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April 15 has passed — now what?

kbotti on April 19, 2013

With the 2012 tax filing season behind us, it’s time to start thinking seriously about 2013 tax planning — especially if you’re a higher-income taxpayer, because you might be subject to one or more significant tax increases this year:

Taxpayers with FICA wages and self-employment income exceeding $200,000 for singles and $250,000 for joint filers face an additional 0.9% Medicare tax on the excess.
Taxpayers with modified adjusted gross income exceeding $200,000 for singles and $250,000 for joint filers may face a new 3.8% Medicare tax on some or all of their net investment income.
Taxpayers with taxable income in excess of $400,000 for singles and $450,000 for joint filers face the return of the 39.6% marginal income tax rate — and of the 20% long-term capital gains rate on long-term capital gains and qualified dividends.

Contact me at karen.botti@whalencpa.com to learn whether you’re likely to be hit with these tax hikes and what strategies you can implement to minimize the impact.

Karen Botti is the staff manager of tax services. She has more than 30 years of experience in the public accounting field with extensive experience in preparing and reviewing federal, state and local income tax returns for businesses and individuals as well as for non-profit entities. She serves as a resource to clients and staff in multiple tax areas. Her areas of expertise also include like-kind exchanges, fixed-asset reporting, tax software and S-Corporation issues. She also has experience in accounting and the preparation of financial statements and payroll taxes.

The perils of filing for an extension

mnarog on April 10, 2013

Now that the 2012 tax return deadline is nearly upon us, if you haven’t filed your return yet, you may be thinking about an extension. This allows you to delay filing your return until the applicable extension deadline:

Individuals — Oct. 15, 2013
Calendar-year partnerships — Sept. 16, 2013
Trusts and estates — Sept. 16, 2013

While filing for an extension can provide relief from April 15 deadline stress, it’s important to consider the perils:

If you expect to owe tax, keep in mind that, to avoid potential interest and penalties, you still must (with a few exceptions) pay any tax due by April 15.
If you expect a refund, remember that you’re simply extending the amount of time your money is in the government’s pockets rather than your own.

Still, filing for an extension can be tax-smart if you’re missing critical documents or you face unexpected life events that prevent you from devoting sufficient time to your return right now. Please contact us if you have questions about avoiding interest and penalties.

IRS provides penalty relief to certain late filers

mnarog on April 9, 2013

On March 20, the IRS issued guidance providing penalty relief to both individual and business taxpayers who file for an extension of their 2012 tax return and ultimately owe additional tax — but only if they meet certain criteria. First, the reason for filing for the extension must be that the taxpayer’s 2012 return involved forms whose publication was delayed because of the American Taxpayer Relief Act of 2012 (ATRA), signed into law Jan. 2. Here’s a sampling of the delayed forms:

Form 8839: Qualified Adoption Expenses
Form 8863: Education Credits
Form 3800: General Business Credit
Form 5884: Work Opportunity Credit
Form 6765: Credit for Increasing Research Activities
Form 8844: Empowerment Zone Employment Credit
Form 8874: New Markets Credit

In addition, the taxpayer must make a good faith effort when filing for the extension to properly estimate the tax liability. Then that estimated amount must be paid by the return’s original due date, and any additional tax owed must be paid by the return’s extended due date.

If you’re considering filing for an extension due to delayed IRS forms, please contact us to help ensure you’ll qualify for penalty relief.

The revived research credit can still reduce your 2012 tax bill

mnarog on April 4, 2013

For many years, the research credit (also commonly referred to as the “research and development” or “research and experimentation” credit) has provided an incentive for businesses to increase their investments in research. But the credit expired at the end of 2011.

The American Taxpayer Relief Act of 2012 (ATRA) extends the credit to 2012 and 2013. You can use the credit for virtually any research that benefits your business. Wages for researchers, the cost of research supplies and the cost of computer licensing for research purposes are all expenses that may qualify for the credit.

The credit is generally equal to a portion of qualified research expenses. It’s complicated to calculate, but the tax savings can be substantial. If you think you may qualify, please contact us for assistance. There’s still time to claim the credit for 2012.

Image courtesy of www.freedigitalphotos.net.

Lower FSA contribution limit may make HSAs more attractive

mnarog on March 27, 2013

Previously, employers could set whatever limit they wanted on employee contributions to Flexible Spending Accounts (FSAs) for health care. But starting this year, the maximum limit is $2,500.

If you’re concerned about a lower limit and aren’t contributing to a Health Savings Account (HSA), look into whether you’re eligible — you must be covered by a qualified high-deductible health plan. As with FSA withdrawals, HSA withdrawals for qualified medical expenses are tax-free. But the HSA contribution limits are higher: $3,250 for self-only coverage and $6,450 for family coverage, plus an additional $1,000 for taxpayers age 55 or older.

HSAs also may be more beneficial because they can bear interest or be invested and can grow tax-deferred similar to an IRA. Additionally, you can carry over a balance from year to year. If you have an HSA, however, your FSA is limited to funding certain “permitted” expenses.

An HSA also can provide a way to do some post-Dec. 31 tax planning: You have until the April filing deadline to make your contribution. Please contact us to learn whether you could benefit from an HSA.

Category: Other News & Info

News & Tech Tips

April 15 has passed — now what?

The perils of filing for an extension

IRS provides penalty relief to certain late filers

The revived research credit can still reduce your 2012 tax bill

Lower FSA contribution limit may make HSAs more attractive