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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.
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.
The District of Columbia has enacted legislation to require that, beginning with the 12-month period ending September 30, 2012, any employer required to file a District withholding return, but not required to collect and remit sales taxes, must file an annual use tax return. The annual use tax return is due October 20, 2012.
The Facts about Medicare Contribution Tax on Unearned Income and the "Home Sale" Exclusion
There has been a great deal of misunderstanding and misinformation circulating with regards to elements of the health care reform legislation passed in 2010. In particular, there has been a rash of internet stories and chain emails purporting that the legislation includes a 3.8% “real estate tax” that would apply to the sale of a principal residence. Although there have been no changes to the rules for excluding a substantial amount of the gain on the sale of a principal residence, the act does include tax on net investment income that can apply to the taxable portion of a home sale for some taxpayers.
Well, the truth of the matter is self-employed individuals have been celebrating since 2010. However, it was only recently that the IRS published Chief Counsel Advice legitimizing a business deduction of medicare premiums paid for self-employed individuals. Under CCA 201228037, all of the medicare parts are permissible as medical care insurance as described in IRC 162(I) and therefore are deductible.
The IRS has announced new procedures (IR-2012-65) to help some US Citizens residing overseas file their delinquent tax returns and Reports of Foreign Bank and Financial Accounts (FBARs) without being assessed large penalties or other enforcement action. In addition to tax returns and FBARs the IRS will allow submission of retroactive deferral elections of foreign retirement plans under the new procedures. All of this is scheduled to go into effect September 1, 2012.
These new procedures specifically target taxpayers who are low compliance risks which mean they owe $1,500 or less for any of the covered years. The covered years are the previous 3 years for information and tax returns and the past 6 years for FBARs.
To take advantage of these new procedures, taxpayers simply have to submit the delinquent tax returns and FBARs in the covered period with any payment of tax that is due. The IRS will then assess whether or not the submissions qualify as low risk under the new procedures.
DC has again passed legislation that further delays the taxation of non-DC municipal bond income. The new legislation ensures that income from all municipal bonds will not be taxable for DC residents in 2012. Starting in 2013, DC will subject municipal bonds from states other than DC acquired after January 1, 2013 to taxation. DC will continue to exclude Metropolitan Washington Regional Airport Authority bonds and under federal law Virgin Islands, Guam, Puerto Rico and American Samoa bond income. See the DC fact sheet for further information: