A new 3.8% Medicare tax applies to taxpayers who have modified adjusted gross income in excess of $200,000 (single filers), $250,000 (maried filing jointly) and $125,000 (married filing separately). This tax will cost $38 per $1,000 of investment income above those levels. Strategies to avoid this tax could include restructuring investment portfolios so they include more tax-free interest and/or investments in non-dividend paying stocks.

There's a new 39.6% tax bracket that applies to taxpayers with taxable income above $450,000 (married filing jointly), $425,000 (head of household) and $400,000 (single). Additionally, if your taxable income exceeds those thresholds, your capital gains will be taxed at a new 20% rate. Controlling the timing of receipt of wages and dividends and/or capital gains could enable you to avoid this tax bracket, and, therefore, the higher rates.

Certian taxpayers will be subject to limitations on itemized deductions and the personal exemptions. Single filers with adjusted gross income above $250,000, heads of households above $275,000, married filing jointly above $300,000 and married filing separately above $150,000 will be affected. By controlling the nature and timing of both your income items as well as your itemized deductions, you may be able to keep your adjusted gross income below those levels, thereby preserving the full benefit of your itemized deductions and personal exemptions.

The FICA tax rate for employees is increased from 4.2% to 6.2% on taxable wages up to that new base amount.

The Medicare tax rate for employees continues to be 1.45% on all taxable wages and, additionally, employees having more than $200,000 in taxable Medicare wages will pay an additional 0.9% on wages exceding $200,000.

In addition, you can find a comprehensive overview of the Act via this PDF from CCH

The White House has provided a list of the top seven things to know about the Act.

If you prefer to read the full text of the law yourself, the US Government is available makes that available.

The Economic Stimulus Act of 2008 provides these incentives to businesses, which include a special 50-percent depreciation allowance for 2008 purchases and an increase in the small business expensing limitation for tax years beginning in 2008.

What does this mean to your business?

If you purchase and place into service qualifying property during your 2008 tax year, you are able to depreciate 50% of the original cost of your purchase. Qualifying property includes any property that would traditionally be depreciated over a period of 20 or fewer years, any off the shelf computer software, or any qualified leasehold property. You can extend your ability to place the property into service through 2009 if the recovery period is ten or more years.

Any purchased property that would traditionally be eligible for Code Sec. 179 expensing, can be treated as an expense, thereby allowing a business to deduct up to $250,000 of the purchase price, instead of depreciating the purchase over several years. There are limits to how much you can spend before the deduction is reduced. If a business operates at a loss in 2008, a deduction cannot be made; however the disallowed deduction can be carried forward to a non-loss year.

Bonus Depreciation
If you purchase and place into service qualifying property during your 2008 tax year, you are able to depreciate 50% of the original cost of your purchase. Qualifying property includes any property that would traditionally be depreciated over a period of 20 or fewer years, any off the shelf computer software, or any qualified leasehold property. You can extend your ability to place the property into service through 2009 if the recovery period is ten or more years.

Enhanced Expensing
If you purchase property eligible for Code Sec. 179 expensing, you are able to treat it as an expense and deduct up to $250,000 of the purchase price, instead of depreciating the purchase over several years.
What purchases are eligible under Code Sec. 179? Basically, any tangible personal property is included in section 179. This property must be actively used in the taxpayer’s business, it must be newly purchased, and it must be an item that can be depreciated.

Some examples of qualifying property are:

• Computers
• Gas storage tanks
• Greenhouses
• Machinery and equipment
• Office equipment—copiers, typewriters, fax machines, etc
• Office furniture—desks, chairs, file cabinets, book shelves, etc
• Off-the-shelf computer software
• Oil and gas well and drilling equipment
• Printing presses
• Signs
• Sport Utility Vehicles (SUVs)
• Storage facility (e.g., peanut, hay, potato or tobacco)
• Store counters
• Testing equipment
• Vineyards

Why should a company take advantage of these savings?
Accelerated depreciation methods have always been an effective tool for writing-off assets that potentially, while not at their actual ‘end-of-life,’ could become functionally obsolete to a company. In such cases, those organizations qualifying for this economic stimulus incentive could find far greater tax shield effects over traditional, straight-line depreciation.

