Wednesday, January 30, 2013
Education credits delayed
The IRS has added form 8863, education credits, to the list of forms they will not process until February or March. Returns that include form 8863 will not be accepted until the IRS says they are ready.
Tuesday, January 29, 2013
E-Filing Starting
The IRS will begin accepting e-filed tax returns on January 30. Most individuals will be able to e-file on this date. Some taxpayers who use certain forms will still not be able to file until February and even March. Click on this link to see the list of affected forms. Probably the most common of these is form 4562 for depreciation and amortization. Many taxpayers who have businesses use this form. Many of the others are quite obscure.
Wednesday, January 9, 2013
News flash
The IRS will begin accepting electronic returns on January 30. There will be a few types of returns that will require further updating by the IRS; such returns will not be accepted until a later, as yet unspecified date. Check with your tax professional for details.
Tuesday, January 8, 2013
Tax legislation, effects on 2012
Most of the fighting about the fiscal cliff was about things that will take effect in 2013, but a large number of items that affect 2012 taxes were finalized as part of the package. Most of them simply continue measures that were in place for 2011, but would have expired for 2012 if no action had been taken.
The biggest of these items concerns the Alternative Minimum Tax (AMT). When this tax was put into place years ago, it was supposed to affect only high-income people. Inflation was raising everyone's incomes up to the point where more than half of returns filed would be affected by it. A "patch" was put into place for the last couple of years; the patch temporarily raised the AMT exemption levels sufficiently that it would bypass most people. The patch was due to expire for 2012, and a lot of people would have gotten whacked. This new legislation made the "patch" permanent. Therefore far fewer people will have to worry about AMT for 2012.
Another big one for businesses has to do with the purchase of machinery and equipment. For the past few years, huge tax write-offs have been available on such items, as another measure to stimulate the economy. These write-offs were supposed to be much reduced in 2012 and then expire in 2013. But they have been extended for at least another year.
In addition to that, a number of other deductions and credits which had been living on annual extensions for a couple of years have been extended again, and some have been made permanent. These will be in effect for 2012. Here are a few of them:
*Refundable child tax credit
*"Marriage penalty" relief
*Student loan interest deduction
*Teacher expenses deduction
*College tuition credits
*Direct donations from IRAs for people 70 1/2 years or older
*Certain renewable energy credits
And many more. Consult your tax professional for any that you believe specifically affect you.
The biggest of these items concerns the Alternative Minimum Tax (AMT). When this tax was put into place years ago, it was supposed to affect only high-income people. Inflation was raising everyone's incomes up to the point where more than half of returns filed would be affected by it. A "patch" was put into place for the last couple of years; the patch temporarily raised the AMT exemption levels sufficiently that it would bypass most people. The patch was due to expire for 2012, and a lot of people would have gotten whacked. This new legislation made the "patch" permanent. Therefore far fewer people will have to worry about AMT for 2012.
Another big one for businesses has to do with the purchase of machinery and equipment. For the past few years, huge tax write-offs have been available on such items, as another measure to stimulate the economy. These write-offs were supposed to be much reduced in 2012 and then expire in 2013. But they have been extended for at least another year.
In addition to that, a number of other deductions and credits which had been living on annual extensions for a couple of years have been extended again, and some have been made permanent. These will be in effect for 2012. Here are a few of them:
*Refundable child tax credit
*"Marriage penalty" relief
*Student loan interest deduction
*Teacher expenses deduction
*College tuition credits
*Direct donations from IRAs for people 70 1/2 years or older
*Certain renewable energy credits
And many more. Consult your tax professional for any that you believe specifically affect you.
Tuesday, December 11, 2012
Slow refunds
Tax refunds will be slower this year. The IRS has had an epidemic of identity theft cases--people claiming refunds using stolen Social Security numbers and fictitious tax information. They have put some measures in place to try to prevent some of it. Those measures will make refunds slower.
Tuesday, November 20, 2012
Obamacare penalty/fee/tax
The penalty for not having health insurance is not due to be put into effect till 2014. People who do not have health insurance in 2013 will not have to worry about it. (They may worry about the cost of medical care, but not about being penalized for not being insured.)
Once the penalty goes into effect, it appears, from what I can see, that it will not actually be payable until the person files his or her 2014 tax return in 2015.
At that point the IRS has been given limited powers to collect it. Tax liens and seizing of property will not be allowed. However, the IRS will have some powers and will probably find a way.
For 2014 the minimum penalty will be $95 per person. For a family of three, the minimum will be $95 X 3 = $285. For families with more than three members, the minimum is frozen at $285. (They stop counting after the third family member.)
The maximum amount of the penalty will be determined by a percentage of taxable income. For 2014 it will be 1%. When it is fully phased in starting in 2016, it will be 2.5%.
But that maximum will not be allowed to go higher than the national average of low-cost plans being offered through the insurance exchanges that will be set up by the law.
