2007 Tax Updates

Tax Updates to keep you prepared for 2007.

2007 Payroll Tax Information

For those who prepare payroll, the following is effective January 1, 2007:

Minimum wage changes to $7.50 per hour.
FICA and Medicare withholding remains at 7.65% (6.2% for FICA and 1.45% for Medicare) for both employees and employers. The FICA wage limit is increased to $97,500. Medicare will be charged to the employee and employer for all wages with no upper limit.
State disability insurance (SDI) drops to 0.6% with the limit increasing to $83,389 of wages.
*Please watch for your EDD notice for SUI rates, this is employer specific, need to change in your software.
FUTA wage limitations are $7,000 at 0.8%.

New Tax Changes

Business mileage rate for 2006 - 44.5¢ and for 2007 - 48.5¢.
Mileage rate for medical and moving expense deductions is 18¢ per mile for 2006 and 20¢ for 2007.
Maximum wages subject to social security tax is $94,200 for 2006.
Social security earnings limit — under age 65, $12,480; 65 and over, no limit.
Increases the age to which the “kiddie” tax provisions apply from under age 14 to under 18 years of age.
A vehicle donation is limited to the amount that the vehicle was sold for by the charity.
Self-Employed health insurance is 100% deductible.
Equipment purchases expensing limit for 2006 - $108,000 ($25.000 for qualified SUVs). Total qualified purchases cannot exceed $430,000. The California deduction remains at $25,000 and phases out at $200,000.
In 2007, all charitable contributions must have a proof of receipt otherwise they may not be deducted.

Important Information for 1099 Filers

If a form 1099-Misc. for services is required to be filed, the payer must report on Form DE 542 to EDD within 20 days of paying either $600 or more or entering into a contract for $600 or more. Keep a copy of these DE 542’s and W-9 forms on file. 1099 forms are due to the recipients by 1/31/07 and to the IRS by 2/28/07 to avoid penalties.

** For those who need it, our Federal I.D. Number is 77-0457760 **

See 2006 Tax Updates