Tax Changes For Year 2001 !!!

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bmcper CEO/Auditor Posts: 80 (5/2/01 5:27 pm)	Tax Changes For Year 2001 !!! House passes IRA , 401(k) boost Contribution limits raised for retirement savings programs MSNBC News Services WASHINGTON, May 2 — The House easily passed legislation Wednesday to expand contribution limits for IRAs and 401(k) plans and encourage more companies to offer retirement pensions. The change to individual retirement accounts (IRAs) would take place over three years starting next year when a maximum contribution of $3,000 would be allowed. The maximum would rise to $4,000 in 2003 and $5,000 in 2004. The 407-24 vote sent the bill to the Senate, where a nearly identical measure died last year. TO HELP older workers catch up on their retirement savings, the legislation would immediately raise the IRA contribution limit to $5,000 for taxpayers 50 and older. Contributions to 401(k) and other employer-sponsored retirement accounts would rise to $15,000 from the current $10,500. Workers would also vest employer matching contributions sooner, reducing the time to three years from five. BILL GOES TO SENATE The 407-24 vote sent the bill to the Senate, where a nearly identical measure died last year. President Bush has spoken favorably of the approach but did not include such a measure in his tax cut package. The legislation is backed by the financial services industry and may be folded into the $1.35 trillion 11-year tax cut bill Bush is expected to sign this year. Sen. Pete Domenici, chairman of the Senate Budget Committee, predicted Wednesday that the Senate would pass the bill this year, perhaps by attaching it to unrelated legislation. Retirement planner The bill would cost an estimated $52 billion over 10 years. The measure also contains more than 50 provisions intended to prompt more companies to offer pensions and simplify the system. These include faster employer vesting requirements, lower Internal Revenue Service fees and greater portability of pension plans for employees who change jobs. MILLIONS DON'T HAVE PENSION PLAN The legislation was billed as a way to supplement Social Security just as 76 million baby boomers begin to retire and boost a U.S. savings rate from its lowest level in 67 years. About 70 million American workers currently aren't covered by a pension plan. While 401(k) plans are increasingly popular, the Employee Benefits Research Institute estimated that the average account balance is only about $37,000 — and half of all 401(k) participants have saved less than $10,000. Democrats offered an alternative that would include maximum $1,000 tax credits for lower-income people to invest in an IRA or 401(k) plan. Many Democrats say the bill passed Wednesday unduly favors middle- and upper-income people who can already afford to save for retirement. The House voted 223-207 against the alternative measure in part because it would nearly double the cost of the legislation. The Associated Press and Reuters contributed to this report.
bmcper CEO/Auditor Posts: 119 (3/7/02 8:54 am)	Re: Tax Changes For Year 2001 !!! Tax relief for victims of the terroist attack of Sept. 11, 2001. Reduced Tax Rates For tax years beginning in year 2001, the income tax rates have been reduced. 15.0% rate is reduced to 10% 28.0% rate is reduced to 27% 31.0% rate is reduced to 30.5% 36.0% rate is reduced to 35.5% 39.6% rate is reduced to 39.1% These rates should have been reflected in your withholding tax after August, 2001. Rate Reduction Credit If you did not receive the maximum advance payment in 2001, you may be eligible for the rate reduction credit. Child Tax Credit The maximum child tax credit has been increased to &600. The qualifications for claiming this credit gave been changed to include a qualifying individual with fewer than 3 children. Interest on Student Loans You may be able to deduct as an adjust to income,interest paid on a student loan. The maximum deduction is increased to $2,500 IRA Limits Increased If you have an individual retirement arrangement and are covered by an employerretirement plan, the amount of income that you can have and not be affected by the deduction phaseout has been increased. The amounts vary, depending on filinfg status. Alternative Minimum Tax (AMT) Exemption amounts have been increased Schedule D The tax computation has been made easier for most taxpayers. Capital Gains Tax The reduction in the capital gain reduction is for 5 year Long-term gain only. You must have held the property for five years or more. Foreign Earned Income The amount of foreign earned income that you can exclude from ordinary income has increased to $78,000 Standard Mileage Rate This rate has increased to 34.5 cents a mile Social Security and Medicare Taxes The maximum wages subject to S.S. tax (6.2%) increased to $80,400. All wages are subject to Medicare tax (1.45%). Third Party Designee Starting in 2001 you can check the "yes" box in the third party designee area, to allow the IRS to discuss your tax return with a friend, family member or tax preparer. This acts as a "power of attorney" for this tax return only.

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