Washington Watch - January 14, 2009

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Washington Watch - January 14, 2009

Washington Watch Special Edition In Honor Of The Inauguration Next Week
After the Inauguration next week, the historic presidency of Barack Obama officially begins. The president-elect promises that his new recovery programs will jumpstart the economy by drastically increasing the country’s production of alternative energy sources, updating and investing in health IT and modernizing primary and higher education.

Join the Washington Watch Team next week to delve into these and other proposals of the new Administration.

Kristin Oberlander
Washington Watch, Editor

Record $1.2 Trillion Deficit In 2009, Says CBO Projection

The most recent projection from the Congressional Budget Office (CBO) anticipates that the federal budget deficit for fiscal year 2009 will hit $1.2 trillion, a number that does not include the newest economic recovery plan being discussed by Congress and President-elect Barack Obama.

The estimate was clearly a surprise to congressional leaders, as Senate Budget Committee Chairman Kent Conrad (D-N.D.) called it “jaw-dropping,” and Senate Minority Leader Mitch McConnell (R-Ky.) described it as “a stunning and sobering reminder that Congress must strengthen its efforts to be good stewards of the taxpayers’ money.”

The CBO projection was released as President-elect Obama and congressional Democrats work on an economic recovery package that could contain $800 billion worth of tax cuts and new spending over two years. Whatever it comes out to be, the final deficit figure for fiscal year 2009 will far exceed the previous dollar record of $454.8 billion recorded in fiscal year 2008.

Additional CBO projections include a 2.2 percent decrease in GDP in 2009, unemployment above 9 percent by early 2010, a 14 percent decline in average home prices through the second quarter of 2010 and a 1 percent decrease in consumption in 2009, followed by modest growth in 2010.



Almost Half of Micro-Businesses Say Current Economic Downturn Is The Worst Ever
The slowing economy has hit small businesses hard over the last few months, and many entrepreneurs are only expecting things to get worse in 2009. Forty-three percent of the self-employed and micro-business owners say that this is the worst economic downturn that they have experienced, and one-quarter say it is the first slump they have experienced with their current business, according to a study undertaken by the NASE.

More than half of the micro-business owners surveyed (51%) expected their 2008 year-end gross revenue to be lower than their gross revenue from 2007. Some small business owners seem more optimistic, with twenty-four percent expecting 2008 year end gross revenues higher than 2007, and eighteen percent expecting no change in gross revenue from 2007 to 2008.

To see the full results of the survey, visit www.nase.org.



Tax Corner: 2008 Tax Changes
  • First-Time Homebuyer Credit – Offices located inside a first-time home purchase may qualify for additional tax incentives if the purchase was made from April 9, 2008, to June 30, 2009. The $7,500 credit is very similar to a 15-year interest-free loan.
  • Standard Mileage Rates Adjusted for 2008 - The standard mileage rate for business use of a car, van, pick-up or panel truck is 50.5 cents per mile from Jan. 1, 2008, to June 30, 2008. The rate is 58.5 cents for each mile driven during the remainder of the year. 
  • Talk to the IRS - The IRS is reaching out to taxpayers who are unable to meet their obligations during this economic slump with tax credits, deductions and additional outreach. Please visit www.IRS.gov for more information on how the agency is working to help financially distressed business owners.
  • Contribution Limits for IRAs and Other Retirement Plans - Where an IRA contributor who is not covered by a workplace retirement plan is married to someone who is covered, the deduction is phased out if the couple’s income is between $159,000 and $169,000. 
  • Self-Employment Tax Changes - For those who receive Social Security Retirement or disability benefits, Conservation Reserve Program (CRP) payments are now exempt from the 15.3-percent social security self-employment tax. The income thresholds increase for the 2008 filing season and are indexed for inflation. 
  • AMT Exemption Increased for 2008 - For tax-year 2008 only, the exemption for a married couple filing a joint return is $69,950, up from $66,250 in 2007; $34,975 for a married person filing separately, up from $33,125 and $46,200 for singles and heads of household, up from $44,350.

Entrepreneurs preparing to meet the filing deadline can turn to Hall and other qualified CPAs for help through NASE’s TaxTalk program at taxtalk.nase.org. While there, they can submit a tax question, watch or download tax advice from Keith Hall and browse the TaxTalk resource library. Find out more information about these and other tax law changes for the 2008 tax season check the instructions on the 1040 form or www.IRS.gov.

Lawmakers and media outlets across the country rely on and regularly cite the NASE as a source of small and micro-business expertise. Help the NASE make sure the micro-business perspective is heard by taking this month’s poll.

Click here to log-in and participate

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