Hold onto your wallets, and tighten up your money management controls!

Here is a brief summary of tax law changes for 2010.

By Patti S. Spencer of Spencer Law Firm

The New Year brings many tax changes. Many tax breaks are phased out. The changes below are the current state of the law. It is always possible for Congress to act to extend or replace disappearing provisions.

The House passed a bill that extended many of these provisions, but the Senate was unable to schedule a vote on it. The Senate has been tied in knots over the health care bill.

Roth IRA conversions

Starting in 2010 the income cap for converting a traditional IRA to a Roth IRA is eliminated. Now anyone can do a Roth conversion. If the conversion is done in 2010, taxpayers can spread the income tax attributable to it over two years: 2011 and 2012. Note that while the income cap is removed for purposes of qualifying for the conversion of a traditional IRA to a Roth IRA, there remains an income cap on regular contributions to a Roth IRA. The income phase-out begins at $167,000 for joint filers.

New vehicle sales tax

Individuals will no longer be able to take an itemized deduction or increase the standard deduction for the sales tax on the purchase of a new motor vehicle. Vehicles had to be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.

Sales tax

The choice to deduct state sales tax payments instead of deducting state and local income taxes is gone. This provision was very important for taxpayers in such states as Florida, where there is no income tax.  THIS IS REALLY UNFAIR TO LOW TAX STATES.

End to phaseouts

In 2010 there will be no phaseout of itemized deductions and personal exemptions for higher-income taxpayers. This will greatly benefit high earners.

Teachers’ deduction

The $250 deduction for teachers who buy classroom supplies with their own money is eliminated.

Tuition and fees

The $4,000 deduction for college tuition and fees expires after 2009. This deduction was permitted “above the line,” meaning it could be taken even if the taxpayers didn’t itemize.

Contribution from IRAs

IRA owners older than 70½ who make contributions from their IRAs directly to charity will no longer be able to exclude these withdrawals from income.

Property tax deduction

Non-itemizers will no longer be able to deduct up to $1000 in property taxes paid. This provision had been a help to homeowners who had no mortgage so that there was no interest deduction to help make itemization worthwhile.

AMT exemptions

The Alterative Minimum Tax exemption levels fall back to $45,000 for married filing jointly and $33,750 for singles and heads of household. (In 2009 the exemption was $70,950 for married filing jointly and 46,700 for singles and heads of household.) Some commentators say that as many as 1 in 5 taxpayers will be subject to the AMT in 2010.

Unemployment benefits

The first $2,400 of unemployment benefits will no longer be tax-free.

Energy credit reduced

The 30 percent tax credit for the cost of energy-saving home improvements is reduced to 19 percent and is capped at $500.

Section 179 expensing

The maximum amount of equipment that can be expensed (instead of depreciated) is reduced to $135,000 from $250,000. Businesses can no longer claim 50 precent bonus depreciation on assets placed in service in 2010.

Tax on dividends

For taxpayers in brackets higher than 15 percent, qualified dividends are taxed at a maximum rate of 15 percent through Dec. 31, 2010. For taxpayers in the 10 percent and 15 percent brackets, qualified dividends are taxed at 0 percent through Dec. 31, 2010. The provisions sunset at the end of the year, and dividend taxation reverts to former 2002 rates.

Mileage reimbursement

The mileage rates in 2010 are 50 cents for business, 16½ cents for medical and 14 cents for charitable purposes.

Home buyers credit

If you used the home buyers credit in 2008, you must start paying it back in 2010. The qualification period for first-time home buyers to purchase a home and qualify for the credit continues through May 1.

Retirement accounts

Remember you have until April 15 to contribute to a traditional or a Roth IRA. If you have Keogh or SEP and you get a filing extension for your 2009 return until Oct. 5, you have until that date to make contributions.

No estate tax

The federal estate tax is repealed for individuals who die in 2010.

Wild cards

If the Senate and House eventually hammer out a health care bill that becomes law, there are various provisions in the current legislation on how to pay for it. The House bill includes a 5.4 percent surtax on high earners and would curtail flexible spending accounts. The Senate bill includes a 40 percent surtax on high-end employer-sponsored health plans that provide health coverage valued at more than $8,500 for individuals and $23,000 for families (they call them “Cadillac plans”) and increases the Medicare payroll tax. Hold on to your wallet.

