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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.
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.
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.