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The IRS launched a new app (IRS2Go) in 2011 for smartphones allowing users to check the status of their refunds.  The IRS app also provides tax tips and access to IRS news.

The 2012 Section 179 Deduction limit after adjustment for inflation has increased to $139,000

The 2012 Section 179 Deduction threshold for total amount of equipment that can be purchased has increased to $560,000.

The Section 179 Deduction is available for most new and used capital equipment, and also includes certain software.  Section 179 is limited by income.

The new law allows 50% “Bonus Depreciation” on qualified assets placed in service during 2012. However, this can be taken on new equipment only.  Bonus depreciation is not limited by income and is mandatory.  IRS requires businesses to make an election to “elect out” of this method.

* Planning Note – Sure, it is well known that businesses can save current year taxes by quickly depreciating assets.  This however, can be a double edged sword.  Depending on the business owner’s overall financial situation, an owner could very well eliminate valuable current year tax credits by electing to deduct too much depreciation along with potentially forgoing a larger future year tax deduction!   Please seek the advice of one of our tax advisors as careful planning is needed when choosing to Section 179 expense or depreciate property. 

                                                                                                      –  Eric J. Buechler, EA

Retirement Plan Contributions

• Simple IRA made per pay period
• 403(b)(7)/ Roth 403(b)(7) made per pay period
• 401(k)/ Roth 401(k) made per pay period
• Safe Harbor 401(k)/ Roth Safe Harbor 401(k) made per pay period
• Individual K/ Roth Individual K made per pay period

Businesses:

Monthly payroll deposits for December due on January 15

4^th Quarter payroll deposits due on January 31

4^th Quarter Sales Tax due on January 20

W-2’s due January 31

W-3’s  due January 31

FUTA due January 31

State Income Tax Withholding report due January 31

State Unemployment Tax Returns due January 31

 

Provisions Expiring in 2011

First-time homebuyer credit for individuals on qualified official extended duty outside the United States (sec. 36(h)(3))

 FUTA surtax of 0.2 percent (sec. 3301(1))

 Credit for certain non-business energy property (sec. 25C(g))

 Tax credit for research and experimentation expenses (sec. 41(h)(1)(B))

 Credit for energy efficient appliances (sec. 45M(b))

 Employer wage credit for activated military reservists (sec. 45P)

 Work opportunity tax credit (sec. 51(c)(4))

 Deduction for State and local general sales taxes (sec. 164(b)(5))

 15-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements (secs. 168(e)(3)(E)(iv), (v), (ix), 168(e)(7)(A)(i) and (e)(8))

 Additional first-year depreciation for 100 percent of basis of qualified property (sec. 168(k)(5))

 Enhanced charitable deduction for contributions of food inventory (sec. 170(e)(3)(C))

 Enhanced charitable deduction for contributions of book inventories to public schools (sec. 170(e)(3)(D))

Enhanced charitable deduction for corporate contributions of computer equipment for educational purposes (sec. 170(e)(6)(G))

 Above-the-line deduction for qualified tuition and related expenses (sec. 222(e))

 Tax-free distributions from individual retirement plans for charitable purposes (sec. 408(d)(8))

 Reduction in S corporation recognition period for built-in gains tax (sec. 1374(d)(7))

 Temporary payroll tax cut (sec. 601 of Pub. L. No. 111-312

Business Tax

• Sole Proprietor
• Hiring spouse can cut your tax bill
• Tax savings come from a medical plan
• By offering family coverage for all employees, you can receive health insurance under your spouse’s policy. If you have no other employees, you don’t incur any extra out-of-pocket cost
• An asset must be ready for business use by year-end to qualify for expensing
• Issuing warrants to shareholders can kill a company’s S corporation status. The warrants are treated as a second class stock, and the firms’ S status is revoked.

 

Statistics for 2009 Federal Income Taxes

 The top 1% of all filers paid 36.7% of all federal income taxes in 2009, this is down from 38% the previous year. They also accounted for 16.95 of adjusted gross income, down from 20% the year before. The top 1% of earners income is at least $343,927. The average tax rate paid by them is 24% of their AGI the highest rate since 2003.

The highest 5% paid 58.7% of total income tax and accounted for 31.7% of all AGI. There AGI was a minimum of $154,643.

The top 10% AGI was $112,124 or more. They bore 70.5% of the total tax burden. While bring in slightly more than 43% of total AGI.

The bottom 50% of filers paid 2.25% of total federal income tax bill, mainly due to refundable tax credits. Their average tax rate was 12.5%.

 

Increases in Tax Benefits for 2012 Due to Inflation

• Personal and Dependent Exemptions will be $3,800 up $100 for 2011
• The new standard deduction for married filling joint is $11,900 up $300 from 2011
• For single or married and filing separately it will be $5,950 up $150 for 2011
• For head of household $8,700 up $200 form 2011
• Tax brackets for each filing status increase also

Credits, deductions, and related phase outs

• For the tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families raises to $5,891 up from $5,791 in 2011, the maximum income limit for the EITC rises to $50,270 up from $49,078 in 2011. The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children
• The foreign earned income deduction rises to $95,100, an increase of $2,200 from maximum deduction for the tax year 2011
• The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and head of household, up from $51,000
• The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from 2011. For single filers the phase out remains the same.

 

 

Retirement Plan Establishment Deadlines

• Profit Sharing / Money Purchase – December 31
• 403(b)(7)/ Roth 403(b)(7) – December 31
• 401(k)/ Roth 401(k) – December 31
• Individual K/ Roth Individual K – December 31

IRS officials informally state if iPads, Android, or other tablets are provided to employees primarily for business, personal use not taxable.