2009 Tax Updates

Tax Updates to keep you prepared for 2009.

2009 Payroll Tax Information

For those who prepare payroll, the following is effective January 1, 2009:

  • Minimum wage remains at $8.00 per hour in California.
  • FICA and Medicare withholding remains at 7.65% (6.2% for FICA and 1.45% for Medicare) for both employees and employers. The FICA limit is increased to $106,800. Medicare will be charged to the employee and employer for all wages with no upper limit.
  • FUTA wage limitations remain the same at $7,000 at 0.8%.
  • State disability insurance (SDI) increases to 1.10% with the limit increasing to $90,669 of wages.
  • Please watch for your EDD notice for SUI rates, this is employer specific, and will need to be changed in your software.
  • All employers are required to notify all of their employees of the Federal Earned Income Tax Credit.
  • State Board of Equalization is converting to e-filing sales tax returns.
  • A person without a valid contractor’s license performing services in the construction trade is an employee of the contractor who either holds a license or is required to be licensed.

New Tax Changes - 2008

  • Business mileage rate for 2008 is 50.5¢ per mile, 1/1/08–6/30/08 and 58.5¢, 7/1/08-12/31/08.
  • Medical and Moving mileage rate for 2008 is 19¢ per mile, 1/1/08-6/30/08 and 27¢, 7/1/08-12/31/08.
  • Charitable mileage rate is 14¢ per mile.
  • ALL charitable contributions must have a proof of receipt otherwise they may not be deducted.
  • Tuition Deduction, Educator deduction of $250 and sales tax deduction extended through 2008.
  • Maximum wages subject to social security tax is $102,000 for 2008.
  • Social security earnings limit – under full retirement age, $13,560; full retirement age and over, no limit.
  • Deduction on Mortgage insurance deduction on a qualified personal residence, phases out ratably by 10% for each $1,000 over $100,000 AGI, unavailable if AGI exceeds $110,000.
  • The Mortgage Forgiveness Debt Relief Act of 2007 provides that a taxpayer may exclude from income up to $2 million of qualified principal residence indebtedness for discharges incurred on or after January 1, 2007, and before January 1, 2013.
  • Equipment purchases expensing limit for 2008 - $250,000 ($25,000 for qualified SUVs). Total qualified purchases cannot exceed $800,000. The California deduction remains at $25,000 and phases out at $200,000.
  • Reinstating bonus depreciation for tangible personal property-Taxpayers are permitted to claim 50% first year bonus depreciation of the adjusted basis of qualifying new property placed in service in 2008.
  • An IRA owner, age 70½ or over, can directly transfer tax-free, up to $100,000 to an eligible charitable organization in 2009.
  • The kiddie tax applies to children who are 19 years old or who are full-time students over age 18 but under age 24 with investment income.

New Tax Changes - 2009

Key developments for the 2009 tax year include the following:

  • Business mileage rate is 55¢ per mile for 2009.
  • Medical and Moving mileage rate is 24¢ per mile for 2009.
  • Charitable mileage rate is 14¢ per mile.
  • The contribution limit for individual retirement accounts (both traditional and Roth) is $5,000 for 2009. A “catch up” provision permits an additional contribution of up to $1,000 by individuals who are at least age 50 in 2009.
  • Maximum contributions limits for 401(k) up to age 50 - $16,500 and age 50+ - $22,000.

Important Information for 1099 Filers

A 1099 must be issued and sent to recipients or the IRS may disallow the deduction. 1099’s are due to the recipients by 2/2/09 and to the IRS by 3/2/09 to avoid penalties. If a 1099-Misc. for services is required to be filed, the payer must also report to the state of CA, EDD, on Form DE 542 within 20 days of paying either $600 or more, or entering into a contract for $600 or more.

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

See 2008 Tax Updates

See 2007 Tax Updates

See 2006 Tax Updates