The IRS has issued a schedule of when the checks will be directly deposited to your account or when you will receive them via mail. Here are the details:

Economic stimulus payments will be issued according to the last two-digits of the main filer's Social Security number. People who use direct deposit also will be among the first to receive the payments starting April 28. The first cycle of paper checks will be mailed starting May 9 and continuing through May 16.

If you used direct deposit on your 2007 1040, then:

• If your social security number ends with 00 through 20; you'll receive your payment April 28.
• If your social security number ends with 21 through 75; you'll receive your payment May 5.
• If your social security number ends with 76 through 99; you'll receive your payment May 12.

If you did not use direct deposit, then:

• If your social security number ends with 00 through 09; you're payment will be mailed May 16.
• If your social security number ends with 10 through 18; you're payment will be mailed May 23.
• If your social security number ends with 19 through 25; you're payment will be mailed May 30.
• If your social security number ends with 26 through 38; you're payment will be mailed June 6.
• If your social security number ends with 39 through 51; you're payment will be mailed June 13.
• If your social security number ends with 52 through 63; you're payment will be mailed June 20.
• If your social security number ends with 64 through 75; you're payment will be mailed June 27.
• If your social security number ends with 76 through 87; you're payment will be mailed July 4.
• If your social security number ends with 88 through 99; you're payment will be mailed July 11.

People who file a return after April 15 will receive their economic stimulus payment, but probably about two weeks later than the schedule shows. A return must be filed by October 15 in order to receive a stimulus payment this year. See the online calculator for an estimate of the amount you will receive.

Additional Information

What is it? It's an economic stimulus payment that more than 130 million households will receive starting in May. It's not taxable, and it won't reduce your 2007 or 2008 refund or increase the amount you owe when you file your 2008 return.

Are you eligible? The vast majority of people who file a 2007 income tax return qualify, and many who don't regularly file a tax return may qualify as well. You're eligible if you have a valid Social Security Number (SSN), can't be claimed as a dependent on a tax return and have either an income tax liability or "qualifying income" of at least $3,000. Qualifying income includes any combination of earned income and certain benefits from Social Security, Veterans Affairs or Railroad Retirement.

Both people listed on a "married filing jointly" return must have valid SSNs to qualify for the payment — if only one has a valid SSN, neither can receive the payment.

How much will you get? The actual amount depends on the information contained on your tax return. Eligible individuals will receive between $300 and $600. Those who are eligible and file a joint return will receive a total of between $600 and $1,200. Those with children will get an additional $300 for each qualifying child. To qualify, a child must be eligible under the Child Tax Credit and have a valid Social Security number.

The payments phase out at certain income levels, so those with higher incomes may receive a reduced payment or even no payment.

Can you estimate your payment? The IRS has created an "online calculator"http://www.irs.gov/app/espc/ that will allow you to answer a few questions and get a quick estimate of your payment amount.

How will you receive the payment? Be sure to choose direct deposit when you file your tax return, even if you aren't due a regular tax refund on your tax return. That way, the stimulus payment will go right to your bank account. Otherwise, we'll mail you a check.

More facts can be found on the IRS website

Distribution Amounts
The annual benefit limitation under a defined benefit plan - the maximum amount such a plan may pay a participant each year - is $185,000.

Contribution Amounts
For defined contribution plans, such as 401(k)s, 403(b)s and 457s, the maximum contribution is $15,500 and the SIMPLE maximum contribution is $10,500.

Catch-up Contributions
For those over 50 the IRA catch-up contribution limit remains the same at $1,000. For 401(k)s, 403(b)s, 457s, and SEPs it is $5,000 and the SIMPLE catch up is $2,500.

Social Security Wage Base
The inflation-based wage base for determining the maximum amount of earnings subject to the Social Security tax will be $102,000 for 2008. The rate remains the same at 6.2%.

Medicare Tax
The Medicare Tax remains the same at 1.45%. There is no upper limit for the wage base.

Mileage Rates
The business mileage rate will remain at $0.505.

Pennsylvania Changes
Income Tax-PA Income tax rate remains the same at 3.07%.
SUTA - Employee Contributions to the PA Unemployment compensation fund will remain at .06%.

