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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.
The health care reform law added 2 new taxes that take effect in 2013. It is important to know the difference as they will affect different taxpayers in different ways.
Virginia will begin to issue tax refunds via debit card or direct deposit only starting with refunds issued in 2013 for the 2012 tax year. Virginia is making the change in hopes of saving money by reducing check printing and mailing costs. The switch to debit cards will be more secure than mailing a check since it will be protected by federal and state banking laws. It can also only by activated by using the holder’s personal information (SSN and DOB). Direct deposit will still remain the fastest way to receive a tax refund so make sure you verify your account information with your tax preparer. For more information check out the FAQs on the VA Department of Taxation’s website: http://www.tax.virginia.gov/site.cfm?alias=refunddebitcardfaq.
The IRS has announced employees will not be taxed when they donate their vacation, sick, or personal leave in exchange for employer cash contributions to qualifying charitable organizations providing relief to the victims of Hurricane Sandy. Additionally, employers will be able to deduct 100 percent of the contributions and will not be subject to any charitable contribution limits.
In spite of pervasive 1099 and W-2 reporting requirements, the US income tax system for most small businesses is still largely an honor system. According to IRS studies, this segment of taxpayers account for approximately 84% of the $450 billion estimated tax gap. As a result, the IRS continues the push to increase 1099 reporting to try and whittle away the large amount of unreported or underreported income among small businesses.
This push can clearly be seen in the question to identify companies required to file 1099’s that was added to all 2011 business entity income tax forms. Furthermore, the IRS has increased the penalties associated with non-filing of 1099’s to a maximum of $250 per 1099, with an additional maximum of $250 per 1099 not provided to payees. This means that you can face a total of up to $500 per non-filed 1099. Even if you are only required to file a handful of 1099 forms, at $500 per non-filed form, you can see how the penalties can quickly mount up.
Yesterday, the IRS announced the annual inflation adjustments for 2013. Here are a few highlights:
Required Minimum Distribution (RMD) planning for those who are turning 70 ½ in 2012.
If you have a 401(k) or traditional IRA plan and are turning 70 ½ this year you are now subject to the RMD rules. These require you to take at least a minimum distribution from your plan based on its balance. The law says the distribution must be taken by April 1st of the year after you turn 70 ½. While sometimes it makes sense to defer the income as long as possible, this may not be the year to do it. We don’t know what tax rates will look like in 2013, but they are currently scheduled to go up absent any congressional action to adjust them. There is also a new 3.8% “Medicare” tax on investment income to the extent your adjusted gross income (AGI) exceeds $200k (single) or $250k (married). If your income is expected to exceed this threshold it may make sense to take the distribution in 2012. You should also consider that if you wait until 2013 to take your RMD you still would need to take the 2013 RMD in 2013, resulting in additional income for that year. If your AGI was otherwise close to the income limit the 2 payments may push it over the top.
Lately every time I open up my e-mail I am getting a forwarded e-mail from a friend or family member about the tax changes that are coming and how everyone is going to end up paying more money to Uncle Sam. None of these e-mails ever address the most important question we need to ask. What can we do to prepare for these changes?
As schools across the Country begin to open their doors, students and parents are confronted with soaring costs for college education. According to a report by the College Board, the annual cost at four-year private nonprofit colleges averaged $38,589 in 2011-2012, a 14% increase after inflation from five years earlier. Over that same period, the in-state cost at four-year public colleges rose 20%, to an average of $17,131. Mounting state deficits and a stagnant economy are placing pressure on state funds to support education, leading to increased costs for students. Furthermore, Federal budget cuts targeting grant funding are making access to subsidies more exclusive than ever.
Parents of young children, with the luxury of time and ability to start saving, should consider beginning to save now in order to mitigate sky-rocketing costs. State Qualified Tuition Programs, commonly referred to as 529 plans, are a tax-advantaged vehicle for college savings.