The first edition of this manual printed in early November contained more questions than answers concerning 1989 legislation. This update is based on the Revenue Reconciliation Act of 1989, passed by Congress on November 22, 1989 but still waiting for the President's signature. Capital gains - Proposed capital gains tax reductions and indexing provisions were all excluded from RRA'89. The Capital Gains debate is almost certain to be continued in 1990. Section 89 - Legislation enacted as part of TRA'96 requiring employers providing accident or health plans and group-term life insurance to follow tough new qualification and nondiscrimination rules was repealed. The old section 89 rules are now in affect. Medicare Surtax - RRA'89 repeals the entire supplemental Medicare premium or surtax and is retroactive to 1989. There will be no surtax paid on 1989 tax returns. Farm Employers Subject to Income Tax Withholding - Beginning January 1, 1990 farm employers must withhold federal and NY State income taxes from cash wages paid to all farm employees subject to FICA (social security) taxes. See page 51 for explanation of farm employees subject to social security. Health Insurance - The 25 percent health insurance deduction for the self-employed taken on form 1040 has been extended through September 1990. Tax Credits - The targeted jobs tax credit, business energy credit, low-income housing credit and research and experimentation credit (with modifications) have been extended through September 30, 1990. The childcare credit was not extended by RRA'89.