• Business mileage rate is 55.5 cents/mile.
• Medical mileage rate is 23 cents/mile
• Moving expense rate is also 23 cents/mile
• Charitable mileage rate is 14 cents/mile*

Due to the portability options with the new estate tax laws, many people that don't have taxable estates and would not have needed to file a return under the old laws would benefit from filing now. By filing now they can port or transfer their estate tax exemption to their spouse, and in doing so increase the size of their spouses estate that escapes taxation.

The president and congress have created a new tax credit aimed at hiring veterans.

Many people, especially small service based professionals, elect to be an S Corporation. An S Corporation can offer liability as well as tax advantages that make it the right choice.

The IRS has revised various figures for 2012 to account for inflation:

Some small business owners (sole proprietors filing Sch. C and S Corp officers who actively participate) will be able to deduct the first $50,000 in net business income on their 2012 NC tax returns. This offers a business owner the chance to avoid paying taxes on up to $50,000 to the state of NC. This is a very generous tax benefit being offered to business owners, presumably to help stimulate hiring and business activity in the state. This does not apply to passive rental income or C Corporation income.

If you are a sole proprietor that wants to operate under a separate legal name and avoid the cost of incorporating or setting up a seperate legal entity, you will need to register the name of your business. In NC that means contacting the county Register of Deeds where you will be operating.

This page will give more guidance on who must register and how it can be done.

This page lists the forms available for you to use.

More Info

So maybe you read this post about home offices and you are hoping you can write off your S Corporation's home office since it is based out of your home. If done correctly then you should be able to take advantage of this deduction.

The way to handle this is to have the S Corporation reimburse the shareholder directly for the actual home office expenses (calculated the same way a sole proprietor would, allocated by square footage). The S Corp. shows the office expense on it's income statement. This expense then flows through to the shareholder through the corporation's K-1. This needs to be done under an accountable plan, so you can't just give yourself a set amount each month. It needs to be based on and supported by documented actual numbers.

Don't be tempted to have the corporation rent the office space from you either. This is an area of the tax law where the IRS will allow the rental deduction on the corporate books, and the shareholder reports the rental income on Schedule E. The deductions allowed on Sch. E are limited because of the employee/employer relationship. Only mortgage interest, real estate taxes, and casualty losses are allowed as deductions under section 280 A (c) (6) of the code. These expenses were already deductible, so the IRS has limited all other operating expenses like depreciation, utilities, HOA dues, repairs, etc. Because of this limitation I do not recommend this scenario. You are just creating extra headache for yourself with no real benefit.

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Congress Repealed the New 1099 Law that was going to put such a burden on small business.

It is sad when you are praised like a hero for cleaning up your own mess, but I am very thankful that this was taken care of.

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The IRS has always offered transcipts by mail by completing form 4506, but now you can request the transcripts online. Some notes about the process:

-A transcript is a computer printout that shows most of the line items found on your tax return when you filed it, including any accompanying forms and schedules. When it comes to verifying income, a transcript often is an acceptable substitute for a copy of your original tax return.However, any changes made after the return was filed will not be reflected on a basic transcript. For that you need a tax account transcript.

-A tax account transcript will provide any adjustments you or the IRS made after you filed your return. Like the basic tax transcript, the tax account transcript also shows things such as your marital status, type of return filed, adjusted gross income and taxable income.

-You can have a transcript sent directly to your lender, who should get it in about 10 days after you submit your request.

-There's no cost to order your current-year transcript, as well as transcripts for the past three years. If you need an exact copies of your old tax returns, that will take up to 60 days to process. It also will cost you $57 for each copy

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The 1% Sales tax temporary increase was allowed to expire and you have probably already seen the effect when shopping. In Wake county the tax rate is now 6.75%, down from 7.75%. That is a state rate of 4.75% plus a local rate of 2%.

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For those who have been taking advantage of the NC income tax deduction for contributions to the NC college foundation, you can rest easy that this tax benefit has been extended. Here is the press release:

Recent legislation passed by the NC General Assembly preserves the deduction on NC 529 contributions for all North Carolinians, regardless of income. Adjusted gross income limitations scheduled to return in 2012 on the state tax deduction for the NC 529 Plan have been eliminated. The maximum annual contribution deductible from NC taxable income remains the same at $2,500 (individual) or $5,000 (married, filing jointly).

Currently the IRS website offers links to those who have agreed to provide free tax preparation to qualified individuals. Some recently felt like it would be a good idea for the IRS to create it's own software and offer it free to everyone. Some possible problems with that scenario:

-It would be a giant programming task. I can't tell you how many updates I get during the year to my tax software to keep up with the tax laws as they change. For the IRS to take on this task with no benefit to itself would be difficult to say the least.

-Someone has to foot the bill, so really you are asking the taxpayers to pony up for this plan. Is this the most efficient and cost effective method?

-The IRS has a conflict of interest. They are trying to squeeze what they can out of people, and the job of the software providers and taxpayers is to pay as little as required. It would be giving the fox the rule of the henhouse.

While paying for tax software isn't enjoyable for anyone, it is a small investment to ensure you are getting a reliable product and minimizing your taxes.

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The IRS has changed it's mind and decided to revise the standard mileage rates for 2011 in teh middle of hte year. Now employers may reimburse up to 55.5 cents per mile driven in teh last half of hte year. The IRS is just acknowledging what we already knew, that gas prices are up and it is costing more to get around!

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Be sure your payroll software is up to date, because there is a rare change in the federal unemployment tax rate. The temporary .2% surtax that was put in place in 1976 was allowed to expire. This is very surprising in the wake of the budget shortfalls we are facing, particularly due to the unemployment insurance payments the government is making.

Regardless, businesses will appreciate any tax cut right now.

