4. Provide a basis for business planning by showing the results of past decisions and facts needed for future decisions.

5. Generate information that is periodically required by taxing and other regulatory authorities.

Developing a sound accounting system can mean more profits because it provides a tool to evaluate the performance of your business. If you would like more information on setting up an accounting system appropriate for your business contact Campanelli & Associates CPA LLC.