by NFS | Jan 15, 2013 | Archives
WASHINGTON, D.C. – The Internal Revenue Service has released the annual inflation adjustments for 2013, including the tax rate schedules and other tax changes from the recently enacted fiscal cliff legislation with its new tax rate of 39.6 percent and permanently patched Alternative Minimum Tax.
Revenue Procedure 2013-15 provides the 2013 cost-of-living adjustments for inflation for certain items, including the tax tables. It also includes items whose values were specified in the American Taxpayer Relief Act of 2012 (ATRA), such as the beginning of the 39.6 percent income tax brackets; the beginning income levels for the limitation on certain itemized deductions, and the beginning income levels for the phaseout of the personal exemptions.
In addition Rev. Proc. 2013-5 modifies Rev. Proc. 2011-52 to reflect an amendment to Section 132(f)(2) made by ATRA concerning qualified transportation fringe benefits. Specifically, for 2012, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $240.
The tax items for 2013 of greatest interest to most taxpayers include the following changes.
- Beginning in tax year 2013 (generally for tax returns filed in 2014), a new tax rate of 39.6 percent has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates—10, 15, 25, 28, 33 and 35 percent—remain the same as in prior years. The guidance contains the taxable income thresholds for each of the marginal rates.
- The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.
- The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).
- The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $150,000 ($300,000 for married couples filing jointly). It phases out completely at $211,250 ($422,500 for married couples filing jointly.)
- The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).
- The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $5,891 for tax year 2012.
- Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.
- For tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).
Details on the inflation adjustments and others are contained in Revenue Procedure 2013-15, which will be published in Internal Revenue Bulletin 2013-5 on Jan.28, 2013. Other inflation-adjusted items were published in October 2012 in Revenue Procedure 2012-41.
– BY MICHAEL COHN Accounting Today
by NFS | Jan 9, 2013 | Archives
We want you to be aware of the current news regarding the filing of your 2012 tax return. The IRS announced yesterday that the start of the tax season has been delayed until January 30th. We know this is devastating news for the many taxpayers who are depending on their tax refunds.
As your tax professionals, we want to be the first to give you the real facts:
- NO ONE CAN FILE A TAX RETURN UNTIL JANUARY 30, 2013. This includes Turbo Tax, H&R Block, Liberty Tax Service, Jackson Hewitt or any other tax office. The IRS has set this date and all who provide tax software or tax preparation are subject to this change.
- IT IS EXTREMELY IMPORTANT THAT YOU DO NOT WAIT until January 30, 2013 to have your taxes prepared. We encourage all of our clients to go ahead and have their tax prepared as soon as they have all of their information together. If everyone waits until January 30th, our office could be overloaded causing long lines and frustration.
- OUR TAX SOFTWARE IS UP TO DATE AND ACCURATE. Although the IRS will not accept returns until January 30th, our software is updated and ready to go. We are permitted to prepare your return, provide a copy to you, have you sign the necessary forms and hold your return until IRS E-Filing is open. Be assured we will E-File your tax return as soon as we are permitted by the IRS.
- REFUNDS MAY BE DELAYED. At this point, we just don’t know how this delay will affect the processing of refunds. We believe it will be well after mid-February before any refunds are issued. We will do our best to keep you informed as the IRS provides updates to us.
- MAKE YOUR APPOINTMENT AS SOON AS POSSIBLE. We encourage you to call now to make an appointment that fits your schedule to be sure you don’t have to wait.
We sure appreciate your business and want you to know it’s our goal to see you through this difficult filing season. As always, don’t hesitate to call, email or stop by if you have any questions.
by NFS | Jan 8, 2013 | Archives
WASHINGTON — Following the January tax law changes made by Congress under the American Taxpayer Relief Act (ATRA), the Internal Revenue Service announced today it plans to open the 2013 filing season and begin processing individual income tax returns on Jan. 30.
The IRS will begin accepting tax returns on that date after updating forms and completing programming and testing of its processing systems. This will reflect the bulk of the late tax law changes enacted Jan. 2. The announcement means that the vast majority of tax filers — more than 120 million households — should be able to start filing tax returns starting Jan 30.
