Morre & Company, LLP
Certified Public Accountants
1450 Grant Avenue, Suite 102
Novato, CA 94945-3142
415-898-0600 Fax: 415-898-0229
Dear Clients and Friends:
Another year has passed and new rates and rules will apply in just a few days. To get you ready for the New Year we?ve provided you with new 2007 rates and amounts as well as some other business items to consider.
Information to develop a job description or set wages
The following information is available at www.labormarketinfo.edd.ca.gov;
? Get job descriptions, wages, skills and more so you can develop announcements of job openings. Use the Occupation Profile on the site
? Compare average local wages for occupations, based on surveys of employers in your area
? Get a local area profile for any county including the unemployment tax rate, industry employment data, consumer price index, building activity, etc.
Business vehicles & equipment
Section 179 expensing deduction:
Autos & trucks under 6,000 pounds gross vehicle weight = $2,960
SUVs over 6,000 pounds gross vehicle weight = $25,000
All other business assets = $112,000
? These limits are reduced for personal use of the business assets and the limit is zero if the personal use is over 50%
? The $112,000 is the overall limit and includes assets that qualified for the lower limits
? The overall limit of $112,000 is reduced if the total qualifying assets purchased during the year exceeds $400,000
? This deduction is allowed for alternative minimum tax as well as for regular tax
2007 mileage rates
Both the federal and California rates for travel starting January 1, 2007 are:
Purpose to the transportation Rate
Business 48.5 cents
Medical 20.0 cents
Moving (if it qualifies for a deduction) 20.0 cents
Charitable 14.0 cents
2007 payroll rates and limits
Rate Maximum tax
SDI 0.6% $500.33
FICA 6.2% $6,045.00
Pension plan limits for 2007
Under 50 years old Over 49 years old
IRA 4,000 5,000
SIMPLE IRA 10,500 13,000
401K (employee contribution) 15,500 20,500
The maximum employer contribution to a 401K, SEP, profit sharing or money purchase pension plan for 2007 is $45,000.
Payroll reporting for 2007
Beginning in January 2007, you should report contributions to your employees? health savings accounts and non-taxable business expense reimbursements paid to employees to your payroll service. Both of these items are required disclosures on Forms W-2.
Non-taxable business expense reimbursements are those that were paid to your employee for reimbursement of business expenses and were substantiated by proper documentation (receipts, hotel invoices, etc).
Construction contractor alert
Did you know that unlicensed subcontractors and unlicensed construction workers are the employees of the contractor for whom they work? They are not independent contractors and must be included in payroll and given Forms W-2.
Under California Unemployment Insurance Code subcontractors and construction workers without valid contractor?s licenses are statutory employees of the contractor who either holds a license or does not hold a license but is required to be licensed.
Consider new benefit plans for 2007
A high deductible medical plan with a Health Savings Account might be a better choice than the traditional medical insurance plan that you have. If you want to know more about Health Savings Accounts, ask us for a copy of our December 2003 client letter that described this strategy.
Is your pension plan the best one for your circumstances? Perhaps a 401K, SIMPLE IRA, or profit sharing plan might be better. Ask us if you are unsure about your options or have other tax, accounting or financial questions.