Once the penalty goes into effect, it appears, from what I can see, that it will not actually be payable until the person files his or her 2014 tax return in 2015.
At that point the IRS has been given limited powers to collect it. Tax liens and seizing of property will not be allowed. However, the IRS will have some powers and will probably find a way.
For 2014 the minimum penalty will be $95 per person. For a family of three, the minimum will be $95 X 3 = $285. For families with more than three members, the minimum is frozen at $285. (They stop counting after the third family member.)
The maximum amount of the penalty will be determined by a percentage of taxable income. For 2014 it will be 1%. When it is fully phased in starting in 2016, it will be 2.5%.
But that maximum will not be allowed to go higher than the national average of low-cost plans being offered through the insurance exchanges that will be set up by the law.
Friday, November 16, 2012
Fiscal Cliff, Tax Aspects
Here are some notes on tax changes scheduled on Jan 1st, if Congress and the President can't get together:
1. Income tax rates will go up (for example, for a married couple):
a) The 10% bracket will become part of the 15% bracket (i.e., there will no longer be a 10% bracket).
b) The 15% bracket will go from taxable income of $0 to $60,550 instead of the current $17,001 to $69,000.
c) The 25% bracket goes to a rate of 28%.
d) The current 28% bracket goes to 31%.
e) The 33% bracket becomes a 36% bracket.
f) The 35% bracket goes to 39.6%.
2. The tax on long term capital gains goes up as follows:
a) For people in the current 10% and 15% bracket for regular income tax, the capital gains rate goes from zero (no tax at all) to 10%.
b) For everyone else it will go from 15% to 20%
c) For upper income people (in the $200,000-plus range), there will also be a 3.8% Medicare surtax.
3. The thresholds for Alternative Minimum Tax go back to where they were in the year 2000. This would mean that probably millions more people would find their tax jacked up by the AMT, which was originally conceived to snag only the very wealthy.
4. Employees' FICA tax withholding would go from 4.2% to 6.2%. (This does not include the Medicare tax withholding of 1.45%, which would not change--except for a .9% increase for the 'wealthy'.)
5. "Obamacare" changes and taxes kick in as follows:
a) The medical deduction threshold for itemized deductions goes from 7.5% to 10%, except for people 65 or older. This will mean that many people who deduct medical expenses will see their deduction shrink or disappear.
b) Increased Medicare taxes for high-incomers
c) Misc other taxes and fees.
6. Reduction of the Child Tax Credit
7. The ability of small and mid-sized businesses to write off (rather than depreciate) purchases of equipment and other assets will be cut from a limit of $125,000 to $25,000. (In 2011 the limit was $500,000.) This has been a very big tax break for small businesses, and having it reduced to $25,000 will make a huge difference to many of them.
8. Various deductions, credits, etc. will expire, such as teachers' deductions for teaching supplies, Qualified Charitable Distributions from IRA's, etc.
1. Income tax rates will go up (for example, for a married couple):
a) The 10% bracket will become part of the 15% bracket (i.e., there will no longer be a 10% bracket).
b) The 15% bracket will go from taxable income of $0 to $60,550 instead of the current $17,001 to $69,000.
c) The 25% bracket goes to a rate of 28%.
d) The current 28% bracket goes to 31%.
e) The 33% bracket becomes a 36% bracket.
f) The 35% bracket goes to 39.6%.
2. The tax on long term capital gains goes up as follows:
a) For people in the current 10% and 15% bracket for regular income tax, the capital gains rate goes from zero (no tax at all) to 10%.
b) For everyone else it will go from 15% to 20%
c) For upper income people (in the $200,000-plus range), there will also be a 3.8% Medicare surtax.
3. The thresholds for Alternative Minimum Tax go back to where they were in the year 2000. This would mean that probably millions more people would find their tax jacked up by the AMT, which was originally conceived to snag only the very wealthy.
4. Employees' FICA tax withholding would go from 4.2% to 6.2%. (This does not include the Medicare tax withholding of 1.45%, which would not change--except for a .9% increase for the 'wealthy'.)
5. "Obamacare" changes and taxes kick in as follows:
a) The medical deduction threshold for itemized deductions goes from 7.5% to 10%, except for people 65 or older. This will mean that many people who deduct medical expenses will see their deduction shrink or disappear.
b) Increased Medicare taxes for high-incomers
c) Misc other taxes and fees.
6. Reduction of the Child Tax Credit
7. The ability of small and mid-sized businesses to write off (rather than depreciate) purchases of equipment and other assets will be cut from a limit of $125,000 to $25,000. (In 2011 the limit was $500,000.) This has been a very big tax break for small businesses, and having it reduced to $25,000 will make a huge difference to many of them.
8. Various deductions, credits, etc. will expire, such as teachers' deductions for teaching supplies, Qualified Charitable Distributions from IRA's, etc.
Subscribe to:
Posts (Atom)