Article Source: http://articles.lancasteronline.com/local/4/247022

Write your congressional representatives and urge them to support the FairTax Act http://www.FairTax.org and leave a comment here that you took action!

Here is a way to get rid of the IRS and never have to file another income tax return; or corporate return for that matter! Every dime you earn would be in your paycheck; no taxes withheld. It’s within your power to make it happen!

There is a tax bill before Congress right now that would abolish the IRS and get rid of income taxes, corporate taxes, death taxes, estate taxes, etc. It is called the FairTax Act and I am here to tell you it is not only fair, it would solve our country’s economic problems overnight. Here’s a snapshot of how it works.

First I do want to say that The FairTax is resisted by a vocal minority precisely because it will do what it claims in eliminating the IRS, the more than $300 billion in tax return filing costs, and the corruption of the current system. Make no mistake, that adjustment will be hard for tax lawyers, special interest groups, lobbyists who make millions from our current tax system and those in Congress who see the current tax code as a way to get your campaign contributions to buy your votes.

What is the FairTax?

The FairTax is a retail consumption tax that is charged when you buy something new. It is a transparent tax. That means that the tax will be on your receipt in plain English so you can see it.

Right now you are paying those taxes when you buy something, but they are hidden in the cost of the item by all of the goods and services that go into making that item from raw materials to packaged product. Those are called embedded taxes because they are hidden from your view. Under the FairTax Act, you would be paying the same price for a loaf of bread but the loaf would have a lower shelf price and the tax would be added at the cash register and printed on your receipt.

Is the FairTax actually fair?

Yes, the FairTax is fair. In fact, it is really much fairer than the current income tax. You can control how much tax you pay simply by deciding what items you are going to buy.

Wealthy people spend more money on more expensive items than other individuals. The FairTax taxes them on these purchases. Tourists and illegal aliens, who pay no taxes now, would be paying their fair share every time they buy something. Someone who deals in cash and never reports it on an income tax return would now pay taxes on their income when they spend it at the cash register.

And yes, the government would still get as much tax revenue as they do now, but it would cost us a lot less to run the government. In addition your Congressional Representatives who spend millions of your tax dollars to buy the votes of special interest groups by voting for insane programs, like studying the mating habits of wooly wingas, would stop. (A wooly winga is a made up name for an animal in case you were wondering.)

The FairTax would have a positive effect on the U.S. economy.

With the penalty for working harder and producing more removed, American businesses will experience a new era of economic growth and business expansion. Hidden taxes are history, Americans are able to save more, and businesses invest more. The FairTax, as proposed, would bring U.S. companies back home as it would no longer be an advantage to have U.S. companies in foreign countries hiring workers for low wages that Americans should be doing here at home for a fair wage. In addition, other international investors will want to invest here to avoid taxes on income in their own countries, which would further spur the growth of our own economy.

The FairTax would have a positive effect on wages and prices.

Americans who produce goods and earn wages are currently required to pay significant tax and compliance costs under the current federal income tax. These taxes and costs both reduce after-tax wages and profits and are then passed on to the consumers of those goods and services in the form of price increases.

When the FairTax removes income, capital gains, payroll, and estate and gift taxes, the pre-FairTax prices of these goods and services will fall. The removal of these hidden taxes may also allow wages to rise. Exactly how much prices will fall and wages will rise depends on market forces. For example, in a profession with many jobs and too few to fill them, wages will likely increase more than in fields where there are too many employees and not enough jobs.

Workers would bring home what they earn.

It would put more money in the pockets of every U.S citizen by eliminating the income tax. There would be no deductions from what you earn to pay federal taxes, Social Security or Medicare. If you earned $100 you would get paid $100. Business would no longer be burdened with paying additional taxes on employee wages for Social Security/Medicare.

The FairTax has a positive effect on Social Security/Medicare.

Under the FairTax Act there would be plenty of money available for both these programs. Like all federal spending programs, Social Security would operate exactly as it does today, except that its funds come from a broad, progressive sales tax, rather than a narrow, regressive payroll tax.

