Novato, CA CPA / Morre & Company, LLP

Dear Clients and Friends:

2009 Selected rate changes

Each year the Internal Revenue Service makes inflationary adjustments to various tax rates and deductions. Following are the changes we are most often asked about:

Item	2008	2009	Change
Estate tax exclusion	$2,000,000	$3,500,000	$1,500,000
Annual Gift Tax Exclusion	$12,000	$13,000	$1,000
Standard Mileage Rate for Business	$0.585	$0.55	$-0.035
Charitable mileage rate	$0.14	$0.14	-
Social Security earnings limit age 62 to calendar year before turning 65 & 10 months	$13,560	$14,160	$600
Social Security earnings limit in calendar year you turn 65 & 10 months	$36,120	$37,680	$1,560
Nanny earnings limit with no W-2	$1,600	$1,700	$100
Kiddie tax applies to earnings over	$1,800	$1,900	$100
Kiddie tax applies to children and full time students under age	24	24	-
Maximum 401K	$15,500	$16,500	$1,000
Maximum 401K if 50 yrs or older	$20,500	$22,000	$1,500
Maximum IRA	$5,000	$5,000	-
Maximum IRA if 50 yrs or over	$6,000	$6,000	-
Maximum SEPIRA	$46,000	$49,000	$3,000
Expensing of business equipment except vehicles	$128,000	$250,000	$122,000
FICA Rate	7.65%	7.65%	-
FICA Wage limit	$102,000	$106,800	$4,800
SDI Rate	0.8%	1.1%	0.3%
SDI Wage limit	$86,698	$90,669	$3,971
Maximum HSA for single plan	$2,900	$3,000	$100
Maximum HSA for family plan	$5,800	$5,950	$150
HSA catch up (over 55 years old)	$900	$1,000	$100

If you have a question about a change not on our list, please call.

Over 70 ½ or have an inherited IRA?

Good news for those of you over 70 ½ years old and for heirs who are receiving mandatory IRA distributions on an inherited IRA. Due to the economic crunch, the government has eliminated the required minimum distribution for 2009. You can skip payouts from plans and IRAs for 2009 without penalty.

Medicare premiums

Upper income seniors will have to pay a considerably larger premium deduction from their Social Security check for Medicare Part B. That is because lawmakers phased in the premium hike for upper income taxpayer’s over three years. The phase is now fully in effect.

The following table shows the 2009 monthly premiums for a single person based on the 2007 tax return. For a married couple, double the income amounts.

Income over

Not over

Variable premium

Total monthly premium

Annual premium

85,000

96.40

1,156.80

85,000

107,000

38.50

134.90

1,618.80

107,000

160,000

96.30

192.70

2,312.40

160,000

213,000

154.10

250.50

3,006.00

213,000

No limit

211.90

308.30

3,699.60

Thoughts about operating a small business in tough times

Remember that recession and crime trend in the same direction. As employees become more financially stressed, you are at greater risk of being the victim of fraud or embezzlement.

Improving the internal controls in your business is a project that we can help you with. Following are a few ideas that we think your internal control plan should include:

1. Have the bank statements sent to your home and look at the canceled checks. Do they appear altered? Do you recognize the payee? Does the endorsement make sense?

2. Have someone other than the bookkeeper open the mail and list all cash receipts.

3. Deposit cash receipts in the bank every day.

4. Make all disbursements by check (other than petty cash).

5. Pre-number all checks and account for them.

6. Sign checks only if adequate documentation is presented.

7. Never have the bookkeeper sign checks.

8. Prohibit checks payable to cash.

9. Prepare monthly bank reconciliations.

Please call us if you have any questions about the issues and facts we raised or about any other tax, business or financial planning issue.

~Your partners in financial success~

~Visit our website at www.morrecpa.com~

January 2009