Category Archives: Business Services

Another tax year approaches and IRS has adjusted the exemptions due to inflation. If you have one w-2 and that;s it you may want to see this adjustment. It could adjust your filing.

 

In 2012, Many Tax Benefits Increase Due to Inflation Adjustments

WASHINGTON — For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation, the Internal Revenue Service announced today.

By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

• The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
• The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Credits, deductions, and related phase outs.

• For tax year 2012, the maximum earned income tax credit (EITC) for low- and moderate- income workers and working families rises to $5,891, up from $5,751 in 2011. The maximum income limit for the EITC rises to $50,270, up from $49,078 in 2011.The credit varies by family size, filing status and other factors, with the maximum credit going to joint filers with three or more qualifying children.
• The foreign earned income deduction rises to $95,100, an increase of $2,200 from the maximum deduction for tax year 2011.
• The modified adjusted gross income threshold at which the lifetime learning credit begins to phase out is $104,000 for joint filers, up from $102,000, and $52,000 for singles and heads of household, up from $51,000.
• For 2012, annual deductible amounts for Medical Savings Accounts (MSAs) increased  from the tax year 2011 amounts; please see the table below.

Medical Savings Accounts (MSAs)	Self-only coverage	Family coverage
Minimum annual deductible	$2,100	$4,200
Maximum annual deductible	$3,150	$6,300
Maximum annual out-of-pocket expenses	$4,200	$7,650

The $2,500 maximum deduction for interest paid on student loans begins to phase out for a married taxpayers filing a joint returns at $125,000 and phases out completely at $155,000, an increase of $5,000 from the phase out limits for tax year 2011. For single taxpayers, the phase out ranges remain at the 2011 levels.

Estate and Gift

For an estate of any decedent dying during calendar year 2012, the basic exclusion from estate tax amount is $5,120,000, up from $5,000,000 for calendar year 2011. Also, if the executor chooses to use the special use valuation method for qualified real property, the aggregate decrease in the value of the property resulting from the choice cannot exceed $1,040,000, up from $1,020,000 for 2011.

The annual exclusion for gifts remains at $13,000.

Other Items

• The monthly limit on the value of qualified transportation benefits exclusion for qualified parking provided by an employer to its employees for 2012 rises to $240, up $10 from the limit in 2011. However, the temporary increase in the monthly limit on the value of the qualified transportation benefits exclusion for transportation in a commuter highway vehicle and transit pass provided by an employer to its employees expires and reverts to $125 for 2012.
• Several tax benefits are unchanged in 2012. For example, the additional standard deduction for blind people and senior citizens remains $1,150 for married individuals and $1,450 for singles and heads of household.

What should you do if you notice that your tax return prepared incorrectly? Should you amend return for ANY reason? What if there are math errors? What if wrong deductions were used? It is important to be accurate when filing a tax return. Use these steps to ensure accurate return.

Ten Facts from the IRS about Amending Your Tax Return

If you discover an error after you file your tax return, you can correct it by amending your return.  Here are ten facts from the Internal Revenue Service about amending your federal tax return:

1. When to amend a return You should file an amended return if your filing status, your dependents, your total income or your deductions or credits were reported incorrectly.
2. When NOT to amend a return In some cases, you do not need to amend your tax return.  The IRS usually corrects math errors or requests missing forms – such as W-2s or schedules – when processing an original return.  In these instances, do not amend your return.
3. Form to use Use Form 1040X, Amended U.S. Individual Income Tax Return, to amend a previously filed Form 1040, 1040A or 1040EZ.  Make sure you check the box for the year of the return you are amending on the Form 1040X. Amended tax returns cannot be filed electronically.
4. Multiple amended returns If you are amending more than one year’s tax return, prepare a 1040X for each return and mail them in separate envelopes to the appropriate IRS processing center.
5. Form 1040X The Form 1040X has three columns. Column A shows original figures from the original return (if however, the return was previously amended or adjusted by IRS, use the adjusted figures). Column C shows the corrected figures. The difference between Column A and C is shown in Column B.  There is an area on the back of the form to explain the specific changes and the reason for the change.
6. Other forms or schedules If the changes involve other schedules or forms, attach them to the Form 1040X.
7. Additional refund If you are filing to claim an additional refund, wait until you have received your original refund before filing Form 1040X.  You may cash that check while waiting for any additional refund.
8. Additional tax If you owe additional tax, you should file Form 1040X and pay the tax as soon as possible to limit interest and penalty charges.
9. When to file Generally, to claim a refund, you must file Form 1040X within three years from the date you filed your original return or within two years from the date you paid the tax, whichever is later.
10. Processing time Normal processing time for amended returns is 8 to 12 weeks.

More than 26 weeks of year have passed and I know you are not thinking about doing your tax return. But think of this……….would you rather have a large refund or large payment from IRS. Most of you might say large refund. There are several problems with this. One, the IRS uses your money throughout the year. Second, you are paying interest( if you are average american with credit card debt) on that money. Finally, you have a vacation spent already for many tax bills that come up at year end. What to do? Read enclosed link.https://mail.google.com/mail/?hl=en&shva=1#label/Tax+Tips/1313cef64e3d5281

A tax season is ending in 3 days and 2011 is already in 2nd quarter. Do you know how you are doing??? Get a good feel for your business and check your receivables and payables. Perhaps it is time to enlist help . Call now.