Municipalities
Area municipality tax rates remain the same for 2008.

Emergency Municipal Services Tax (formerly OPT)
EMST is changing its name to Local Services Tax.The rate remains the same. The tax now becomes a weekly payroll deduction and is payable at the end of each quarter.
* Millcreek - $10.00
* Lawrence Park - $52.00
* Harborcreek - $35.00
* Summit - $10.00
* City of Erie - $52.00

For a printable version, click here

When CPAs prepare or assist in preparing financial statements, they are required under professional standards to issue a report on those financial statements. This report can be one of three types:
* Audit report
* Review report
* Compilation report

The type of report is determined by mutual agreement between the client and the CPA. This determination usually depends on many factors, such as the needs of the client, needs of creditors or investors, the size and complexity of the business, and other factors. Securities laws require all publicly held enterprises to provide annual audited financial statements, while privately held companies often opt for reviewed or compiled statements. Or, credit agreements with lenders may require audited statements, even for private companies.

Regardless of the level of service performed by the CPA, the financial statements are the primary responsibility of the reporting entity.

We are experienced in performing audits, reviews, and compilations for entities of all kinds and sizes. This experience can be placed at your disposal.

A Comparison

Compiled Financial Statements represent the most basic level of service CPAs provide with respect to financial statements. In a compilation, the CPA must comply with certain basic requirements of professional standards, such as having a knowledge of the client's industry and applicable accounting principles, having a clear understanding with the client as to the services to be provided, and reading the financial statements to determine whether there are any obvious departures from generally accepted accounting principles (or, in some cases, another comprehensive basis of accounting used by the entity). It may be necessary for the CPA to perform "other accounting services" - such as creating your general ledger, or assisting you with adjusting entries for your books - before the financial statements can be prepared. Upon completion, a report on the financial statements is issued that states a compilation was performed in accordance with AICPA professional standards, but no assurance is expressed that the statements are in conformity with generally accepted accounting principles. This is known as the expression of "no assurance." Compiled financial statements are often prepared for privately held entities that do not need a higher level of assurance expressed by the CPA.

Reviewed Statements require that the CPA perform inquiry and analytical procedures in addition to the procedures described above for a compilation. Upon completion, a report is issued stating that a review has been performed in accordance with AICPA professional standards, that a review is less in scope than an audit, and that the CPA did not become aware of any material modifications that should be made in order for the statements to be in conformity with generally accepted accounting principles, or if applicable, another comprehensive basis of accounting. This is known as the expression of "limited assurance." Reviewed financial statements are often prepared for entities that have bank loans, outside investors, or trade creditors, but those third parties do not require audited statements.

Audited Financial Statements are the product of a CPA's highest level of assurance services. In an audit, the CPA performs all of the steps indicated above regarding compiled or reviewed statements, but also performs verification and substantiation procedures. These verification and substantiation procedures may include direct correspondence with creditors or debtors to verify details of amounts owed, physical inspection of inventories or investment securities, inspection of minutes and contracts, and other similar steps. Also, the CPA gains a knowledge and understanding of the entity's system of internal control. When the audit is completed, the CPA's standard audit report states that an audit was performed in accordance with generally accepted auditing standards, and expresses an opinion that the financial statements present fairly the entity's financial position and results of operations. This is known as the expression of "positive assurance."

Audit vs. Review

There are significant differences between the objectives of an audit of financial statements in accordance with generally accepted auditing standards and the objectives of a review in accordance with statements on standards for accounting and review services. The objective of an audit is to provide a reasonable basis for expressing an opinion regarding the financial statements taken as a whole. A review does not provide a basis for the expression of such an opinion because a review does not contemplate obtaining an understanding of the internal control structure or assess control risk, tests of accounting records and of responses to inquiries by obtaining corroborating evidential matter through inspection, observation or confirmation, and certain other procedures ordinarily performed during an audit. A review may bring to the accountant’s attention significant matters affecting the financial statements, but it does not provide assurance that the accountant will become aware of all significant matters that would be disclosed in an audit.

If you would like more information or would like to discuss your needs, contact us for a free consultation.

Why the need.

