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Volume 4, Issue 8, August 2006

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Highlights of the Tax Increase Prevention and Reconciliation Act of 2005

The Tax Increase Prevention and Reconciliation Act of 2005 (Tax Reconciliation Act) was signed into law on May 17, 2006. The law contains provisions that affect a wide range of taxpayers. The bill provides for $70 billion in net tax cuts and $20 billion in revenue raisers. Below is a summary of some of the bill’s key provisions:

For 2006 only, the Alternative Minimum Tax exemption amounts for individuals have increased to $62,550 for taxpayers who are married, filing jointly and to $42,500 for single taxpayers.

The “Kiddie Tax” rules have changed, effective immediately; where the Kiddie Tax on a child’s unearned income previously only affected dependents under the age of 14, the Tax Reconciliation Act now extends the rules to dependents under the age of 18.

The $100,000 adjusted gross income ceiling previously governing the conversion of a traditional IRA to a Roth IRA has been eliminated for tax years after 2009, and the 10% early withdrawal penalty does not apply, although the conversion is treated as a taxable distribution. Additionally, if taxpayers opt to make the conversion in 2010, they can choose either to recognize the conversion income in 2010 or to average it over the next two years.

In order to continue to encourage business investment under Code Sec. 179, the Tax Reconciliation Act provides for an increase in the amount a taxpayer may expense. For 2006, a taxpayer may expense up to $108,000 of the cost of qualifying property instead of dropping to $25,000. The expensing election is extended through December 31, 2009.

The 15% maximum tax rate for long-term capital gains and dividends, originally scheduled to expire in 2008, has been extended through 2010. The 5% maximum tax rate for long-term capital gains and dividends for taxpayers in the lowest two tax brackets drops to zero in 2008, and the 2008 rate extends through 2010.

Several additional provisions not mentioned above were introduced in the Tax Increase Prevention and Reconciliation Act of 2005, many of which can impact your tax situation. If you have any questions related to the Tax Reconciliation Act, please contact the certified public accountants and consultants at Kemper CPA Group LLP for further details.

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Did You Know That Kemper CPA Group LLP Offers...

Bookkeeping Services:

- monthly

- quarterly

- general ledger

- planning reviews

Employee Benefit Plan Services:

- plan design

- plan administration and compliance

- retirement plans

- cafeteria plans

Diverse Tax Services:

- tax compliance

- property tax services

- sales and use tax services

- representation before taxing

authorities

Professionals who are:

- friendly

- highly skilled

- certified

- experienced

Whether you are an individual or business owner, we can help you with a wide array of financial and consulting services. We’ve been serving clients in five states for over forty years. Contact us today!

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Moving?

If you took advantage of the summer months to move or are planning to move in the coming months, keep the following in mind:

Moving expenses: You may be able to deduct moving expenses if you meet these requirements:

Your move is related to starting work at a new location

You meet the distance and time tests

If your employer reimburses you for moving costs, however, you may have to include the reimbursement on your tax return. IRS Publication 521, Moving Expenses contains additional information.

Buying a new house: Mortgage interest “points” you pay to obtain your mortgage are deductible if you itemize deductions on your tax return. Depending on your particular mortgage situation, points may be deducted either in full the year they are paid, or over the life of the loan. More information about mortgage points is available in IRS Publication 936, Home Mortgage Interest Deduction. Remember also that real estate taxes qualify as an itemized deduction.

Selling your home: You may be able to exclude up to $250,000 of gain on the sale of your main house ($500,000 for taxpayers who are married, filing jointly), provided that you meet ownership and use tests. Generally speaking, you must have owned and lived in your house for a minimum of two out of the five years prior to the year you sell it, and you must not have excluded gain on a different house sold during the two years before the date of sale on your current house. IRS Publication 523, Selling Your Home contains further details.

Change of address: Be sure to notify the U.S. Postal Service of your new address, so that IRS correspondence can be forwarded on to you. The IRS updates its system based upon updates received from the Postal Service.

Should you have any questions related to the tax implications of moving, the certified public accountants and consultants at Kemper CPA Group LLP are here to help. Contact your local tax professionals today!

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Loose Change

The July/August 2006 issue of the “Loose Change” Newsletter includes the following articles:

Contact Kemper Capital Management LLC for all of your investing needs.

Investment advisory services offered by KCPAG Financial Advisors LLC, a registered investment advisor. Securities officered through Securities America, Inc., a registered broker/dealer. Member NASD/SIPC. Thomas A. Moore, John D. Porter, Polly Reynolds, Shawna D. Horne, Jeffery C. Holt, CA insurance Lic. #0E38034, Jessica Daugherty, Joseph M. Mendes, CA Insurance Lic. #0C62535, Regina S. Hughes, Gregory Meador, Marcia Elder, Registered Representatives. Insurance services offered through KCPAG Insurance Services LLC. Kemper Capital Management LLC and its subsidiaries are not affiliated with Securities America.

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Kemper Technology Consulting Offers Hands-On Software Training

The summer months are fading fast, but it’s not too late to enroll in one of Kemper Technology Consulting’s hands-on software training seminars at our Evansville, Indiana office!

Our certified instructors offer one-day workshops featuring QuickBooks Pro Accounting software. In our “Get Smart with QuickBooks” Seminar, hands-on instruction covers everything from getting started with QuickBooks to setting up inventory, entering and paying bills, paying sales tax, doing payroll, using online banking, and more! The “Get Smart with QuickBooks” workshop is scheduled for October 20, 2006.

For more advanced users, our “Beyond the Basics” Seminar teaches you tips on handling tricky transactions, how to perform month-end and year-end processing, and how to understand the general ledger and important financial reports. Let our professionals help take your QuickBooks accounting to the next level! Two opportunities remain for the “Beyond the Basics” workshop – on September 22 and November 17, 2006.

We are also offering a series of workshops on Microsoft Dynamics GP, covering the areas of Payroll, Fixed Assets, and FRx Reporting on September 12, October 10, and November 14, 2006, respectively.

Click here to view our full 2006 training schedule. Contact Kemper Technology Consulting today for more details.

Kemper Technology Consulting
Robinson, IL
618-546-5633
www.kempertc.com
Evansville, IN  •  Indianapolis, IN  •  Paducah, KY  •  Effingham, IL

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Please be advised that, based upon current Internal Revenue Service (IRS) rules and standards, the advice herein is not intended to be used, nor can it be used, as the sole basis for decisions. Additional issues may exist that could affect the treatment of the individual transactions, and this narrative does not provide a conclusion with respect to all such issues.

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