Have you noticed that milk, gas, and insurance (to name a few items) have gone up in price?

Have you realized that your grocery bill is much higher than it used to be?

What about your real estate taxes?

Well, The New York State taxing authorities have decided to jump on board with everyone else…

We would like to inform you of some recent changes which may affect your 2009 taxes. Unfortunately, New York State has increased personal income taxes (based upon income qualifications). The state has also imposed a new tax, called the “Metropolitan Commuter Transportation Mobility Tax” (MCTMT).

New York State Income Tax Increases will affect taxpayers in several areas. The changes are retroactive to January 1, 2009.

First, a phase-out will affect taxpayers having an adjusted gross income (“AGI”) in excess of $1,000,000. If you fall into this category, all your state itemized deductions will be eliminated with the exception of 50% of your charitable deductions. That could result in a substantial increase in your taxable income. Many of us depend on our itemized deductions (such as real estate taxes and mortgage interest) to reduce our taxable income considerably.

Second, many taxpayers are facing increased rates for 2009. The increases affect individuals who have New York taxable income that is:

• More than $300,000 (married filing jointly or qualifying widower)

• More than $200,000 (single or married filing separate)
  

• More than $250,000 (head of household)

The New York State tax rates before this increase ranged from 4% to 6.85%. In 2009, the rates have increased to 7.85% for many and 8.97% for others, depending on taxable income as well as filing status.

Third, due to the above changes in tax laws, we are forced to recompute our 2009 estimated taxes. Taxpayers who pay estimated taxes each quarter must now recalculate the estimates under the new rules. Before these new rules came into effect, we could compute our estimates based on the previous years’ tax. New York’s tax rule states that, generally, the estimated tax must be the lesser of:

• 90% of the current year’s tax due shown on your tax return; or

• 110% of the tax shown on the previous year’s tax return.

Under the new tax rules, we must refigure the “previous year’s tax” using 2009’s increased tax rates, as well as the new “itemized deduction elimination”. If your estimated taxes are underpaid due to this new rule, it can result in penalties for underpayment of estimated tax. However, since the tax increases are retroactive, New York State will not be imposing penalties on any shortages in your April 15, 2009 estimate, as long as the shortage was paid in the June 15, 2009 estimate.

“Metropolitan Commuter Transportation Mobility Tax” (MCTMT)

This is a completely new tax, which became effective March 1, 2009. This tax is being imposed in order to raise money for the Metro Transportation Authority. There will be a separate MCTMT report which must be filed each quarter. NYS has not released these reports yet, however, we do know who this tax will affect and when it must be paid.

This new tax affects employers and self-employed individuals who conduct business within the Metropolitan Commuter Transportation District (MCTD). This district encompasses the five boroughs (Manhattan, Queens, Brooklyn, Bronx, and Staten Island), and the counties of Rockland, Nassau, Suffolk, Orange, Putnam, Dutchess and Westchester.

Employers:

In order to determine if the employer has payroll that is within the MCTD area, New York State outlines  what is considered to be services performed in the MCTD area. If an employee’s services fall under any of the following categories, then the employer is subject to this new tax:

1. Services that are performed entirely inside the MCTD area.

2. Services that are both in and out of the MCTD area, but those that are performed outside the area are not the main area where work is usually done.

3. Services of an employee with an MCTD Base of Operation- This pertains to an employee who is not always inside the MCDT area providing services, however, he/she returns to a specific area that is within the MCTD in order to gather documents, sign in, replenish supplies, etc. For example, this may be the regional office.

4. Where the employer controls or directs activities and some work is performed in the MCTD area.

5. If none of the above applies, and the employee lives in the MCTD area, than the employer will be subject to the tax.

 

Basically, they get you in any way they can!

The tax will be .34% (i.e. thirty-four hundredths of a percent) of each employee’s salary or wages. No withholding is permitted from employees. The tax is therefore imposed on the employer.

 

Self Employed Individuals: (sole proprietors and owners of a partnership or LLC that is an active business)

The MCTMT for self employed individuals is a little bit different than that of the employers. Although the tax rate of  .34% is consistent, the tax will be based on the net income of self-employed individuals. However, if the self-employed individual’s net earnings are $10,000 or less, he/she will be exempt from this tax. (For 2009, the amount due will be based on ten-twelfths of the net private practice income.)

Estimated tax will be due each quarter. Normally, the due dates will be April 30, July 31, October 31, and January 31. However, because the form has not been released to the public yet, the first payment for 2009 will be due on November 2, 2009. This payment will cover the amount due for the period of March 1 through September 30.

We certainly need to eat, drive and pay taxes. Who knows, maybe when the economy turns around, we will be given more rebates to offset these increases during tough times. There are no guarantees in life, but we can dream!

 

If you have any questions, please feel free to call our office.