The IRS estimates that remaining households will be able to start filing in late February or into March because of the need for more extensive form and processing systems changes. This group includes people claiming residential energy credits, depreciation of property or general business credits. Most of those in this group file more complex tax returns and typically file closer to the April 15 deadline or obtain an extension.
“We have worked hard to open tax season as soon as possible,” IRS Acting Commissioner Steven T. Miller said. “This date ensures we have the time we need to update and test our processing systems.”
The IRS will not process paper tax returns before the anticipated Jan. 30 opening date. There is no advantage to filing on paper before the opening date, and taxpayers will receive their tax refunds much faster by using e-file with direct deposit.
“The best option for taxpayers is to file electronically,” Miller said.
The opening of the filing season follows passage by Congress of an extensive set of tax changes in ATRA on Jan. 1, 2013, with many affecting tax returns for 2012. While the IRS worked to anticipate the late tax law changes as much as possible, the final law required that the IRS update forms and instructions as well as make critical processing system adjustments before it can begin accepting tax returns.
The IRS originally planned to open electronic filing this year on Jan. 22; more than 80 percent of taxpayers filed electronically last year.
Who Can File Starting Jan. 30?
The IRS anticipates that the vast majority of all taxpayers can file starting Jan. 30, regardless of whether they file electronically or on paper. The IRS will be able to accept tax returns affected by the late Alternative Minimum Tax (AMT) patch as well as the three major “extender” provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.
Who Can’t File Until Later?
There are several forms affected by the late legislation that require more extensive programming and testing of IRS systems. The IRS hopes to begin accepting tax returns including these tax forms between late February and into March; a specific date will be announced in the near future.
The key forms that require more extensive programming changes include Form 5695 (Residential Energy Credits), Form 4562 (Depreciation and Amortization) and Form 3800 (General Business Credit). A full listing of the forms that won’t be accepted until later is available on IRS.gov.
As part of this effort, the IRS will be working closely with the tax software industry and tax professional community to minimize delays and ensure as smooth a tax season as possible under the circumstances.
Updated information will be posted on IRS.gov.
by NFS | Jan 7, 2013 | Archives
National Association of Tax Professionals, Appleton, WI – Jeffrey N. Schweitzer, EPA, CEP, ATP, RTRP of Northeast Financial Strategies, Inc in Wrentham, MA has reached a personal and professional milestone in his career by passing the Internal Revenue Service’s (IRS’) Registered Tax Return Preparer (RTRP) competency exam. The award of the RTRP designation recognizes demonstrated knowledge of all aspects of federal individual taxation and assures clients that the preparer is up-to-date on the latest tax law changes and ethics requirements.
To retain the status of a registered tax return preparer, individuals must complete a minimum of 15 continuing education credits (CPEs) per year. RTRPs are also
governed under stringent rules set forth by the IRS.
If you need assistance with any taxation issue, you should seek the help of a tax professional. As a professional tax preparer and member of the National Association of Tax Professionals (NATP), Jeffrey N. Schweitzer, EPA, CEP, ATP, RTRP of Northeast Financial Strategies, Inc in Wrentham, MA, can assist you with a review of your tax history and answer questions on how taxation issues may impact your future. Please contact him at 800-560-4637 x 14 or via email at jeff@nfsnet.com.
Members of the National Association of Tax Professionals (NATP) work at offices that assist over 11 million taxpayers with tax preparation and planning. The average NATP member has been in the tax business for over 20 years and holds a tax/financial designation and/or a college degree. NATP has more than 22,000 members nationwide. Members include individual tax preparers, enrolled agents, certified public accountants, accountants, attorneys and financial planners. As a nonprofit professional association, NATP serves professionals working in all areas of tax practice through professional tax education, tax research and tax office supplies. The national headquarters, located in Appleton, WI, employs over 50 staff members. Learn more at www.natptax.com.
by NFS | Jan 2, 2013 | Archives
WASHINGTON, D.C. – The House passed a deal to avert an income tax rate increase on middle-class families on Tuesday night, following a New Year’s Eve vote by the Senate, sending the bill to President Obama for his signature.
