Another year means new inflation adjustments to some of the key IRS figures. Here are the most popular ones that may affect you:
401K max 17,000 to 17,500
IRA (Roth or Traditional) 5,000 to 5,500
Gift tax exclusion 13,000 to 14,000
Kiddie tax exclusion 950 to 1,000
SS Wage base 113,700 to 110,100
Per Diem Limit adjustments
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Some ministers who are approaching retirement or in retirement may be interested in this article about the different housing options available to retired ministers. Keep in mind that housing allowances are not taxable income to the minister, so this can be a very good benefit to these individuals.
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Here in NC we are used to hearing about an estate tax, at the US and NC level. Some states have an inheritance tax though, and this article highlights which states have which type of laws regarding estates.
The main difference is that if there is an estate tax the estate will pay it and whatever money you receive as an inheritance has already paid any applicable taxes and you get to keep all your receive.
With an inheritance tax the person who receives the money will have to send in a portion of their inheritance. Each files and is taxed individually.
The main difference is that if there is an estate tax the estate will pay it and whatever money you receive as an inheritance has already paid any applicable taxes and you get to keep all your receive.
With an inheritance tax the person who receives the money will have to send in a portion of their inheritance. Each files and is taxed individually.
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A few years ago Congress lowered the amount of taxes that social security (FICA) is taking out of your paycheck by 2%. This was a temporary measure to stimulate the economy with extra money in our pockets (that has been extended because the economy needed more of a push and people liked the extra money).
Unfortunately the clock is ticking on this tax break, and it looks like our paychecks will be a little smaller in 2013 (Unless Congress decides to extend this even more). I doubt that will happen, because the SS Trust Fund is hurting and needs the money.
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Unfortunately the clock is ticking on this tax break, and it looks like our paychecks will be a little smaller in 2013 (Unless Congress decides to extend this even more). I doubt that will happen, because the SS Trust Fund is hurting and needs the money.
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The short answer is...probably not, but this article helps explain the criteria the IRS has established to determine if your political donation is deductible or not.
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Article
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The Affordable Health Care Act did much more than just alter the health care industry. There are a multitude of tax changes that accompany it. Here is a summary of those tax changes (in order by what most people will be impacted by):
Medical care itemized deduction threshold (Sec. 213): Threshold for the itemized deduction for unreimbursed medical expenses is increased from 7.5% of adjusted gross income (AGI) to 10% of AGI for regular income tax purposes. (Effective 2013 generally, 2017 for certain taxpayers.)
Health flexible spending arrangements (FSAs) (Sec. 125(i)): Maximum amount available for reimbursement of incurred medical expenses under a health FSA for a plan year (or other 12-month coverage period) must not exceed $2,500. (Effective 2013.)
Restrictions on use of HSA and FSA Funds (Sec. 223): Amounts paid for over-the-counter medications will no longer be reimbursable from HSAs, Archer MSAs, health FSAs, or health reimbursement arrangements. (Effective 2011.)
Medicare tax on investment income (Sec. 1411): Imposes a tax on individuals equal to 3.8% of the lesser of the individual's net investment income for the year or the amount the individual's modified AGI exceeds a threshold amount. (Effective 2013.)
Premium-assistance credit (Sec. 36B): Refundable tax credits that eligible taxpayers can use to help cover the cost of health insurance premiums for individuals and families who purchase health insurance through a state health benefit exchange. (Effective 2014.)
Medical care itemized deduction threshold (Sec. 213): Threshold for the itemized deduction for unreimbursed medical expenses is increased from 7.5% of adjusted gross income (AGI) to 10% of AGI for regular income tax purposes. (Effective 2013 generally, 2017 for certain taxpayers.)
Health flexible spending arrangements (FSAs) (Sec. 125(i)): Maximum amount available for reimbursement of incurred medical expenses under a health FSA for a plan year (or other 12-month coverage period) must not exceed $2,500. (Effective 2013.)
Restrictions on use of HSA and FSA Funds (Sec. 223): Amounts paid for over-the-counter medications will no longer be reimbursable from HSAs, Archer MSAs, health FSAs, or health reimbursement arrangements. (Effective 2011.)
Medicare tax on investment income (Sec. 1411): Imposes a tax on individuals equal to 3.8% of the lesser of the individual's net investment income for the year or the amount the individual's modified AGI exceeds a threshold amount. (Effective 2013.)
Premium-assistance credit (Sec. 36B): Refundable tax credits that eligible taxpayers can use to help cover the cost of health insurance premiums for individuals and families who purchase health insurance through a state health benefit exchange. (Effective 2014.)
Small business tax credit (Sec. 45R): Small businesses—defined as businesses with 25 or fewer employees and average annual wages of $50,000 or less—would be eligible for a credit of up to 50% of nonelective contributions the business makes on behalf of their employees for insurance premiums. (Effective 2010.)
