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Volume 6, Issue 1, January 2008

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2007 Tax Law Changes

Many tax law changes were made during the course of 2007, some as late as December, and the changes cover a wide variety of circumstances that will affect many taxpayers. With tax season beginning, these changes are worth mentioning.

As you prepare for tax season, keep the following tax law changes in mind:

AMT Exemption: For the 2007 tax year, the alternative minimum tax exemption has increased. Click here to read additional information about the new exemption amounts, provided in a separate article in this newsletter.

This recent change impacts the IRS’s ability to process forms 8863 (Education Credits), 5695 (Residential Energy Credits), 1040A, Schedule 2 (Child and Dependent Care Expenses for Form 1040A Filers), 8396 (Mortgage Interest Credit), and 8859 (District of Columbia First-Time Homebuyer Credit). The IRS will not be able to process those forms until February 11, 2008.

Standard Deduction: The standard deduction amounts for 2007 have been adjusted for inflation. They are as follows:

$10,700 for married taxpayers who file jointly and for qualifying widows and widowers

$7,850 for heads of household

$5,350 for single taxpayers and married taxpayers who file separately

Personal Exemptions: The personal exemption amount has risen to $3,400 for 2007, up from $3,300 in 2006. Taxpayers can claim the full amount of the deduction for a family member, even if he or she was born on December 31; however, the personal exemption deductions are phased out as adjusted gross income increases. For 2007, the phase out amounts are:

Married filing jointly: $234,600 to $357,100

Head of household: $195,500 to $318,000

Single: $156,400 to $278,900

Married filing separately: $117,300 to $178,550

Retirement Plan Contribution Limits: The contribution limits for IRAs have risen for 2007, which means more people will be able to make tax-deductible traditional IRA contributions. However, the deductions are phased out:

For singles and heads of household who are covered by a workplace retirement plan and have incomes of between $52,000 and $62,000

When the spouse making the IRA contribution is covered by a workplace retirement plan and the couple’s income is between $83,000 and $103,000

When the spouse making the IRA contribution is not covered by a workplace retirement plan and the couple’s income is between $156,000 and $166,000

For a married taxpayer filing separately who is covered by a workplace retirement plan and has an income of between $0 and $10,000

Also for 2007, the contribution limit for employees who participate in workplace retirement plans (401(k)s, 403(b)s, and most 457 plans), rose to $15,500, with a catch-up contribution for those age 50 to 70 1/2 of $5,000. For SIMPLE plans, the limit rose to $10,500, with a $2,500 catch-up contribution.

Deductions for Homeowners: A law passed in late 2007 includes provisions that impact some homeowners – a mortgage insurance deduction and the exclusion of debt cancelled as a result of foreclosure. For additional information about these changes, click here to read a more detailed article in this newsletter.

Charitable Donation Rules: In order to deduct a charitable cash donation, taxpayers must obtain a written record of the contribution from the eligible charity. The IRS requires documentation of the name of the charitable organization, the date of the donation, and the amount of the donation.

Hope and Lifetime Learning Credit: The income limits for the Hope and Lifetime Learning credits have increased for 2007, making the education credit accessible to more taxpayers. The amount of the Hope or Lifetime Learning credit is reduced for modified adjusted gross incomes of between $47,000 and $57,000 ($94,000 and $114,000 for joint returns). These amounts are up from $45,000 and $55,000 ($90,000 and $110,000 for joint returns) in 2006.

Contact an office near you today to set up an appointment with one of our accounting professionals. The certified public accountants and consultants at Kemper CPA Group LLP are available to answer any questions you may have about these tax law changes or any other matter pertaining to your tax situation.

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Provisions of the Tax Increase Prevention Act
of 2007

The Tax Increase Prevention Act of 2007, just passed by Congress, includes significant provisions affecting individuals.

Alternative Minimum Tax Patch Extension

In order to prevent approximately 25 million taxpayers from facing, on average, a $2,000 tax increase due to the Alternative Minimum Tax (AMT), the Act has extended a temporary patch for a period of one year. The patch provides higher AMT exemption amounts for 2007, as compared to the 2006 amounts:

Use of Nonrefundable Personal Credits

In addition to the higher exemption amounts, the law provides for taxpayers to use most nonrefundable personal tax credits to offset AMT liability. Such personal credits include the HOPE and Lifetime Learning Education credits, as well as the dependent care credit. Additional personal credits such as the child, adoption and saver’s credits were already allowed under prior law.

The friendly professionals at Kemper CPA Group LLP are here to help you understand the tax laws and prepare your tax return – contact us today!

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Mortgage Forgiveness Debt Relief Act of 2007

The Mortgage Forgiveness Debt Relief Act of 2007, signed into law on December 20, 2007, includes some key tax provisions for individual homeowners.

Due to the significant number of home mortgage foreclosures in the United States in the past two years, the Mortgage Forgiveness Debt Relief Act of 2007 was passed to assist qualified homeowners facing foreclosure. The critical provision of this new law allows for a three-year exclusion of debt cancelled as a result of a foreclosure from the homeowner’s income. This exclusion is available for the three-year period beginning January 1, 2007 to December 31, 2009.

In addition, a temporary provision allowing homeowners to deduct qualified home mortgage insurance premiums as deductible home interest was extended for three years to December 31, 2010. The provision was originally a part of the Tax Relief and Health Care Act of 2006; the extended provision considers mortgage insurance provided by the Federal Housing Administration (FHA), the Veterans Administration (VA), the Rural Housing Administration (RHA) or private mortgage insurance as qualified mortgage insurance.

Specific rules apply for each provision and the associated tax deductions, exclusions, etc. The friendly, knowledgeable professionals at Kemper CPA Group LLP can help you with determining whether the new legislation applies to your individual tax situation.

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Loose Change

The January/February 2008 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, Shawna D. Horne, Jeffery C. Holt, CA insurance Lic. #0E38034, Sheila Lautenbacher, Jessica Daugherty, Joseph M. Mendes, CA Insurance Lic. #0C62535, 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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Does Your Network Need a Little First-Aid?

Why begin the year with a sub par network? Your computer network is the lifeblood of your business, and if it isn’t functioning smoothly, it is costing you in terms of employee productivity, customer confidence and, ultimately, lost revenue. It can be a real drain on your bottom line.

As you begin to make plans for your business during the coming year, consider your network, and all that it could be doing for you, but isn’t. Could your network use a check-up?

A network “health check” can provide you with the following:

Physical inventory of all of your hardware, including a progress report that discusses specific hardware issues so that you know where your hardware stands and can determine which elements are in need of upgrades or replacement

Details about your network security policies that pinpoint potential issues with the integrity of your business data

Assessment of wireless network capabilities to determine if a wireless environment is right for your business

A network assessment can help you calculate the technology costs you can expect to accrue in the coming year, providing you with the numbers you need to figure into your budget now. It can be an invaluable tool that gives you the knowledge you need to keep your network up and running. Contact Kemper Technology Consulting today to schedule a network health check today.

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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