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Online Tax Advisor |
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June 2006 |
Volume 1, Number 1 |
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In This Issue Link Category Title Contact Us |
Major Tax Deadlines For June 2006 June
15 - Second quarter
2006 individual estimated tax is due. NOTE: Businesses are required to make
federal tax deposits on dates determined by various factors that differ from
business to business. Payroll
tax deposits:
Employers generally must deposit Form 941 payroll taxes (income tax withheld
from employees' pay and both the employer's and employees' share of social
security taxes) on either a monthly or semiweekly deposit schedule. There are
exceptions if you owe $100,000 or more on any day during a deposit period, if
you owe $2,500 or less for the calendar quarter, or if your estimated annual
liability is $1,000 or less. Monthly
depositors are
required to deposit payroll taxes accumulated within a calendar month by the
fifteenth of the following month. Semiweekly
depositors generally
must deposit payroll taxes on Wednesdays or Fridays, depending on when wages
are paid. For more information on tax
deadlines that apply to your business, contact our office.
70 billion tax cut signed by Bush Congress finally passed a
bill that provides for $70 billion in tax relief for American taxpayers.
President Bush signed the Tax Increase Prevention and Reconciliation Act of
2005 on May 17, 2006. The centerpiece of the law
is the two-year extension of the lower tax rates for dividends and capital
gains, but the law contains a number of other provisions of significance to
individuals and businesses. Here’s an overview of what the law contains. * In a 2003 tax law, the
maximum tax rates for dividend income and long-term capital gains were cut to
15% through 2008. The rate for taxpayers in the two lowest brackets for
ordinary income was cut to 5% through 2007 and to 0% in 2008. The new law
extends the lower rates through December 31, 2010. * The alternative minimum
tax (AMT), a separate tax calculation intended to keep wealthy taxpayers from
using tax breaks to eliminate their tax liability, has caught millions of
middle-income taxpayers in recent years. To keep an additional 15 million
taxpayers from having to pay the AMT this year, the new law provides higher
exemption amounts. The AMT exemption for married couples filing jointly in
2006 is $62,550, and the exemption for singles is $42,500. * The new law also extends
through 2006 the benefit of certain personal tax credits in calculating the
alternative minimum tax. * The expensing election
that allows small businesses to write off equipment costs in the year of
purchase was scheduled to drop from the current $108,000 to $25,000 after
2007. The new law extends the higher expensing allowance through December 31,
2009. * Effective beginning in
2010, the new law ends the income limit for converting a traditional IRA to a
Roth IRA. Higher-income taxpayers will be permitted to convert to Roths. * Under previous law, the
unearned income of children under age 14 was taxed at the parents’ highest
rate if it exceeded a certain amount. The new law raises this “kiddie tax” threshold to age 18. * The law makes several
changes to the payment dates and required amounts for the tax estimates of
large corporations. * The law contains many
other tax provisions. Among them are changes in the tax treatment of
self-created musical works, the foreign earned income exclusion, and the
domestic manufacturing deduction. Contact our office if you
need details on this latest piece of tax legislation. What's New in Finances:
This year employers can
offer a Roth option within their 40l(k) plans. The
IRS recently issued a sample plan amendment providing language employers can
use to amend their existing 40l(k)s to allow
employees to designate their contributions as Roth contributions. Why offer the Roth option in
your company’s 401(k)? The big advantage to a Roth is that, though contributions
are not tax-deductible, qualifying distributions are completely tax-free.
Regular 40l(k) contributions are deductible, but
distributions are subject to tax as ordinary income. A Roth 40l(k) has an advantage over a Roth IRA, too: the
contribution limit is much higher - $15,000 for the Roth 40l(k) compared to
$4,000 for the Roth IRA ($20,000 and $5,000 for those aged 50 or older). If you would like to discuss
offering this retirement savings option to your employees, give us a call. Follow these tips to
grow a profitable company
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