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Dear Clients: During the course of the year, we will be adding additional notes, commentaries, and information on various topics as we hear about them. Please call us for additional information at (815) 363-0808.

Should you wish to visit with me personally or have a question, I will have a Booth at:
- McHenry Area Chamber of Commerce Expo on Saturday, February 20th from 10am to 4pm.
- Crystal Lake Home & Business Expo on Saturday, March 27 from 10am to 4pm & Sunday, March 28 from 11am to 3pm.
- Please stop by! We will have a Free Prize Drawing of one professionally completed Tax Return.
With the U.S. economy evolving so quickly, I continue looking for information that can help you focus on and understand the activities that may impact you financially. Below is a summary of key legislative items included in the new American Recovery and Reinvestment Act (aka- the Stimulus Bill) recently passed by the U.S. Government. I encourage you to review this information to become more familiar with how its benefits may apply to you. You can also find additional information about this new legislation on-line at: www.recovery.gov

The items shown below may have a direct impact on your 2009 Tax Return!

The American Recovery and Reinvestment Act (aka- The Stimulus Bill) On Feb. 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009. This new law is intended to jump-start the U.S. economy through direct spending and tax incentives. Most of the tax incentives are retroactive to Jan. 1, 2009. The individual incentives included in the law are as follows:
- Making Work Pay Credit This allows a credit against income tax in an amount equal to the lesser of 6.2% of an individual’s earned income or $400. This credit applies in full for individuals whose modified adjusted gross income does not exceed $150,000, married filing jointly, or $75,000, filing single. This credit effectively offsets an individual’s FICA payroll taxes.
- $250 economic-recovery payment This is a one-time payment of $250, for 2009 only, to individuals on fixed incomes; i.e., Social Security recipients, railroad retirees and disabled veterans.
- AMT patch The 2009 alternative minimum tax exemption amounts are $70,950 for joint filers and surviving spouses and $46,700 for singles and heads of household.
- First-time home-buyer tax credit The current credit is increased to $8,000, from $7,500, and extends the eligible use until Nov. 30, 2009. It also eliminates any required repayment to the Internal Revenue Service after 36 months in the home. This credit applies to purchases made after Dec. 31, 2008. The credit phases out at $75,000 for single filers and $150,000 for joint filers.
- New-car deduction This allows for an above-the-line deduction on purchases of new vehicles for state and local sales taxes or excise taxes paid on the purchase. There are two limits on the deduction: 1. Deductible sales or excise taxes cannot exceed the portion of the tax attributable to the first $49,500 of the purchase price of any one vehicle; and 2. Any deduction will be phased out to the extent the purchaser has adjusted gross income exceeding $125,000 for single filers and $250,000 for joint filers. This deduction is allowed only on purchases made after Feb. 17, 2009.
- Education credit The HOPE Education Credit has been renamed the American Opportunity Tax Credit. The credit has been increased from a maximum of $1,800 to $2,500 and also makes 40% of the credit refundable.
- Child Tax Credit The income threshold has been set at $3,000, thus effectively increasing the refundable portion of the credit for 2009 and 2010.
- Earned Income Tax Credit This credit has been increased to 45% of the first $12,570 of earned income for taxpayers with three or more qualifying children.
- Unemployment compensation For 2009, $2,400 of unemployment compensation will be excluded from gross income.
- Transit benefits parity Currently, $120 per month of qualified transportation fringe benefits are excluded from gross income. The new law increases that amount to $230 per month.
- Qualified tuition programs (Section 529 college savings plans) Historically, under the qualified tuition program, beneficiaries of a 529 plan would be taxed on distributions that were not used to pay qualified education expenses. For 2009 and 2010, the new law allows beneficiaries tax-free distributions to pay for computers and computer technology, including Internet access.

The business incentives included in the law are as follows, which may have a direct impact on your 2009 Tax Return:

1. Bonus depreciation The new law extends the 50% first-year bonus depreciation that was allowed under the 2008 Economic Stimulus Act through Dec. 31, 2009. There is also a higher cap on vehicle depreciation ($8,000).

2. Internal Revenue Code Section 179 expensing The new law retains the 2008 Section 179 expensing amounts of $250,000 and $800,000 for the cost threshold on purchases.

3. Net operating loss carry-back The new law provides a five-year carry-back of 2008 NOLs but only for qualified small businesses with average gross receipts of $15 million or less. The new law gives these businesses the choice to carry back NOLs three, four or five years.

4. Work Opportunity Tax Credit Two new categories of targeted groups have been created: unemployed veterans and disconnected youth. According to a February Government Accountability Office report, disconnected youth are those “14 to 24 who are not in school and not working, or who lack family and other support networks.”

5. Cancellation of indebtedness The new law will allow certain businesses to elect to recognize cancellation of indebtedness income over five years, beginning in 2014, for specific types of business debt purchased by the business after Dec. 31, 2008, and before Jan. 1, 2011.