House lawmakers voted for the bill by a 257 to 67 margin, after the Senate’s 89 to 8 vote, in a rare New Year’s Day session of a lame-duck Congress (see Senate Approves Post-Midnight Fiscal Cliff Deal, Shifting Pressure to Boehner). Vice President Joe Biden and Senate Minority Leader Mitch McConnell, R-Ken., worked out the final deal this week following a stalemate in negotiations between Obama and Speaker of the House John Boehner, R-Ohio.
Republican lawmakers had threatened to amend the bill with deep spending cuts to offset the tax cuts and send it back to the Senate, but with time running out before the re-opening of the financial markets on Wednesday morning, Boehner ultimately decided to allow an up or down vote on the bill.
The deal restores the top 39.6 percent rate for high-income households in effect during the 1990s. That rate would apply to single taxpayers with incomes above $400,000 and married couples with incomes above $450,000, up from 35 percent.
“Under this law, more than 98 percent of Americans and 97 percent of small businesses will not see their income taxes go up,” said Obama in a speech following the vote. He pointed out that the agreement reduces the deficit by raising $620 billion in revenue from the wealthiest households.
In addition, the agreement provides a permanent and retroactive patch for the alternative minimum tax to prevent it from ensnaring middle-class taxpayers. The bill indexes the exemption amounts to adjust them for inflation.
The capital gains tax rate would return to what it was under President Clinton, 20 percent, up from 15 percent. Counting the 3.8 percent surcharge from the Affordable Care Act, dividends and capital gains would be taxed at a rate of 23.8 percent for high-income households. These tax rates would apply to singles above $400,000 and couples above $450,000. The top capital gains rate would stay at 15 percent for lower-income taxpayers.
The agreement reinstates the Clinton-era limits on high-income tax benefits, the phaseout of itemized deductions (Pease) and the Personal Exemption Phaseout (PEP), for couples with incomes over $300,000 and singles with incomes over $250,000. These two provisions reduce tax benefits for high-income households. This sets the stage for future balanced approaches to deficit reduction, which could include additional revenue through tax reforms that reduce tax benefits for Americans making over $250,000.
The deal did not include an extension of the 20111 and 2012 payroll tax cut on Social Security tax withholding from paychecks, so most workers will see their Social Security taxes rise from 4.2 to 6.2 percent (see IRS Changes Income Tax Withholding Tables for 2013 to Reflect Expired Tax Cuts).
The agreement also raises the tax rate on the wealthiest estates from 35 percent to 40 percent, with an exemption of $5 million per person.
There is also a one-year extension of 50 percent bonus depreciation, and the extension of various tax breaks. The deal extends President Obama’s expansions of the Child Tax Credit, Earned Income Tax Credit, and the American Opportunity Tax Credit, which helps families pay for college. The agreement would extend the tax breaks for five years.
In addition, the agreement will prevent 2 million people from losing unemployment insurance benefits in January by extending emergency unemployment insurance benefits for one year.
The bill also extends renewable energy incentives and other business tax incentives through the end of next year. They include extensions of the Production Tax Credit, a key incentive for renewable energy, as well as the Research & Experimentation tax credit.
The agreement also avoids a 27 percent cut to reimbursements for doctors seeing Medicare patients for 2013 by fixing the sustainable growth rate formula through the end of next year (the “doc fix”). It also renews a price support program for the dairy industry to prevent a sharp increase in milk prices, as well as blocks a pay increase for Congress.
In addition, the bill postpones the sequester for two months, paid for with $1 of revenue for every $1 of spending, with the spending balanced between defense and domestic. The agreement saves $24 billion, half in revenue and half from spending cuts which are divided equally between defense and nondefense programs, in order to delay the sequester to give Congress time to work on a balanced plan to end the sequester permanently through a combination of additional revenue and spending cuts in a balanced manner.
Obama promised further deficit reductions would be worked out with Congress, but he indicated that he would not allow a fight over raising the debt ceiling to derail the economy, insisting he would not “have another debate with this Congress over whether or not they should pay the bills they’ve already racked up.”
However, Republicans indicated that they would push for further spending cuts. “Now the focus turns to spending,” said Boehner. “The American people re-elected a Republican majority in the House, and we will use it in 2013 to hold the president accountable for the ‘balanced’ approach he promised, meaning significant spending cuts and reforms to the entitlement programs that are driving our country deeper and deeper into debt.”
-BY MICHAEL COHN ACCOUNTING TODAY
