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“Taxing” is a word synonymous with “onerous” and “wearing.” Bond Beebe, Accountants & Advisors, have created a user friendly blog called “It’s Taxing” to inform and educate our clients and business associates on timely topics related to tax, estates, accounting and finance. We hope our blog answers your questions and alleviates the heavy burden and anxiety related to understanding complicated tax laws and related matters.
IRS CIRCULAR 230 DISCLOSURE: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.
The IRS has announced many cost-of-living-adjustments for retirement plans, social security tax and some other tax items.
The limits on contributions to retirement plans have been increased for 2012. Participants can elect to defer up to $17,000 (up from $16,500) into 401(k) plans. The "catch-up" contributions for participants over age 50 is still the same at $5,500. The total contribution for defined contribution plans has increased to $50,000 from $49,000, using a compensation base of up to $250,000 (up from $245,000). IRA and Roth IRA contribution limits have not changed.
The Social Security wage base has been increased to $110,100 from $106,800 for 2012. The employee's share (if the tax rate reverts to 6.2%) will be $6,826.20 for 2012.
The standard deduction for 2012 was increased to $5,950 for Single filers and $11,900 for Married-Filing-Joint returns (up from $5,700 and $11,400 respectively). The personal exemption was inreased to $3,800 from $3,650.
The annual gift exlcusion remains at $13,000, but the estate tax exclusion for decedents dying in 2012 has been inreased to $5,120,000 from $5,000,000.
There were many more changes as well--you can click through to the link to read more or stay tuned for any other important changes!
In Announcement 2011-64, the IRS details an offer for settling potential worker classification issues. The IRS is offering employers a chance to reclassify workers as employees (as opposed to independent contractors) going forward. An employer who wishes to avail themselves of this settlement offer will pay 10% of the employment taxes (as calculated under IRC section 3509) that would have been due for the most recent tax year (if the worker had been classified as an employee), but will not be charged any interest or penalties. Further, the IRS will not subject the employer to an employment tax audit related to worker classification for those workers for any prior year.
The employer must apply with the IRS, and the IRS retains discretion on whether to accept the settlement. However, this could be a unique opportunity to correct misclassification issues with very little cost. The IRS has increasingly been focusing on worker classification issues, and the Obama administration seems to be particularly aggressive about pursuing misclassified workers.
First, the bad news. Effective October 1, 2011, DC residents with taxable income above $350,000 in a tax year will be subject to a new 8.95% tax rate on that income. This is up from a top rate of 8.5% on income over $40,000. This rate will be effective for 4 years only, then expire.
Now, the good news. The higher rate was implemented as an offset to pay for delaying the taxation of out-of-state municipal bond income. Municipal bond income from any jurisdiction outside of DC was scheduled to be taxed in DC starting January 1, 2011. That income will now be taxed starting January 1, 2012, providing a one-year delay to the inevitable taxation of this income, and eliminating the need to adjust estimated taxes for 2011.
Mayor Vincent Gray will sign the emergency budget amendment as soon as it hits his desk.
UPDATE: 9/22/2011: The new law changes the taxation of non-DC municipal bond income in one additional way. Previously, the tax, when it took effect, applied to all non-DC municipal bond income. With this new law change, the tax applies only to non-DC municipal bonds purchased after the effective date of January 1, 2012. This "grandfathers" in existing bonds but creates additional complexity in determining which bonds are subejct to the new tax.
With all the debt discussions and economic uncertainty of recent, demand for precious metals has seen a major increase. With any rise in demand there is often a similar rise in price further emphasized by the value of gold, which has risen to record levels on a global scale. There are many reasons to hold and/or invest in gold including preserving one’s wealth, fighting against inflation, and maintaining a level of diversification just to name a few among the many other reasons to invest in this precious metal.
You can, also, own gold in a variety of ways such as purchasing gold coins, bullion, jewelry, even through a futures market and exchange-traded funds (ETFs). It is important to remember the IRS classifies gold as a capital asset and more specifically as a collectible. A collectible is defined by the IRS, in regards to capital gains and losses, as art, rugs, antiques, metal, gems, stamps, and coins. When sold, net collectible gains are subject to a HIGHER tax rate of 28%, if held for more than one year rather than the current long term capital gain tax rate of 15% for other capital assets.
Just remember the IRS considers collectible gains (held for more than one year) to be subject to the 28% tax rate the next time you sell some of your valuables, artwork, and precious metals.
UPDATE: August 5, 2011: Congress passed and the President has signed legislation that reinstates the taxes, retroactive to July 23, 2011. Therefore, passengers who purchased tickets before July 23, 2011 and traveled between July 23, 2011 and August 5, 2011 are not entitled to a refund of the taxes. The IRS plans to provide relief regarding taxes not otherwise paid or collected because of the lapse.
At midnight on July 22nd, 2011, the legislation mandating some of the taxes that passengers pay when purchasing an airline ticket expired. Until Congress passes new legislation reauthorizing the taxes, airline tickets will not include these taxes. The taxes include a 7.5 percent tax on the base ticket price, $3.70 per person per segment for domestic flights (higher for international flights), and a 6.25 percent tax on the amount paid for transporting property by air.
If you purchased an airline ticket prior to July 23rd, 2011, for travel after July 22nd, 2011, you are eligible for a refund of those taxes that you paid. The taxes apply relative to the travel dates, not the ticket purchase dates. The IRS suggests, in a posting on its website, that you first attempt to get the refund from the airline. They have your travel dates and payment information and therefore can streamline the refund process. If you are unable to get a refund through the airline, the IRS will come out with guidance “at a later date” to allow taxpayers to claim a refund through the IRS.
It is unclear at this point what will happen to passengers who purchase their tickets after July 22nd, 2011 and pay no tax, yet travel after the tax is reinstated. Congress will have to address that scenario when they reauthorize the taxes.
In the meantime, check any tickets that you have purchased and request a refund from your airline. Good luck!
As sure as the sun will rise in the morning, a phishing scam alleging to be from the IRS will appear in your e-mail box. Since most everyone has some dealing with the IRS and filing taxes, You are a popular target for scammers who count on people to take the bait and click on the links. Fear of the IRS or an audit can make normally cautious people panic and click through the emails without fully considering the ramifications.
The IRS issues repeated warnings about these emails.
Due to increases in the price of fuel, the IRS announced today an increase in the optional standard mileage rates effective July 1,2011. The new standard mileage rates are 55.5 cents per mile for business use of an automobile and 23.5 cents per mile for medical or moving. The mileage rate for charitable miles is fixed by law and remains at 14 cents.
Here are four ways to make your required business travel a little less stressful:
Saturday night stay-overs: Your out-of-town business chores conclude on Friday and you would like to extend your business trip to take advantage of a low-priced fare requiring a Saturday night stay-over. The IRS says that if the savings in airfare are higher than the costs of the weekend meals and lodging, then you can deduct your Saturday meal and lodging expenses.