Audit committees are generally recommended for organizations that retain outside auditors, particularly those with $1 million or more in total annual revenues, according to The Sarbanes-Oxley Act and Implications for Nonprofit Organizations, provided by BoardSource and Independent Sector. Some states even require not-for-profits with a certain level of annual revenue to have audit committees. Of course, whether you need to create an audit committee depends on your organization and board.

Smaller nonprofits that don't conduct outside audits probably don't need an audit committee. They may have a finance committee instead, which oversees financial matters relating to the organization. Not-for-profits that do have an audit committee should separate it from the finance or investment committee to achieve greater independence.

Effective audit committees serve as positive agents of change by making sure their organizations understand and act on auditor recommendations.

What its responsibilities are

As the name suggests, the primary responsibility of the audit committee is to oversee the annual audit — this involves hiring the outside auditor, renewing the contract and monitoring performance. Additional responsibilities include:

• Meeting with auditors to plan and review the audit and at other times of the year to discuss suggested improvements or areas of concern,
• Recommending the approval or modification of the annual audit to the board,
• Monitoring the adequacy and integrity of accounting, internal control and risk management procedures, and
• Ensuring compliance with all financial reporting requirements.

Also, committee members should encourage a culture that views whistleblowing as a valuable contribution to both the workplace and employees' futures.

How to learn from for-profits

In addition to reaffirming the important role of the audit committee, many not-for-profits have adopted governance standards from the public sector. Nonprofit education and advocacy groups such as BoardSource and Independent not-for-profits. These include:

Ensuring the independence of audit committee members. Audit committee members, who are typically board members, should not be paid consultants or employees of the nonprofit staff members can provide support to the committee as needed. Also, members shouldn't have a financial stake or other conflict of interest with any organizations that conduct business with your not-for-profit. In certain instances, such as when a nonprofit has the need for specific expertise as discussed below, a non-board member might be permitted to serve in an advisory role.

Requiring financial expertise. All audit committee members will ideally possess financial savvy, but one committee member should have a background in analyzing nonprofits and be a "financial expert." This is generally defined as someone with considerable experience analyzing, preparing or auditing financial statements.

Large not-for-profits typically have an easier time attracting board members with financial expertise than do smaller organizations. One way your nonprofit may be able to acquire expertise in this area is to contract with a certified public accountant to act as an advisory member, assuming this practice is permitted by state law. To uphold independence standards, this individual should not be associated with your audit firm or provide other accounting services to your nonprofit.

Overseeing positive change. Effective audit committees serve as positive agents of change by making sure their organizations understand and act on auditor recommendations. As part of the annual audit, most not-for-profits receive a management letter outlining suggestions for improvements relating to financial management, accounting and internal control practices.

Maintaining an active relationship with auditors throughout the year. This includes consulting them as needed with questions about financial regulations or other matters pertinent to the audit. Another sound practice is for the committee to request an annual meeting with
auditors in an executive session to discuss any concerns members may have about the organization's financial situation, risk environment or staff members.

Why it's in your best interest

Like for-profit companies, nonprofits have a broad range of stakeholders and a similar degree of public accountability. And so its in their best interests to follow the highest standards of conduct. By establishing an audit committee and operating it in a manner consistent with prevailing best practices, your organization can demonstrate its commitment to upholding the public's trust.

Investment policies help you chart a prudent course

A carefully crafted investment policy goes a long way toward ensuring an organization's financial protection for individual board members against claims that investments were mishandled.

Investment policies generally address issues including:

• Investment performance goals,
• Appropriate investments in terms of risk, potential yield, liquidity, and social and ethical considerations,
• Guidelines for asset allocation, quality and diversity,
• Performance expectations and accountability requirements for investment managers, and
• Roles and responsibilities of board and staff members in overseeing investments.

Once your investment policy is established, review it quarterly. without regular monitoring, it can easily veer off course, opening up your not-for-profit and board members to risk.

On the May 15 primary ballot there will be a referendum proposing a homestead and farmstead rebate that is tied to a matching earned income tax (EIT) or personal income tax (PIT).

This statewide referendum arises from Gov. Ed Rendell’s property tax reform legislation, Act One, “Pennsylvania Tax Payer Relief Act,” which was signed into law June 27, 2006.

