Summary of Tax Relief Plan

I'm sure that many of you are, like me, Turbo Tax users. If so, you likely have been advised of the information I'm including in this post.

The current TurboTax Newsletter had the following explanation of the government's tax relief program. I hope you'll find it helpful.

Most taxpayers will get more money in their pockets in 2009

The new recovery act, according to the White House, will give a direct tax break to 95 percent of workers and their families, through the Making Work Pay Credit.

The law contains many other tax breaks that should provide a financial boost to everyone from the unemployed and low income, to families with children and children in college, to first-time homebuyers and taxpayers buying new cars.

The $787 billion legislation, which Congress approved Feb. 13, is designed to get both individuals and businesses to open their wallets and to lift the economy out of its slump. Most of the cuts are good for only a year or two.

As more details about the tax changes become available, TurboTax will post them here.

Tax breaks for individuals, families:

Workers

Making Work Pay Credit: Workers and the self-employed would get a payroll tax credit for 2009 and 2010 of up to $400 a year for single taxpayers, and up to $800 for couples filing jointly.

The IRS will get the money to taxpayers by adjusting the withholding tables, thereby boosting paychecks. The increase could be as much as $40 per month per worker, depending on when the withholding tables are changed. Self-employed workers will claim the credit on their tax returns. In the meantime, they can reduce their estimated tax payments for 2009.
For single tax filers, the credit will begin phasing out at an Adjusted Gross Income (AGI) of $75,000. For couples filing jointly, the phaseout zone will start at $150,000 of AGI. (Adjusted Gross Income is your total income from wages and other income minus certain adjustments, such as deductible IRA contributions and alimony paid.)

Unemployed

Reduced taxes on unemployment income: Normally, people receiving unemployment benefits must report them as income and can be taxed on them. The new bill makes the first $2,400 of unemployment income nontaxable.

First-time homebuyers

First-time Homebuyer's Credit: The tax package increases the $7,500 first-time homebuyer credit to $8,000 for primary residences purchased between Jan. 1, 2009 and Nov. 30, 2009, and eliminates the requirement that the credit be repaid, as long as the house isn’t sold within three years.

College students

Expanded Hope Credit: The Hope Credit for college costs is increased to $2,500 for 2009 and 2010, covering 100 percent of the first $2,000 of tuition and related expenses per year and 25 percent of the next $2,000.

The credit is available for all four years of college, up from only two years, and covers the cost of books. It is 40 percent refundable, and begins to phase out at $80,000 of Adjusted Gross Income for singles and $160,000 of Adjusted Gross Income for married couples.

The bill also allows tax-free distributions from Section 529 College Savings Plans to cover computer purchases.

New car buyers

New car sales tax deduction: Buyers of new cars, light trucks, SUVs, motorcycles or motor homes during 2009, can deduct the state sales or excise tax they pay, even if they don’t itemize their deductions.

This break starts phasing out for single taxpayers with Adjusted Gross Income over $125,000 and couples with AGI over $250,000.

Tax Breaks for Families

Expanded Earned Income Tax Credit (EITC): More couples who file jointly and have children will qualify for the Earned Income Credit.

The tax package starts the phaseout range at $21,420, an increase of $1,880. Also in 2009, the credit increases for families with three or more children to 45 percent of the first $12,570 of earned income, up from 40 percent.

Enhanced Child Tax Credit: Plus, the Child Tax Credit will cover more low-income earners: For 2008, the credit is refundable to the extent of 15 percent of an individual’s earned income in excess of $8,500; for 2009 and 2010, that floor drops to $3,000.

Retirees, veterans and the disabled

One-time payment of $250: Because the payroll tax credit only goes to employees and the self-employed, the bill adds something for others as well: a one-time payment of $250 to recipients of Social Security benefits, Railroad Retirement benefits, Supplemental Security Income payments, and pension and disability benefits from the Veterans Administration.

Government retirees who don’t get Social Security will also get a one-time refundable tax credit of $250 in 2009.

Homeowners

Extended energy-saving credits: The 10 percent tax credit for energy-saving home improvements climbs to 30 percent and is extended through 2010. Improvements that qualify for the credit include energy-efficient skylights, windows and outer doors, along with energy-saving water heaters, central air conditioners and biomass stoves.

The bill also eliminates individual credit caps for the different types of property, and instead imposes a $1,500 cap on all qualifying property.

Middle-income taxpayers

One-year "patch" on the Alternative Minimum Tax: To keep millions of middle-income taxpayers from being forced to pay the Alternative Minimum Tax (AMT) for 2009, the measure increases the minimum tax exemptions to $70,950 for couples filing jointly and $46,700 for single filers. Otherwise, the exemptions would top out at just $45,000 for couples and $33,750
for singles.

Businesses will get a big share of the tax breaks

Small businesses would most likely be affected by the following changes:

Bonus depreciation

Special 50 percent, first-year bonus depreciation is revived for assets bought and placed in service during 2009.

Loss carrybacks

Businesses that averaged $15 million or less in gross receipts over the past three years will be allowed to carry back losses for five years instead of two. The easing applies only to 2008 losses.

A Password Horror Story

Our clients often get aggrevated or downright mad when we suggest using strong passwords because they're hard to remember and sometimes even harder to type.

We invaiably suggest that passwords have the following characteristics:

• At least seven (7) characters long
• At least one upper case character, more than one is better
• At least one number
• At least one special character
• A life of not more than 42 days (that's 6 weeks for those who are numerically challenged)
• Mandatory password change every 42 days
• Passwords cannot contain any part of the username
• Passwords cannot be reused for at least 13 months.

One of our clients insisted on keeping passwords SIMPLE. The administrative password was a subset of the company name and all users shared the same short password. They held firm and nothing we said could make them change their mind -- that is UNTIL

• There was a requirement to reboot their server
• The system immediately rejected the administrator username and pasword when entered
• No amount of guessing resulted in a username/password combo that worked
• The perpetrator also hijacked disk space and turned off all administrative reporting so that network administrators would have no idea what was happening
• They took a two day outage while the server was reloaded.

Was it worth what happened to keep things simple? I argue NO.

How To Reduce System Vulnerability

Never does a day go by without at least one client calling to report a security related problem. More often than not, it's a problem with a computer they have at home rather than one at work.

We universally ask the same question -- at the time of the problem (or system infestation), were you signed on as a user with administrator rights on the system. The answer is almost universally "YES".

The byline of an article I read earlier today says "Removing admin rights stymies 92% of Microsoft's bugs." Believe me, folks, 92% is a BIG NUMBER when you consider the number of bugs reported to Microsoft.

Having less than administrator rights makes operating a computer a little cumbersome -- it means that you may not be able to install software or add printers to your machine. There are also a few programs (e.g., some versions of QuickBooks) that expect you to be signed on as a user with administrator rights; but there are usually ways around that.

So what do I suggest. Have two (2) user accounts on your PC and ALWAYS use the user account unless you absolutely need to do something that requires administrator priviledges. That's not nearly as big a problem now as it used to be anyway; because in most instances you can "Run As Administrator" when installing software even if your user account has less than administrator priviledge so long as you know the right passcode.

Try this, you'll like it and find your system stability to improve.