Employers would continue to report the wages they pay to each employee to the Social Security Administration simply for the determination of benefits. The move to a reformed Social Security system is eased while ensuring there is sufficient funding to continue promised benefits.

In the meantime, Social Security/Medicare funds are no longer triple-taxed like they are under the current tax system: 1) when payroll taxes are initially withheld; 2) when those withheld payroll taxes are counted as part of the taxable base for income tax purposes; and 3) when the promised benefits are finally received.

The FairTax protects low-income and lower-middle-income families and individuals.

Under the FairTax Plan, poor people pay no net FairTax at all up to the poverty level! Every household receives a monthly prebate check that is equal to the FairTax paid on essential goods and services [groceries and medicine], and all wage earners are no longer subject to the most burdensome tax of all, the payroll tax.

The FairTax protects senior citizens.

Seniors do very well under the FairTax. Low-income seniors are much better off under the FairTax than under the current income tax system. Some people incorrectly believe that people who live exclusively on Social Security pay no taxes. They may not know it, but they are paying hidden corporate income taxes and employer payroll taxes whenever they buy anything. Under the FairTax, seniors pay $0.23 out of every dollar they choose to spend on new goods and services. Plus, seniors, like everyone else, receive the monthly prebate check, in advance of purchases, for taxes paid on the cost of necessities.

Yes, The FairTax CAN really be passed into law!

Do you have the right to vote in this country? Passing the original 16th Amendment and the income tax wasn’t easy, and repealing the income tax and the 16th Amendment won’t be easy either. That is why the FairTax has undertaken to build a grassroots movement and grassroots alliances to support the effort. But this will only happen when the American people rally behind the effort, throw off the yoke, and demand that their congressional representatives correct 90 years of wrongs done by the income tax.

What you can do RIGHT NOW to make sure this bill gets passed.

First, go to the website www.FairTax.org and sign the petition to let Congress and the President know that you want this bill passed into law.

Second, while you are on the website, look at the congressional scorecard to see whether your state congressional representatives support this bill. If they don’t, write them a letter and tell them that you think they should vote for it and that you will be watching this scorecard to see how they stand come election time.

Third, buy The FairTax Book: Saying Goodbye to the Income Tax and the IRS by Neal Boortz and Congressman John Linder. Read it so you understand what this bill actually says. The book is easy to understand. Then give it to a friend to read and ask them to pass it on.

Fourth, if you hear anyone, especially a politician, saying that the FairTax Bill will hurt the poor, or help the rich, or hurt senior citizens, then politely tell them that they either (A) have not read the FairTax Bill and understood it, or (B) they are intentionally misleading the public, so they must have a personal vested financial interest in keeping the current tax code in place.

Fifth, pass this article on to everyone you know and encourage them to join the grassroots movement to get this bill passed into law. Remember, our politicians serve us, we don’t serve them.

Sandra Simmons, President of Money Management Solutions, specializes in helping business owners and individuals manage their money to acheive financial freedom. Claim your FREE Debt Reduction Solutions Guide

© 2008 Sandra S. Simmons. All Rights Reserved.

If you would like to know just how bankrupt the US is – with future committments for medicare, medicaid and Social Security for the 78,000,000 baby boomers who will start tapping the system starting January 2008 – you’ll want to check out these 2  short videos by David Walker, Chief  Comptroller for US General Accountability Office.

According to the video, between 2000 and 2005, the US incurred 26 trillion (yes, trillion) additional future debt. No wonder why the Dollar is falling hard against foreign currencies.

http://www.youtube.com/watch?v=DXr_Ga_n0pY&feature=related

Lastly, if you have always wanted to get de-mystified about the Federal Reserve Bank – and how a small group of private individuals have bankrupted America – you won’t want to miss this video featuring Ron Paul:

http://video.google.com/videoplay?docid=5232639329002339531

“It is well enough that people do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” – Henry Ford

Wake up America! Your personal financial survival is at risk. Your Constitutional rights are being violated, and you are being robbed of your financial freedom.

Sandra Simmons, President of Money Management Solutions, Inc. specializes in helping business owners and individuals manage their money to achieve financial freedom. Claim your FREE Debt Reduction Solutions Guide

© 2008 Sandra S. Simmons. All Rights Reserved.