Tax-exempt health insurers: Program administered by the Department of Health and Human Services that will foster the creation of qualified nonprofit health insurance issuers to offer health insurance.
Reporting requirements (Sec. 6055): Requires insurers (including employers who self-insure) that provide minimum essential coverage to any individual during a calendar year to report certain health insurance coverage information to both the covered individual and to the IRS. (Effective 2014.)
Cafeteria plans (Sec. 125): A qualified health plan offered through a health insurance exchange is a qualified benefit under a cafeteria plan of a qualified employer. (Effective 2014.)
Additional hospital insurance tax on high-income taxpayers (Sec. 3101): Employee portion of the Medicare hospital insurance tax part of FICA is increased by 0.9% on wages that exceed a threshold amount. (Effective 2013.)
Employer responsibility (Sec. 4980H): An "applicable large employer" that does not offer coverage for all its full-time employees, offers minimum essential coverage that is unaffordable, or offers minimum essential coverage that consists of a plan under which the plan's share of the total allowed cost of benefits is less than 60%, is required to pay a penalty if any full-time employee is certified to the employer as having purchased health insurance through a state exchange with respect to which a tax credit or cost-sharing reduction is allowed or paid to the employee. (Effective 2014.)
Fees on health plans (Sec. 4375): Fee is imposed on each specified health insurance policy. (Effective Oct. 2012.)
Excise tax on high-cost employer plans (Sec. 4980I): Excise tax on coverage providers if the aggregate value of employer-sponsored health insurance coverage for an employee (including, for purposes of the provision, any former employee, surviving spouse, and any other primary insured individual) exceeds a threshold amount. (Effective 2018.)
Tax on health savings account (HSA) distributions (Sec. 223): Additional tax on distributions from an HSA or an Archer medical savings account (MSA) that are not used for qualified medical expenses is increased to 20% of the disbursed amount. (Effective 2011.)
Tax on indoor tanning services (Sec. 5000B): 10% tax on amounts paid for indoor tanning services. (Effective 2010.)
SIMPLE cafeteria plans for small business (Sec. 125): An eligible small employer is provided with a safe harbor from the nondiscrimination requirements for cafeteria plans as well as from the nondiscrimination requirements for specified qualified benefits offered under a cafeteria plan. (Effective 2011.)
Expansion of adoption credit, adoption-assistance programs: Maximum adoption credit was increased and, for adoption-assistance programs, the maximum exclusion was increased. (Effective 2010; scheduled to expire at end of 2012.)
Charitable hospitals (Secs. 501(r) and 6033(b)(15)): New requirements applicable to Sec. 501(c)(3) hospitals, regarding conducting a community health needs assessment, adopting a written financial-assistance policy, limitations on charges, and collection activities. (Effective March 2010; community health needs assessment effective March 2012.)
Information reporting (Sec. 6051(a)(14)): Requires employers to disclose on each employee's annual Form W-2 the value of the employee's health insurance coverage sponsored by the employer. (Effective 2012.)
Return information disclosure (Sec. 6103): Allows the IRS, upon written request of the secretary of Health and Human Services, to disclose certain taxpayer return information if the taxpayer's income is relevant in determining the amount of the tax credit or cost-sharing reduction, or eligibility for participation in the specified state health subsidy programs. (Effective March 2010.)
Annual fee on pharmaceutical manufacturers and importers: Fee on each covered entity engaged in the business of manufacturing or importing branded prescription drugs for sale to any specified government program or pursuant to coverage under any such program. (Effective 2011.)
Excise tax on medical device manufacturers (Sec. 4191): Tax equal to 2.3% of the sale price is imposed on the sale of any taxable medical device by the manufacturer, producer, or importer of the device. (Effective 2013.)
Codification of the economic-substance doctrine (Sec. 7701(o)): Codifies the judicially created economic-substance doctrine and makes underpayments due to transactions that do not have economic substance subject to the Sec. 6662 accuracy-related penalty. (Effective 2010.)
Change to cellulosic biofuel producer credit (Sec. 40): Excludes from the definition of cellulosic biofuel any fuels that (1) are more than 4% (determined by weight) water and sediment in any combination or (2) have an ash content of more than 1% (determined by weight) (so-called black liquor). (Effective 2010.)
Deductions for federal subsidies for retiree prescription plans (Sec. 139A): Eliminates the rule that the exclusion for subsidy payments is not taken into account for purposes of determining whether a deduction is allowable for retiree prescription drug expenses. (Effective 2013.)
Adult dependent insurance coverage: Changes the definition of "dependent" for purposes of Sec. 105(b) (excluding from income amounts received under a health insurance plan) to include amounts expended for the medical care of any child of the taxpayer who has not yet reached age 27. The same change is made in Sec. 162(l)(1) for purposes of the self-employed health insurance deduction, in Sec. 501(c)(9) for purposes of benefits provided to members of a VEBA, and in Sec. 401(h) for benefits for retirees. (Effective 2010.)
