S-Corporations:

	Deduct Health Insurance premium (above the line deduction) for S-corporation shareholders only if it is reported on their W-2 box 1.
	New Relief for LATE S Elections under Rev. Proc. 2007-62, application for relief needs to be filed no later than 6 months after the first due date of the first year tax return. Rev. Proc. 2003-43 gives you relief up to the 24 months from the time the corporation was setup.
	Tip credit NOT reduced If minimum wage increases

Corporations:

Prepaid Postage deductible under the 3 ½ months rule: Ex: Direct mail advertising business, can expense the prepayment of postage as long as it can establish that the postage is regularly purchased on a quarterly basis and will be used within the 3 ½ months period.

Section 199 deduction: The domestic production activity deduction was created back in 2004 and effective since then. For “C” corporation, the deduction is equal to a stated percentage of the lesser of the corporation’s qualified production activities for the tax year or modified taxable income. The percentage was 3% in 2005-2006 and now INCREASED to 6% for 2007. The wage limit is 50% of W-2 wages paid.

Partnerships:

	Failure to file penalty is $86/Partner/month for a max. of $2,086/year which is increased from $500.
	A transfer of partnership property to a partner in satisfaction of a guaranteed payment under sec. 707(c) is a taxable sale or exchange by the partnership under Sec. 1001, not a tax-free distribution under sec. 731.

2007/2008 Individual Tax Highlights for this year:

1. A ten-percent credit can be claimed for various energy-saving improvements made to a taxpayer’s main home. The credit is based on the cost of new energy-efficient improvements including insulation, exterior windows, exterior doors, water heaters, heat pumps, central air conditioners, furnaces and hot water boilers. The overall credit is limited to $500.

2. The maximum amount subject to social security tax has increased to $97,500 and up to $102,000 for 2008.

3. The standard mileage is 50.5 cents for each business mile driven in 2007.

4. Real estate owner can deduct rental losses of up to $25K from other income. Real Estate professionals are exempt from the passive-loss rules.

5. The amount you can deduct for exemption has increased from $3,300 to $3,400 for the year 2007. For 2008, it increases to $3,500.

6. Individuals with “Long Term” unused minimum tax credits will be able to claim a portion of them as a “Refundable credit in 2007-2012”.

7. IRA Contribution Relief Pension act for 2007-2009, permits a class of individuals to elect to make additional IRA contributions of up to $3,000 per year. IRC Sec. 219 (b)(5)(c) Victimized by employer bankruptcies.

8. Max. Annual contribution to an HAS is $2,850 for self only coverage and $5,650 in case of a family.

9. CA imposes 2.5% “penalty” on early withdrawals of qualified retirement plans and IRAs. This is a counterpart to the 10% penalty imposed by the IRS.

10. The Roth and Traditional IRA deduction contribution amount has increased to $5K. If 5 yrs or above 50, you can make catch up contributions max. $1K. Max. contribution to an employer 401K plan is $15,500 and defined benefit plans annual limit is $46,000.

The above are just some of the highlights for tax year 2007/2008. Please feel free to consult my office for additional inquiries. We look forward to serving you in all you tax and accounting needs.