All school districts in Pennsylvania, other than Philadelphia, Pittsburgh, and Scranton, are required to include a referendum on the May ballot.

The following are some questions and answers designed to help you understand the issues before you cast your vote.

How can I get a homestead/farmstead property tax rebate?
To get a property tax rebate under Act One, voters will have to approve the referendum on the May ballot that would institute a personal income tax or earned income tax. If the school district already has an earned income tax, a new rate will need to be approved.

What is the difference between an EIT and a PIT?
For employees, an EIT is a local tax on wages earned on the job, similar to withheld state income tax. Business owners would pay a local EIT on the profit from sole proprietorships and partnerships. A local PIT, like state income tax, would include the income from wages and profits, as well as other sources, such as interest, dividends, capital gains, rental income, and gambling winnings.

Will I be able to choose between an EIT and a PIT at the election?
No. Your school district chose which type of tax will be offered. Each school district was required by law to appoint a local tax commission in the fall, composed of volunteers from the district. The commission’s job was to recommend which type of tax to propose and the tax rate. The school district, using this recommendation and feedback from public hearings, then made a decision as to the wording of the referendum on the ballot.

If I don’t pay any state income tax now, because my income is too low, will I need to pay a local income tax?
If your school district is proposing a PIT, the low income provisions that apply for state income tax would also apply for local tax. If the proposal is for an EIT, there is no mandatory low income threshold, but the school district has the ability to enact one.

What if I rent instead of owning a home?
You will be subject to any new EIT or PIT on your income, but since you did not pay property tax, there would be no corresponding property tax rebate.

Will the homestead and farmstead rebate be based upon how much property tax I pay now?
No. The rebate will be a fixed dollar amount for each household. The amount has been calculated based upon the average property tax currently paid in the school district, and it will be specifically stated in the referendum.

If the referendum does not pass, will there still be a property tax rebate?
No. If the referendum does not pass, there will be no new tax and there will also be no rebate at this time. Everything will remain as it currently stands.

Does the outcome of the referendum affect the school district’s budget?
No. The referendum is designed to be an even tradeoff between property tax reduction and increased income tax. However, your district may have a separate referendum on the ballot relating to the school district’s budget. Act One requires any school district whose budget calls for an increase in property tax above the rate of inflation to put an additional referendum on the ballot asking for permission to increase property taxes by the higher rate. These are different issues. It is important not to confuse the two.

If the referendum passes, what is the effective date of the tax increase?
The effective date will be July 1, 2007, which is the beginning of the next fiscal year. Whether it passes or fails, each school district will have the opportunity to have a new referendum every two years.

If you have any other general questions regarding Act One and the ballot referendum, contact us. Alternatively, you can visit the free, “Ask a CPA” online service provided by members of the Pennsylvania Institute of CPAs. It can be found at www.IneedaCPA.org.

Your local school board members and your state representative are also excellent resources for specific questions regarding your property tax.

These facts have been provided for informational purposes only. Content from the PICPA. The Pennsylvania Institute of Certified Public Accountants is a 19,000-member association of Pennsylvania CPAs in business and industry, public practice, government, and education. Information is provided as a public service to inform the voting public of basic tax issues. Views expressed do not imply an opinion of the PICPA, its officers, directors, employees, or members. PICPA is headquartered in Philadelphia with a government relations office located in Harrisburg and a western regional office in Pittsburgh. Visit www.picpa.org.

Free advertising may sound too good to be true, but many nonprofits have received just that through a program known as Google Grants — and yours may qualify. In the program's first year, 80% of organizations that applied received a grant, and the online search firm has given away $33 million in free advertising to more than 800 not-for-profits in the last two years. Ads for organizations selected by Google appear as sponsored links next to search results for keywords relating to their mission.

To be eligible for a Google Grant, which the company awards quarterly, organizations must have 501©(3) status and cannot be religious or political in nature. They also have to make a strong case in their application.

The company looks for nonprofits that share its community-service philosophy and have a strong mission to help the world in areas such as:

• Science and technology,
• Global public health,
• The environment,
• The arts,
• Youth advocacy, and
• Education.

For additional information or to apply online, go to: services.google.com/googlegrants/application.