Time for payment of corporate estimated taxes for 2014: For corporations with assets of at least $1 billion (determined as of the end of the preceding tax year), estimated tax payments due in July, August, or September 2014 were increased.
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Here is a good article with more details on the educational benefits available to employees. The basics are that you could offer to reimburse (or pay directly) for education that either is required for an employees current position or maintains her qualifications. So this would include things like continuing education. You can’t use reimbursement for education that qualifies an employee for new work though (a different degree or field). There is no written plan needed and no limits on the amounts. As long as you maintain records on the reimbursements then it is not wages to the employee and you can write it off as an employee benefit. It is just like reimbursing an employee for work related supplies, meals, or travel. You just have to get them to account for the expenses with receipts and reimbursement forms.
The article also mentions scholarships and written plans, but there is additional red tape with those options that I wouldn’t recommend for most small businesses. Keep in mind these type benefits would not be recommended for owner/employees.
The article also mentions scholarships and written plans, but there is additional red tape with those options that I wouldn’t recommend for most small businesses. Keep in mind these type benefits would not be recommended for owner/employees.
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Those individuals and businesses that rent a space to themselves or a related party (their Corporation) need to take heed of this caveat to the tax code. This will impact how the income/losses from any rentals will be treated (whether passive or not and allowed to net against other passive income/losses)
More info
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For those in church/nonprofit treasurer or accounting positions, the below article offers guidance on the language that should be included on the annual donation statements.
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If you own a business, you have probably received a solicitation for labor law posters. The solicitation often reads as if you have no choice but to buy their posters or you will be hit with noncompliance penalties. Fortunately you don't have to buy the posters from this vendor, but you can download all that you need for FREE at this government link.
So stay in compliance and save your money.
So stay in compliance and save your money.
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The IRS has clarified that it will allow self employed taxpayers to deduct their payments to the SSA for medicare premiums once they are enrolled in medicare. In the past the IRS had disallowed this deduction, but it has now reversed that decision, ruling that Medicare is a government insurance program that is eligible for the deduction. This will primarily benefit those over 65 who have income on a schedule C from self employment, though the article does explain how a S Corp shareholder could gain the deduction if they are willing to jump through all the right hoops.
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Article.
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When you get down to the wire, do you extend your return or file and then amend later with the additional details? This can be a touch choice, especially if you are expecting a large refund and your hands are tied while you wait on a K-1 or a social security number to come in the mail. The odds say it is better to extend according to this article if you can live without the refund funds for a little while.
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If you work from home and use your car from business then you will want to know the rules on deducting mileage. In order to qualify, your home must meet the home office limitations (whether you claim the home office or not). That means you must have an area of the home that is exclusively and regularly used as the principal place of business. If that is the case, then all the mileage you conduct for business will be deductible. Otherwise, it is considered commuting and only trips between clients would be deductible. For more details see this helpful website.
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For those who work from their home, here are some good pointers in deducting the mileage from your home to the various points of business that you will need to go to (Post Office, Supplies, Clients, Bank, etc.).
Your home must be regularly and exclusively used as the principal place of business. This can be met if you use it regularly for admin or management activities like bookkeeping and you don't have another fixed location that is set aside for those activities. Be sure that a room or at least portion of a room is used just for these business purposes (i.e. your kitchen table won't qualify).
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In a compromise that will defer but not solve the problem, Congress has decided that two more months of payroll tax cuts will be given. A little tax savings is better than nothing.
With any tax law change, there are caveats and unintended consequences. One of those is that they don't want those in higher earning brackets to save more than 2/12's of their annual FICA savings by taking all their income in the first few months. To resolve that they have also added a recapture tax to the payroll system.
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Like last year, the Emancipation day celebrations in Washington DC will delay the filing day to April 17th. This will give procrastinators 2 extra days to take care of their annual tax filing!
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For 2012 the IRS has published the following chart that shows when you can expect your refund if you efile and direct deposit your refunds:
Basically if you send in your return by Wednesday, it will be available the following Wednesday. (Interesting since last year Friday was the key day for deposits). Note that this is if all goes smoothly and your return doesn't have any processing issues or flags for review and your banking institution doesn't have any processing delays.
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With many people losing their jobs in this economy, many are turning to home based work to make ends meet. One deduction that you may qualify for is the home-office deduction. This article does a good job of highlighting who would qualify.
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For most small employers, this won't apply until 2013 at the soonest. The IRA has released more details about the disclosure requirements of health insurance premiums on employees W-2's. In 2011 (the W2 you will receive in a few weeks) the disclosure is optional as they transition in the requirement. Next year the disclosure is required if you employ more than 250 employees. After 2013 it is uncertain whether the 250 employee limit will still exempt smaller employers or not, so we will wait for further clarification. The notice also answers questions about what type of costs should be reported, and what to do if employees pay for a portion of the cost through paycheck withholding.
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