January 20, 2011 Melissa Joins Us! The day has been eagerly anticipated for many years and we are happy to announce that Melissa Lisch has joined all the Lisch Family of Companies as a partner. Melissa is a Certified Public Accountant and is securities licensed. She joins us directly from the Accounting and Advisory firm of Pricewaterhousecoopers where she was a Manager. Melissa will be active in all areas of the business and because of her youth, vision, and experience, will add expertise to help our clients navigate the twenty first century’s financial challenges. As such, Accounting Offices of Howard Lisch curtails its active solicitation and performance of business as of December 31, 2010 and, instead, as of January 1, 2011 Lisch & Lisch LLC will be the active entity reflecting the new reality. Lisch Investment Services curtailed its solicitation and performance of business as of December 31, 2010 and, instead, as of January 1, 2011 Hudson River Investment Group LLC is the active entity. Come meet her! HAPPY NEW YEAR!! The following tax rates and amounts are effective for 2011: OASDI rate reduced to 4.2% and wage base remains at $ 106,800. Rate rises to 6.2% in 2012.Medicare rate remains at 1.45% and there is no wage limit.There is again, no cost of living hike for Social Security beneficiaries this year. The maximum earnings one can earn before social security benefits will start to be withheld is $37,680 for those under age 66. Those between age 62 and age 66 can earn $14,160. For each $2 earned above that, $1 of benefits is lost. There is no limit on earnings for those older than 66. The retirement age for social security continues to rise this year. Those turning 62 this year are affected. They will get reduced benefits if they start receiving payments before they attain age 66. Ultimately, anyone born after 1959 will not get full benefits before age 67. Social Security benefits will rise 5.8%.Personal exemptions rise to $3,700 and exemptions will not phase out in 2011 due to high income. Phaseout returns in 2013.Standard deduction rises to $11,600 plus $1,150 for each spouse 65 or older. For children age 14 who must file returns, it remains at $850Income tax rates will remain at 10%, 15%, 25%, 28%, 33% and 35%. Dividends are taxed at 15%. Those in the 15% or lower brackets receive a 0% rate on gains and dividends. 15% bracket is doubled for marrieds over singles for 2011. Alternative Minimum Tax rate remains at 26% on first $175,000 of income for marrieds and 28% over that. Exemptions from the minimum tax rise slightly in 2011.Back up withholding rate remains at 30%.401(k), 403(b) and 457 contribution pay-in limitation remains at $16,500, with $5,500 more for employees 50 and older. Ceiling on SIMPLE plans remains at $11,500 but folks age 50 or older can put in an additional $2,500 in 2011.Maximum level of pay on which pay-ins to plans can be based upon remains at $245,000, with the maximum pay-in for defined contribution plans remaining at $49,000. Percentage of compensation that can be put in remains at 100%. Profit Sharing percentage remains at 25%. Benefit limit remains at $195,000.Business meal and entertainment deductibility remains at 50%. Standard business mileage allowance rises to 51¢ per mile, from 50¢. Medical travel and moving expense rate rises to 19¢ from 16.5¢. Charitable driving rate remains at 14¢ a mile.Federal estate tax exemption rises to $5,000,000. Maximum Estate and Gift rate is lowered to 35%. Lifetime gift tax exemption rises to $5,000,000.Maximum amount of equipment eligible for expense election for small businesses rises to unlimited for assets with useful lives of 20 years or less.Simplified per diem allowances are up slightly.Phaseout for IRA deductions start at $90,000 and ends at $110,000 for couples. Phaseout for singles is from $56,000 to $66,000. If only one spouse is covered by a plan, the phaseout zone for deducting a payin for the spouse who is not covered begins at $166,000 of AGI and ends at $176,000. Contribution limit remains at $5,000. If 50 or older, can contribute up to $6,000.The interest exclusion on U.S. Savings Bonds redeemed to pay qualified higher education expenses starts to phase out at AGI above $106,650 for marrieds.Eligible portion of long term care premium rises to $4,240 for those age 71 and older, $3,390 between ages 60 and 70, $1,270 between ages 50 and 60, $640 from 40 to 50 and $340 for age 40 and under, deductible as medical expenses.Medicare Part B premium remains at $96.40 for those singles with AGI under $85,000. The minimum premium will increase to $115.40 for those who sign up in 2011. Maximum premium rates may rise to $369.10.The Nanny tax threshold remains at $1,700 No social security tax is due for domestics paid $1,700 or less this year. It is not indexed for inflation. FUTA is due whenever a domestic employee is paid $1,000 or more in a calendar quarter in the current or prior year.The exemption from the Kiddie Tax for 2011 remains at $1,800. A parent will be able to elect to include a child’s income on the parent’s return for 2011 if the child’s income is more than $850 and less than $8,500 and the child needs to be less than 20. If earned income of child is less than ½ the support, age rises to 24 If Kiddie Tax applies, a child’s earned income over $1,800 is taxed at the parents’ marginal rateLow and middle income savers can still get a tax credit of up to $1,000 for contributions made to IRAs and qualified plans. Credit disappears for marrieds when AGI hits $55,500, $27,750 for singles.Adoption tax credit rises to $13,360 of expenses, from $12,170. Phaseout starts at $182,520 AGI.Hope and Lifetime Learning credit phaseout for MFJ starts at $100,000, $50,000 for singles. The maximum Hope credit remains at $2,000.Gift tax exclusion remains at $13,000 per donee for gifts made in 2011.The limit on deducting payins to Health Savings Accounts remains at $6,150 for family coverage and $3,050 for individual coverage. Account owners born before 1955 can put in an additional $1,000. Ceiling on out of pocket cost rises to $11,900 for family coverage and $5,950 for individual coverage. IRAs can be rolled into HSAs.The 10% credit for energy saving improvements up to a maximum credit of $500 returns for 2011. See our August 2005 Newsletter for details.The up to $250 above the line deduction for teachers’ out of pocket classroom related expenses remains through 2011.Companies can deduct 9% of income from U.S production activities.U.S. taxpayers working abroad have a higher exclusion, $92,900, up from $91,500.Landlords must file 1009s if they pay a service provider $600 or more.Federal minimum wage is $7.25, food service employees, $2.13. New Jersey and New York Minimum wage is $7.25. New York tipped employees, $4.29. Connecticut minimum wage is $8.25, tipped employees $5.52. Pennsylvania minimum wage is $7.25 with tipped employees $2.83.Credit and Debit Card companies will issue 1009s on payments made to merchants in 2011. Third party networks such as Paypal will issue 1009s to payees with over 200 sales transactions and more than $20,000 in sales income.S Corporations and partnerships owe a penalty of $195 per owner or partner per month for up to 12 months for failure to file on time.High income taxpayers can convert their IRAs to ROTHs. The $100,000 AGI cap is gone. Self-employeds can no longer deduct health insurance premiums on Schedule C.Nearly all businesses must wire tax deposits to the IRS. People Vote With Their Feet The results of the 2010 Census are in and the high taxed blue unionized states lost Congressional seats and the low or no tax red, right to work states picked up Congressional seats. Big winners were Texas, with an additional 4 seats and Florida close behind with 2. Top losers were New York and Ohio with 2 each, and Illinois, Taxachusetts, Michigan, New Jersey, Pennsylvania, Missouri, Louisiana, Iowa each with one. Adding one seat each were Arizona, Georgia, Nevada, South Carolina, Utah and Washington. Bloomberg Business week 1/3/11 As always, if you have any questions about these or any other matters, do not hesitate to call me. Remember, We’re Here For You!!