Welcome to Money Tips!
A publication of Johnson Financial Services

In This Issue                                                    July 2009

~A Note from JFS: Minimum Wage goes UP

~Tax Information: Employer Provided Cell Phones

~Personal Financial Information: Cash for Clunkers Program
~Need Help? Johnson Financial Services has a myriad of services to help you succeed!

A Note From JFS

 Lots of financial activity this month….Federal Minimum Wage will increase on July 24, 2009 to $7.25 per hour.  Employers of employees who are subject to both state and federal minimum hourly wage rates will have to comply by paying those employees the greater of the state or federal rates.  Here are the new 2009 rates effective July 24, except as noted:

§                  ALABAMA - $7.25 (was $6.55)

§                  ALASKA - $7.25

§                  ARIZONA - $7.25

§                  ARKANSAS - $7.25 (was $6.55)

§                  CALIFORNIA - $8.00 (except in "living wage" areas).

§                  COLORADO - $7.28

§                  CONNECTICUT - $7.65

§                  DELAWARE - $7.25 (was $7.15)

§                  D.C. - $7.55

§                  FLORIDA - $7.25 (was $7.21)

§                  GEORGIA - $7.25 (was $6.55)

§                  HAWAII - $7.25 per hour.

§                  IDAHO - $7.25 (was $6.55)

§                  ILLINOIS - $8.00 as of 7/1/09 (was $7.75)

§                  INDIANA - $7.25 (was $6.55)

§                  IOWA - $7.25 per hour.

§                  KANSAS - $7.25 (was $6.55)

§                  KENTUCKY - $7.25 7-1-2009

§                  LOUISIANA - $7.25 (was $6.55)

§                  MAINE - $7.25

§                  MARYLAND - $7.25 (was $6.55) (A living wage of $8.30 or $11.30, is applicable to contractors doing business with the state.)

§                  MASSACHUSETTS - $8.00 per hour. (The state minimum wage rate must be at least 10 cents higher than the federal minimum wage rate.)

§                  MICHIGAN - $7.40 per hour.

§                  MINNESOTA - $7.25 (was $6.55)

§                  MISSISSIPPI - $7.25 (was $6.55)

§                  MISSOURI - $7.25 (was $7.05)

§                  MONTANA - $7.25 (was $6.90) - exception for businesses with annual gross sales of $110,000 or less).

§                  NEBRASKA - $7.25 (was $6.55)

§                  NEVADA - $7.25 (was $6.85) (was $6.55 - for employees who do not receive health benefits.(Some exceptions for employers who provide a qualified health plan.)

§                  NEW HAMPSHIRE - $7.25 per hour

§                  NEW JERSEY - $7.25 (was $7.15)

§                  NEW MEXICO - $7.50

§                  NEW YORK - $7.25 (was $7.15) (Watch for wage order increases.)

§                  NORTH CAROLINA - $7.25 (was $6.55)

§                  NORTH DAKOTA - $7.25 (was $6.55)

§                  OHIO - $7.30 per hour.

§                  OKLAHOMA - $7.25 (was $6.55)

§                  OREGON - $8.40

§                  PENNSYLVANIA - $7.25 (was $7.15)

§                  PUERTO RICO - $7.25 (was $6.55)

§                  RHODE ISLAND - $7.40

§                  SOUTH CAROLINA - $7.25 (was $6.55)

§                  SOUTH DAKOTA - $7.25 (was $6.55)

§                  TENNESSEE - $7.25 (was $6.55)

§                  TEXAS - $7.25 (was $6.55)

§                  UTAH - $7.25 (was $6.55)

§                  VERMONT - $8.06

§                  VIRGINIA - $7.25 (was $6.55)

§                  WASHINGTON - $8.55 (Special rate for youth.)

§                  WEST VIRGINIA - $7.25

§                  WISCONSIN - $7.25 (was $6.55)

§                  WYOMING - $7.25 (was $6.55)  

Tax Planning

Employer Provided Cell Phone PROPOSALS
 
The personal use portion of an employer-provided cell phone is a taxable fringe benefit to employees and belongs on their W-2s accordingly.
 
In Notice 2009-46 IRS has proposed three (really four) methods to simplify the tax treatment of an employee’s personal use of employer-provided cell phones.  These are proposals, not yet effective.
 
IRS has requested comments on the proposals on or before September 4, 2009.  There are specific areas they would like to see people address including, among others, type of employee records that should be sufficient, how to define the specified amount or type of “minimal” personal use, and the methods employers are currently using.  The Notice provides the address to use to send comments.  Here are the proposals IRS has put forth for comments:
1) Minimal Personal Use Method #1 – The entire amount of an employer provided cell phone would be deemed to be for business use if the employee can account to his or her employer with sufficient records to establish that the employee maintains and uses a personal (non-employer-provided cell phone for personal purposes during the employee’s work hours.
 
2) Minimal Personal Use Method #2 – The entire amount would be deemed to be for business use if the employee uses the phone for no more than a specified amount or type of “minimal” personal use.  This could be based on number of minutes or for certain personal purposes.
 
3) Safe Harbor Substantiation Method – A flat 75% of the phone’s use would be considered to be business and the remaining 25% would be considered personal and treated as employee compensation.
 
4) Statistical Sampling Method –An employer could use statistical sampling to measure an employee’s personal use and multiply the personal use percentage by each employee’s usage to determine the compensation (personal use portion).
 
This Notice does not change or address the deduction computation for self-employed individuals nor non-reimbursed employees.  Substantiation was somewhat addressed in INFO 2007-0030.
 
