As of May 15th here are more changes to consider when anticipating your taxes for 2009.

Some good news, believe it or not. In the true spirit of loopholes, the Obama administration has inadvertently lowered taxes on taxpayers that fall close to the upper limit of the 28% tax bracket for 2011. The way this works is the upper limit of the 28% bracket will move from $210,000 now to about $250,000 in 2011. So, the $40,000 between those two amounts will be taxed at 28% in 2011 compared to 33% today. Quit reading here if all you want is good news. The rest isn’t going to be pretty.

The income to be taxed at the new higher rates will be that above $250,000, not some lower amount which had been discussed previously.

The tax rate on capital gains will increase from 15% now to 20% in 2011, maybe sooner.

The phaseout for itemized deductions which is set to expire after the 2009 tax year, will be reinstated for uppers income earners in 2011 and later years. Right now it looks like there will be no phaseout of itemized deductions for any taxpayers in 2010. It also looks like the itemized deductions will not be allowed to reduce taxable income below the 28% tax bracket although there is a lot of political opposition to that proposal.

From a compliance standpoint, the President is proposing the corporations be forced to issue 1099’s to everyone, not just individuals, to which they pay more than $600 a year.

Independent contractors would be subject to withholding if they don’t provide a valid tax id number to the person for which they are providing services.

Employee leasing firms would be liable for unpaid payroll taxes, removing the employer from the burden of making those payments.

Estate taxes will be kept at this year’s level of $3.5 million. But estate planning will get trickier for those of you using the family limited partnerships for that purpose. The proposed rules include restrictions on valuation discounts for family limited partnerships making them less attrative to reduce the overall value of an estate.

The social security wage base is expected to remain the same for 2010, the first time since 1971 that the base amount on which social security taxes are assessed did not increase. In addition, there has been some talk of the social security tax rates increasing. This will not happen in 2011.

There has been a lot of discussion of the new sales tax deduction for new car purchases made between Feb. 16, 2009 and Jan. 1, 2010. The issue is the cap on the value of the new car on which the sales tax can be deducted. That cap is $49,500. Now, the IRS is saying they will allow the cap to be deducted for each car. Not just a single cap per taxpayer. So, if you buy two new cars this year, you can take the deduction for the sales tax on the first $49,500 cost of each vehicle, even if you don’t itemize.

That summarizes the most recent changes to the tax laws. But I am sure there will be many more proposals and we will try to keep you updated as they happen. As we approach the last half of the year, it will become more important to consider these changes in your tax planning meetings with us.

As always, please call us with any questions.