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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.
By now it is no secret; we have been saved from tumbling off the ‘Fiscal Cliff’ after Congress and the President passed the American Taxpayer Relief Act of 2012. Granted, the legislation came right down to the wire before an affirmative vote. We are now entering a time of increased certainty with respect to U.S. transfer taxes (estate, gift, generation-skipping transfer, etc.).
The 2012 American Taxpayer Relief Act extended the ability to make tax-free IRA distributions to charity until December 31, 2013 for qualified donors (age 70 ½ and older). These distributions, up to $100,000, are not treated as taxable income to the donor but are still counted towards the required minimum distributions (RMDs) for the year, as long as they are made directly to the charity. The best part of this is that qualified donors do not have to wait until the 2013 tax year to take advantage of this extension thanks to a pair of special elections:
As everyone has heard the past several days, the “Fiscal Cliff” has been averted with the passing of The American Taxpayer Relief Act of 2012. You’ve read so far about how individuals were impacted but what about businesses? Below is a listing of the some of the key developments from the act which will affect businesses in the next few years:
The American Taxpayer Relief Act of 2012 was passed by both The Senate and Congress on January 1st, thus averting the now infamous “Fiscal Cliff,” which would have caused major tax hikes to take place as well as many favorable tax breaks to expire.
Here are some of the highlights of the Act:
As signs of progress are surfacing in an effort to avoid the Country’s dive off the “fiscal cliff,” it’s a good time to take a look at which tax issues are being negotiated as the ledge quickly approaches. The tax provisions set to expire on December 31, 2012 are comprised of the following key components:
Bush Tax Cuts
In recent years, fines imposed by various professional sports teams and organizations on professional athletes have become commonplace. But what are the tax implications of these fines paid by players? Professional athletes may be able to claim these fines on their Schedule A as a miscellaneous deduction for unreimbursed employee expenses subject to the 2% adjusted gross income (AGI) floor.
According to Internal Revenue Code (IRC) §162, a miscellaneous deduction is allowed for “ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business.” The two key words in that statement are “ordinary and necessary”. A professional athlete is in the business of playing sports and by not paying a fine levied upon them by the governing organization of their sport or their employer, they would no longer be able to continue in their profession. Therefore, these fines may be considered necessary in their profession. As stated before, the fines levied by these organizations have become common in the industry and would satisfy the “ordinary” requirement of the expense.
In the spirit of the Harvest Festival, let’s take a closer look at the concept of Tax-Loss Harvesting as it relates to the current tax environment and the uncertain future. We can begin with the foundation of the current tax environment: in general, the markets have rebounded since the 2008 financial collapse leaving many investors with more unrealized capital gains (appreciation) as each year passes. Net long term capital gains for tax year 2012 will be taxed at 15% and net short term capital gains are taxed at the taxpayer’s ordinary tax rate.
The idea of harvesting tax losses involves selling assets which have decreased in value, generating capital losses to off-set the tax liability from the taxable long term and short term capital gains otherwise already recognized. One constraint to this strategy is the net $3,000 capital loss limitation imposed, however taxpayers can carry forward capital losses to future years to off-set future capital gains when tax rates may be higher.
Today the IRS announced the standard mileage rates for 2013. They are 56.5 cents per mile for business miles, 14 cents per mile for charitable miles, and 24 cents per mile for medical miles. The business and medical rates are a one-cent per mile increase from 2012, but the charitable rate remains unchanged. These new rates are in effect on January 1, 2013.