These proposals could simplify some employer methods.  Or this news could cause some employers more work if they aren’t already including the personal use of company-provided cell phones in the employees’ wages.
 
Notice 2009-46 can be found at www.irs.gov by using the Search box.  It is currently included in the Internal Revenue Bulletin 2009-23.

Personal Financial Information

Cash for Clunkers
 
This is not a tax issue, but contains a part you may be interested in knowing about.  We have already heard from clients asking about this so we figured we’d share what we found.
 
HR 2346 was passed by the House and Senate and forwarded to President Obama, who is expected to sign it.  The official title of the Cash for Clunkers portion of HR 2346 is the “Consumer Assistance to Recycle and Save Act of 2009.”  The program is established in the National Highway Traffic Safety Administration.  Here are the rules we have found:
 
1)  The Secretary shall authorize the issuance of an electronic voucher to offset the purchase price or lease price for a qualifying lease (not less than 5 years) of a new fuel efficient automobile upon the surrender of an eligible trade-in vehicle to a dealer participating in the program.
 
2)  The Secretary will register dealers for participation in the Program and require that all registered dealers:
-- a) Accept the vouchers as partial payment or down payment for the purchase or qualifying lease of any new fuel efficient automobile offered for sale or lease by that dealer, and
-- b) To transfer the trade-in vehicle to an entity for disposal.
 
Eligible trade-in vehicles must:
1) Be in drivable condition,
2) Been continuously insured consistent with applicable State law and registered to the same owner for a period of not less than one year immediately prior to the trade-in,
3) Was manufactured less than 25 years before the date of the trade-in, and
4) In the case of an automobile, has a combined fuel economy value of 18 miles per gallon or less.
 
The new vehicle must:
1) Be a vehicle where the equitable or legal title has not been transferred to any person other than the ultimate purchaser,
2) It carries a manufacturer’s suggested retail price of $45,000 or less,
3) It meets certain standards under various sections of Title 40, Code of Federal Regulations, and
4) That meets the mpg ratings of at least 22 (automobile), 18 (category 1 truck), or 15 (category 2 truck).
 
Qualifications for vouchers (and their value):
1) $3,500 if the new vehicle:
-- a) Is a passenger automobile and the combined fuel economy value (we’ll call this the “mpg”) is at least 4 mpg higher than the qualifying old vehicle,
-- b) Is a category 1 truck and is at least 2 mpg higher than the old vehicle,
-- c) Is a category 2 truck that is at least 15 mpg and
---- i) The new vehicle is a category 2 truck with an mpg at least 1 mpg higher than the old vehicle, or
---- ii) The old vehicle is a category 3 truck of model year 2001 or earlier, or
-- d) Is a category 3 truck and the old is a category 3 truck of model year of 2001 or earlier and is of similar size or larger than the new as determined in a manner prescribed by the Secretary.
 
2) $4,500 if the new vehicle:
-- a) Is a passenger automobile with an mpg at least 10 higher than the old vehicle,
-- b) Is a category 1 truck with an mpg at least 5 higher than the old vehicle,
-- c) Is a category 2 truck with at least 15 mpg and is at least 2 mpg higher than the old vehicle AND the trade-in vehicle is a category 2 truck.
 
Limitations:
1) These vouchers only apply to purchases or qualifying leases that occur between July 1, 2009 and November 1, 2009.
 
2) Not more than one voucher can be issued for a single person, not more than one voucher can be issued for the joint registered owners of a single eligible trade-in vehicle, and not more than one voucher can be applied toward the purchase or lease of a single new fuel efficient automobile.
 
3) The availability or use of a Federal, State, or local incentive or a State-issued voucher for the purchase of a qualifying vehicle does not limit the value of the voucher under this program.
 
4) The Department has a one billion dollar limit on the vouchers and not more than 7.5% of the total limit can be used on category 3 trucks.
 
5) Dealers cannot charge a fee for the use of the voucher but is allowed to retain $50 of any amounts paid to the dealer for scrapping of the trade-in.
 
6) The dealers will have to certify that they are transferring the clunker for disposal and are not selling, leasing, exchanging, etc. the clunker.  The disposal company can sell any parts of the disposed vehicle other than the engine block and drive train, although the drive train could be sold as the separate parts of the transmission, drive shaft, and rear end.
 
Definitions:
PASSENGER AUTOMOBILE – This is a passenger automobile, as defined in §32901(a)(18) of Title 49 USC, that has a combined fuel economy value of at least 22 miles per gallon.
CATEGORY 1 TRUCK – This is a non-passenger automobile, as defined in §32901(a)(17) of Title 49 USC, that has a combined fuel economy value of at least 18 miles per gallon AND that is not a Category 2 truck.
CATEGORY 2 TRUCK – This is a large van or a large pickup, as categorized by the Secretary using the method used by the EPA and described in the report entitled “light-Duty Automotive Technology and Fuel Economy Trends:  1975 through 2008.”
CATEGORY 3 TRUCK – This is a work truck, as defined in §32901(a)(19) of Title 49 USC.
COMBINED FUEL ECONOMY VALUE – This is the number in mpg centered below the words “Combined Fuel Economy” on the label required to be affixed to a new automobile.
 
For the trade-in vehicle it is the amount under “Estimated New EPA MPG” for vehicles of model year 1984 through 2007, the amount under “New EPA MPG” for vehicles of model year 2008 or later, found on the fueleconomy.gov website of the EPA for the make, model, and year of such vehicle.

Questions can probably be best answered by the dealers or the Department of Transportation. 

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