November 2009

Dear Clients and Friends:

The merger of LSHR, CPA’s has been a huge success. Our merged firms have integrated well and we have enhanced and expanded our services. One of the major enhancements is business and wealth management. We encourage you to visit our new websites, www.lshrcpas.com and www.llbiz.com.

The economy is still in a state of flux, but we are starting to see some light at the end of the tunnel. Unfortunately, the federal and state governments are under extreme financial pressure and many states have raised taxes. The federal government has passed tax incentives for many individuals. To counter any tax benefit, the IRS has raised penalties for late filing of tax returns.

If you purchase a new vehicle in 2009, you can deduct the sales tax attributable to the first $49,500 of the new vehicle. If you do not itemize, we can add the sales tax on the vehicle to your standard deduction. This tax break starts to phase out for married individuals with adjusted gross income (AGI) over $250,000. For single individuals, this tax break starts to phase out when your AGI is over $125,000.

Congress will extend the $8,000 first time home buyer credit to houses purchased before May 1, 2010 provided the home closes before July 1, 2010. In addition, home buyers who have owned a home for five out of the last eight years will be eligible for a $6,500 home buyer credit. The home purchased must be a principal residence costing less than $800,000. For homes purchased after November 6, 2009, the credit starts to phase out for married individuals when your AGI is over $225,000 and if you are single over $125,000.

If you are planning to convert a traditional IRA to a Roth IRA, you may want to wait until 2010. The tax on 2010 conversions can be deferred and spread out over two years. You will have to pay 50% of the tax on the conversion in 2011 and the balance in 2012. In 2010, anybody who wants to convert from a traditional IRA to a Roth IRA will be allowed to do so. There will be no more income limitations.

There are no required minimum year end distributions from retirement plans in 2009, except defined benefit plans.

Donating appreciated stock to a recognized charity is a great tax saver. If you have owned the shares for over a year, you can deduct the full value of the stock as a charitable contribution and not pay tax on the appreciation.

In terms of depreciation for businesses, bonus depreciation, which allows 50% of the new asset cost to be deducted up front is available in 2009. It is anticipated that it will also be available in 2010. Businesses can also expense up to $250,000 of  the cost of new or used fixed assets in the current year.

Placing a new heavy SUV in service by December 31, 2009 can give an even better write off. If you purchase a new $50,000 SUV with a loaded weight exceeding 6,000 pounds, you can write off up to $25,000 of the cost of the vehicle. In addition, you can claim the balance as 50% bonus depreciation.

In 2009, Congress has reinstated a tax credit for energy efficient improvements. The insulation of energy efficient skylights, windows and outer doors along with furnaces and hot water heaters will benefit you.

New York State has enacted a large increase in taxes for high income individuals. In the past, the highest New York State tax rate was 6.85%. If you are single and have a taxable income greater than $200,000 or if you are married filing jointly having a taxable income greater than $300,000, your tax rate has increased to 7.85%. Please note, if your income increases by an additional $50,000, the tax rate becomes a flat tax on all income. If your New York State taxable income exceeds $500,000, your tax rate has further increased to 8.97%. If your New York State taxable income exceeds $550,000, your tax rate of 8.97% is a flat tax on all income. Furthermore, to make matters worse, if your AGI is more than $1,000,000, all of your New York itemized deductions are eliminated with the exception of 50% of your deduction for charitable contributions.

As many of you are aware, New York State instituted a Metropolitan Commuter Transportation Mobility Tax (MCTMT) in 2009. For employers, this is an employer tax of .34% of gross payroll. For individuals who are self- employed, this is a tax of .34% of your self employment income.

New York State has also raised interest on underpayments to a minimum rate of 7.5%. Penalties for late payment of taxes have also increased.

New Jersey has also raised their income taxes as of January 1, 2009. For taxpayers with a taxable income in excess of $400,000 but less than $500,000, the tax rate has increased from 6.37% to 8%. Taxpayers with a taxable income between $500,000 and $1,000,000, the tax rate increase form 8.97% to 10.25%. Taxpayers with a taxable income in excess of $1,000,000, the tax rates increase from 8.97% to 10.75%.

We continue to advise our clients to fully maximize allowable contributions to tax deferred retirement programs. For self-employed and corporate clients, you must open a profit-sharing plan by December 31, 2009, however, the plan contribution can be funded up to the due date of the tax return, including extensions. The maximum contribution to a profit-sharing plan and a SEP IRA in both 2009 and 2010 is $49,000. SEP IRA’s can be established and funded until the due date of the tax return including extensions.

IRA’s, on the other hand, must be funded by April 15, 2010. The maximum contribution to a traditional and Roth IRA through 2010 is $5,000. An individual who is at least 50 years old by the end of the tax year is allowed to make an additional contribution to a traditional IRA or Roth IRA of $1,000. We always recommend a Roth IRA contribution if you are able to do so.

Contributions to a Roth IRA are not tax deductible. In 2009, Roth IRA’s begin to phase out for single taxpayers with adjusted gross income exceeding $105,000 and married taxpayers filing jointly at $166,000.

401K plans are widely used. The maximum 401K contribution in both 2009 and 2010 is $16,500. Individuals who will be at least 50 years old by the end of the year may contribute an additional $5,500 in 2009 and 2010.

The social security tax rate has remained the same at 6.2% with the wage base remaining the same in 2009 and 2010 at $106,800. There will be no cost of living increases for Social Security benefits next year, but Congress is expected to allow a special $250 payment to benefit recipients.

We will require all individual and entity clients to sign an engagement letter with our firm. This engagement letter will clearly define what our role as your CPA firm is. Engagement letters are now standard amongst CPA firms.

We have just attended a three day tax seminar. Given the state of the economy the governments need to look for additional tax revenue. Per the lecturers, both Federal and State agencies will be embarking on increased tax enforcement and audits.

Please remember, in order to have your tax returns timely filed by April 15, we must have your information in the office by March 25.

So that our staff can gear up for tax season and celebrate the holidays, the office will be closed on both Thursday and Friday, December 24 and December 25 and December 31 and January 1.

We are a full service firm, here to assist in all aspects of your business and individual tax planning needs. We stay within the realm of our expertise. We utilize the knowledge and ability of other individuals on our team when the need arises. Over the years we have developed business relationships with many competent individuals who can assist you with your business and financial needs. These individuals include investment advisors, mortgage brokers, attorneys and insurance agents. By addressing your needs and giving you the service you require, we know that we have instilled a mutual sense of confidence and loyalty.

We thank you for your past business and hope that your faith in us will continue. We have always treated your referrals with the same courtesy, respect, and care that you have received from us.

We urge anyone who needs to go over their 2009 tax projections or requires any tax planning to make an appointment with us as soon as possible.

The whole team at LSHR CPA’s would like to wish you and your family a safe, happy, healthy holiday season and a prosperous New Year.

Very truly yours,

Lebenhart, Seckendorf, Hasson and Reilly CPA’s, LLC