The maximum amount of net earnings subject to the social security part of the self-employment tax for tax years beginning in 2007 is $97,500. All net earnings of at least $400 are subject to the Medicare part of the tax.

The maximum amount of wages subject to the social security tax for 2007 is $97,500. There is no limit on the amount of wages subject to the Medicare tax.

Generally, if you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership and you must file Form 1065, U.S. Return of Partnership Income.

Partners and more-than-2% shareholders in an S corporation may be able to claim this deduction when the insurance policy is in the name of the partner or shareholder. You can either pay the premiums yourself or the partnership or S corporation can pay them. However, if you pay the premiums yourself, you must be reimbursed by the partnership or S corporation to claim the deduction. For more information, see chapter 6 of Publication 535, Business Expenses.

For tax years beginning in 2007, 2008, or 2009, the percentage used to figure the domestic production activities deduction increases to 6%. For more information on this deduction, see Form 8903, Domestic Production Activities Deduction, and its instructions.

Generally, a policyholder owning one or more employer-owned life insurance contracts issued after August 17, 2006, is required to file a report for each tax year the contract(s) is owned. However, you are not required to file a report for any tax year ending before November 14, 2007. For more information, see Form 8925, Report of Employer-Owned Life Insurance Contracts.

For tips received for services performed after 2006, the amount of tips for any month that is used to figure the credit must be reduced by the amount by which the wages that would have been payable during that month at $5.15 an hour exceed the wages (excluding tips) paid by the employer during that month.

For tax years beginning after 2006, the credit is allowed against both the regular tax and the AMT.

The work opportunity credit has been extended to cover members of targeted groups who begin work for you before September 1, 2011. For tax years beginning after 2006, the credit is allowed against both the regular tax and the AMT. For more information about this credit, see Form 5884, Work Opportunity Credit.

For refueling property placed in service after 2005, the $30,000 and $1,000 credit limitations apply to each location at which property is placed in service. Also, the definition of alternative fuel is revised. For more information, see Form 8911, Alternative Fuel Vehicle Refueling Property Credit.

Additional guidance is available on obtaining the required certification of qualified costs. Also, for tax years ending after 2002, the adjustment required when you deduct qualified costs and also claim the low sulfur diesel fuel production credit is clarified. For more information, see Form 8896, Low Sulfur Diesel Fuel Production Credit.

You can generally exclude a limited amount of the value of qualified parking and commuter highway vehicle transportation and transit passes you provide to an employee from the employee's wages subject to employment taxes. For 2007, the monthly exclusion for qualified parking increases to $215 and the monthly exclusion for commuter highway vehicle transportation and transit passes increases to $110. See Qualified Transportation Benefits on page 17 of Publication 15-B, Employer's Tax Guide to Fringe Benefits (For Benefits Provided in 2007).

The following changes affect S corporations.

For returns required to be filed after December 20, 2007, the late filing penalty is increased to $85 for each month or part of a month (up to 12 months) the return is late or does not contain the required information, multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year for which the return is due. For more information, see the Instructions for Form 1065 or the Instructions for Form 1065-B, U.S. Return of Income for Electing Large Partnerships.

For returns required to be filed after December 20, 2007, a new penalty may be charged if the return is filed after the due date (including extensions) or the return does not show all required information. The penalty is $85 for each month or part of a month (up to 12 months) the return is late or does not contain the required information, multiplied by the total number of persons who were shareholders in the corporation during any part of the corporation's tax year for which the return is due. For more information, see the Instructions for Form 1120S.

A 25% exclusion from gross income is allowed for long-term capital gain from certain conservation sales of qualifying mineral and geothermal interests located on eligible federal land. The sale must be to an eligible entity and occur after December 19, 2006. An excise tax may be imposed if an eligible entity fails to take steps consistent with the protection of conservation purposes.

For details, including the geographical location of eligible federal land, see section 403 of Title IV, Division C, of the Tax Relief and Health Care Act of 2006. Also see Form 8924, Excise Tax on Certain Transfers of Qualifying Geothermal or Mineral Interests, when it is released.

In determining your net operating loss (NOL), you can no longer treat income and expenses attributable to qualified timber property located in the GO Zone, Rita GO Zone, or Wilma GO Zone as attributable to a farming business for 2007 or later years.

See When To Use an NOL in Publication 536, Net Operating Losses (NOL) for Individuals, Estates, and Trusts.

In general, you can deduct only 50% of your business-related meal expenses. However, for 2008 and later years, you can deduct 80% of meal expenses while traveling away from your tax home for business purposes if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. Business meal expenses are covered in chapter 1 of Publication 463. Reimbursements for employee meal expenses are covered in chapter 11 of Publication 535.

The maximum amount of net earnings subject to the social security part of the self-employment tax for tax years beginning in 2008 is $102,000. All net earnings of at least $400 are subject to the Medicare part of the tax.

The maximum amount of wages subject to the social security tax for 2008 is $102,000. There is no limit on the amount of wages subject to the Medicare tax.

The 6.2% FUTA tax rate has been extended through calendar year 2008. It was scheduled to decrease to 6.0% after 2007.

For 2008, an employer providing a passenger automobile for the first time for the personal use by an employee may determine the value of the personal use by using the vehicle cents-per-mile value rule if the vehicle's fair market value on the date it is first made available to the employee does not exceed $15,000 for a passenger automobile other than a truck or van, or $15,900 for a truck or van. For more information, see Cents-Per-Mile Rule on page 20 of Publication 15-B, Employer's Tax Guide to Fringe Benefits.

You can generally exclude a limited amount of the value of qualified parking and commuter highway vehicle transportation and transit passes you provide to an employee from the employee's wages. For 2008, the monthly exclusion for qualified parking increases to $220 and the monthly exclusion for commuter highway vehicle transportation and transit passes increases to $115. See Qualified Transportation Benefits on page 17 of Publication 15-B.

Generally, all amounts deferred under a nonqualified deferred compensation plan for the tax year and all preceding tax years are included in your employees' wages in the current year, unless the plan meets certain requirements. These requirements were stated in Notice 2005-1. However, portions of that notice were obsoleted and replaced by final regulations that were effective for tax years beginning after 2007. For more information, see Treasury Decision (T.D.) 9321, 2007-19 I.R.B. 1123, available at www.irs.gov/irb/2007-19_IRB/ar02.html.

For returns required to be filed for tax years beginning in 2008, the penalty is increased to $86 for each month or part of a month (up to 12 months) the return is late or does not contain the required information, multiplied by the total number of persons who were partners in the partnership during any part of the partnership's tax year for which the return is due.

In addition to certain provisions discussed earlier, the following tax benefits expired as shown below.