6. Qualified small-business stock Investors may exclude 75% of the gain from the sale of certain small-business stock after Feb. 17, 2009 and before Jan. 1, 2011.

7. S corporation built-in-gain period The new law shortens the holding period for assets subject to the built-in-gains tax imposed after a C corporation elects to convert to an S corporation to 7 years, from 10. This applies to C corporations that convert to S status in tax years beginning in 2009 and 2010.

8. Estimated taxes Individuals whose income is primarily from small business in 2009 may calculate their estimated tax payments on 90% of their 2008 tax liability.

9. COBRA Benefits Individuals involuntarily separated from employment between Sept. 1, 2008, and Jan. 1, 2010, may elect to pay 35% of COBRA coverage and have it treated as paying the full amount. The former employer will be required to pay the remaining 65% but will be reimbursed by crediting those amounts against income tax withholding and payroll taxes it is otherwise required to remit to the federal government.

You will hear and read a lot this year about Roth IRA, and, specifically the Conversion of Traditional IRA accounts to Roth IRA. This can be an attractive tax and investment move for individuals, but not for some. It can also be a good Estate Planning tool, but also a tax trap for the unwary. Please call us for an appointment should you wish to review your own personal situation with me, whether or not I have been working with your investments. The same applies to your friends and relatives if they are looking for some help.

The IRS has announced that it has $123.5 million in the form of 107,831 refund checks that were returned by the U.S. Postal Service due to mailing address errors. Because of address or mailing problems, it is generally best to choose electronic filing and direct deposit when you file your tax returns because it puts an end to lost, stolen, or undeliverable checks.

Here are some personal notes and observations to seriously consider this year:

It has been statistically proven that investors do better using the services of a financial advisor than going it alone. Emotion, biases, expertise, tax knowledge, etc. all play a part in determining personal results.
A recent study of results over a 25-year period has concluded that investment results of the stock market versus the bond market showed a difference of only .25% in favor of the stock market.
Many experts believe that stock market returns for the foreseeable future will be somewhat muted, in the range of 6% to 7%, and nowhere near its previous historical averages. Bond Funds may be a good alternative - ask me for suggestions.
Although the stock and bond markets have risen nicely over the last six months or so remember that the numbers cited reflect increases in returns from very historical lows in many instances. Furthermore, many experts believe a "Market correction" is in our future, which could dampen returns once again.
Social Security payments have not increased, but Medicare and Part D Premium payments have gone up. Other cost of living items have also gone up, but interest rates paid on savings and investments have not risen, and may not go up for some time to come. Are you feeling financially "squeezed"? Call us if you would like to discuss the possibilities of making more money and also protecting what you do have.
Is the bubble about to burst with gold; is there room for still higher prices?
Do you think you have a good investment/financial plan, or do you think it could use some improvement? Bond Funds may be a good source of income - ask me for suggestions.
Do you have a financial/investment plan? Systematic investing may be a good start. Ask me for suggestions.
Have you saved any money in the last year for your future; do you know how to do so? Bond Funds may be a good way to start - ask me for suggestions.

Finally, I work with Long Term Care Insurance, and represent Prudential Insurance Co., and Mutual of Omaha. Please read the article, "Consider long-term care insurance now," written by Sun-Times Columnist Terry Savage, and seriously consider the facts she discussed, which could also have other implications such as those I have outlined above.

As always, if you have any questions about this information, please contact me at your convenience at (815) 363-0808.

IRS CIRCULAR 230 NOTICE: THIS WRITTEN ADVICE WAS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED, BY ANY TAXPAYER, FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THE TAXPAYER UNDER THE INTERNAL REVENUE CODE. THE FOREGOING STATEMENT HAS BEEN ADDED TO THIS COMMUNICATION PURSUANT TO U.S. TREASURY REGULATIONS.

Other thoughts:

Securities offered through SagePoint Financial, Inc., member FINRA/SIPC. Investment advisory services offered through Frank D. Olesuk, a registered investment advisor not affiliated with SagePoint Financial, Inc.

This communication is strictly intended for individuals residing in the states of AZ, CA, CT, FL, IA, ID, IL, IN, MI, NJ, NY, OH, PA, SD, TN, TX, VA, and WI. No offers may be made or accepted from any resident outside the specific state(s) referenced.

A Broker/dealer, investment advisor, BD agent, or IA rep may only transact business in a state if first registered, or is excluded or exempt from state broker/dealer, investment adviser, BD agent, or IA registration requirements as appropriate. Follow-up, individualized responses to persons in a state by such a firm or individual that involve either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without first complying with appropriate registration requirements, or an applicable exemption or exclusion. For information concerning the licensing status or disciplinary history of a broker/dealer, investment adviser, BD agent, or IA rep, a consumer should contact his or her state securities law administrator.

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