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The Treasury Department has announced that paper savings bonds will be a thing of the past, and everything will be moving electronic in 2012. Bonds can be bought through the website www.treasurydirect.gov .

One website noted that this will limit the amount of bonds that can be bought per person per year because in the past you could buy up to 5,000 in each (paper and electronic) and now you are limited to just 5,000 in electronic bonds.

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The NC Department of Revenue has released a reminder that the annual sales tax holiday for school supplies, clothes, and some electronics is coming up soon. For more details you can visit their website here.

Here is an interesting article that claims you can use the like-kind exchange rules to push the tax into the next tax year, without having to truly reinvest the funds. It means you can't touch them, and there are a lot of i's to dot and t's to cross to make sure you toe the line, but it could be worth a shot if you are dealing with a large gain and want to defer the taxes one year.

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We've all seen the commercials, and with the hard economic times I'm hearing from more and more people wondering if these deals are legitimate. Well here is an insightful article that brings some reality to the situation, even if it isn't what most people want to hear. If you want to settle for less than your are owed, consider this advice they give:

The two fundamental rules IRS operates by for offers in compromise are:

a) If you have enough assets to pay the taxes, your offer will not get approved.

b) If you earn enough money to pay your tax debt over 5-10 years, your offer will be rejected.

Let's be honest, the IRS has the power to collect, so why would they settle for less if they didn't have to? For most people the best bet is an installment agreement. You end up paying the whole amount, but over time. The IRS stops harassing you because you are back in compliance. This doesn't mean everyone will qualify for an OIC, but the truth is that few do.

Another word of advice, don't ignore the tax notices. The sooner you reply the more the IRS is willing to talk and be reasonable.

The IRS has offered more clarity about who is required to report the employer provided health insurance costs on employee W-2's. In 2011 it is optional for all employers, but in 2012 larger employers (250 or more employees) will have to begin reporting the value of health benefits provided. This does not mean that the benefits will be taxed, but is just additional information that is being provided to the IRS.

More info

Those living in counties declared a disaster area by FEMA (see link) will have penalties and interest waived for late filing and payment due to the storm systems and tornadoes that rolled through April 16th. More info here.

If the recent tornadoes and storms caused you to file or pay late on your April 15th NC tax return, you can find relief by filing form 5500 with your return. More info is found on their website here:
Link

If you recently received a notice for NC DOR for tax year 2008, it may have been sent in error.

More Details

If you enjoy the rewards of a credit card, but don't want the temptation of falling into consumer debt (or are trying to rebuild your credit), you may want to consider the Perkstreet Financial checking account. It pays 1-2% in rewards when you use your debit card (but ring it up as a credit card). The payment will immediately come out of your account, so no temptation to overspend, but you get a small cash back reward as well. Just another option that some might like.

The AICPA has compiled a list of some of the authoritative accounting principles and rulings for homeowners associations. This could be a useful resource if you are trying to understand an audit better or to determine the appropriate accounting principle for your HOA.
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* The IRS does not guarantee a specific date that a refund will be deposited into a taxpayer's financial institution account or mailed. Taxpayers who e-filed can generally get refund information 72 hours after the electronic return data is acknowledged as accepted by the IRS. To check the status of a refund go to www.irs.gov and click on Where's My Refund? Taxpayers without internet access can get refund information by calling 1-800-829-1954 or 1-800-829-4477.

2011 IRS e-file Refund Cycle Chart

Transmitted & Accepted (by 11:00 am) between...	Direct Deposit Sent*	Paper Check Mailed*
Jan 14 and Jan 20, 2011	Jan 28, 2011	Feb 4, 2011
Jan 20 and Jan 27, 2011	Feb 4, 2011	Feb 11, 2011
Jan 27 and Feb 3, 2011	Feb 11, 2011	Feb 18, 2011
Feb 3 and Feb 10, 2011	Feb 18, 2011	Feb 25, 2011
Feb 10 and Feb 17, 2011	Feb 25, 2011	Mar 4, 2011
Feb 17 and Feb 24, 2011	Mar 4, 2011	Mar 11, 2011
Feb 24 and Mar 3, 2011	Mar 11, 2011	Mar 18, 2011
Mar 3 and Mar 10, 2011	Mar 18, 2011	Mar 25, 2011
Mar 10 and Mar 17, 2011	Mar 25, 2011	Apr 1, 2011
Mar 17 and Mar 24, 2011	Apr 1, 2011	Apr 8, 2011
Mar 24 and Mar 31, 2011	Apr 8, 2011	Apr 15, 2011
Mar 31 and Apr 7, 2011	Apr 15, 2011	Apr 22, 2011
Apr 7 and Apr 14, 2011	Apr 22, 2011	Apr 29, 2011

NC DOR has officially announced that due to the federal holiday in Washington DC on April 15th, that NC returns will also have until the following Monday to be filed. That gives taxpayers an extra weekend to get their returns and payments in. Note that some corporate filings and payments are not included in this extension.
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Apparently the new congress has heard the cries of the business world about the headache the former congress created with the 1099 law in the Health care bill. They are set to introduce a bill that will repeal this part of the bill. While it was done to raise revenues to pay for some of the health care legislation, this provision has become so unpopular on both sides of the aisle that it looks like it should pass. To that, I say thank goodness. What a waste of time and paper compliance with this law would have been.

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The IRS is having to reprogram it's computers because of the changes that Congress pushed through at the last minute. This means that for many filers (particularly itemizers), you can't file until mid to late February. There is no firm date yet, so we will wait and see when the IRS is ready to receive you return. This may cause some hardship for a few itemizers who were anticipating using their refund to ease cash flow early in 2011. They will be forced to wait until the IRS gives the green light to file.