2009 Tax Change Highlights
The following are the highlights of rates on primary federal taxes that affect all businesses, effective January 1, 2009 .
· Social Security and Medicare Taxes. Employer and employee will continue to pay 6.2% FICA social security tax (old-age, survivors, and disability insurance) up to $6622 (from $6,324 in 2008), and 1.45% for Medicare tax.
· Wage limits. For social security tax, the maximum amount of 2009 wages subject to the tax has increased to $106,800 from $102,000 for 2008. For Medicare tax, all covered 2009 wages are subject to the tax.
· Self-Employment Tax rate on net earnings remains the same at 15.3%, which is a total of 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).
· Federal Unemployment Tax Act (FUTA) tax rate remains at 0.8% of the first $7,000 paid each employee as wages during the year.
· Depreciation and Section 179 Expense. The maximum section 179 deduction you can elect for property you placed in service in 2009 is increasedto $250,000 (from $128,000 in 2008) for qualified section 179 property. This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $800,000 (from $510,000 in 2008).
· Business mileage rate decreases to 55 cents a mile for all business miles driven, from 58.5 cents a mile, effective Jan. 1, 2009.
· Federal minimum wage is $7.25 from $7.15 in 2008.
2009 Retirement Plan Limits
· Maximum Pre-Tax Contribution, 401(k), (403(b), or 457 Elective Deferrals: The maximum amount your employees can defer increases to $16,500 from $15,000 in 2008.
· Annual Addition Limit is $49,000, up from $46,000 in 2008.
· Annual Compensation Limit is $245,000, up from $230,000 in 2008.
· Highly Compensated Limit is $110,000, up from $105,000 in 2008.
· Key Employee Compensation Limit, the annual compensation limit an officer can earn before being considered a key employee rises to $160,000 from $150,000 in 2008.
· SEP Coverage Minimum Compensation that must be earned to be eligible rises to $550 from $500 in 2008.
· SIMPLE Retirement Account Limit is $$11,500 from $10,500 in 2008.
· Defined Benefit Plans, the maximum annual benefit payable to a participant increases to $195,000 from $185,000 in 2008.
· Catch-up contributions: The maximum additional contributions for individuals who have attained age 50 by year end for 401(k), (403(b), SEP and or 457 plans is $5,500, up from $5,000 in 2008. For SIMPLE IRA and Simple (401(k) plans, the amount remains at $2,500.
More information on Tax Law Changes for Business is available at http://www.irs.gov/formspubs/article/0,id=109879,00.html.
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