There are several significant tax changes coming into effect in 2012, along with some that took effect late in 2011 and so are "new." These tax changes stem from tax legislation passed in prior years, or are activated by effective dates in regulations and rulings, or will be activated by default in 2012 if there isn’t any Congressional action taken.
Business changes taking effect in 2012 and late 2011:
New guidance on deduction versus capitalization of tangible property costs.
Recently the IRS has published temporary regulations, generally effective in tax years beginning after 2011, in regards to the treatment of amounts paid to ...
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The Foreign Account Tax Compliance Act reporting requires foreign assets to be reported if the assets have a total value of more than $50,000 ($100,000 if married filing jointly). The Foreign Account Tax Compliance Act is more expansive than the Report of Foreign Bank and Financial Accounts.
Furthermore, the prior obligation to report the Report of Foreign Bank and Financial Accounts on Form TDF90-22.1, Foreign Account Tax Compliance Act must now be reported on a new Form 8938.
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Form 1099-B has been modified so that brokers can report the basis of transactions during the year. The IRS will inspect to make sure that this data matches the basis reported on the taxpayer's return. Furthermore, these transactions should now be reported on the new Form 8949, instead of directly on Schedule D.
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Beginning in 2011, the added tax on distributions taken from a health savings account and not spent on qualified medical expenses, increases from 10% to 20%. Likewise, the extra tax on distributions taken from an Archer medical savings account and not spent on qualified medical expenses, increases from 15% to 20%.
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In 2011, eligible self-employed individuals and S corporation shareholders can utilize the self-employed health insurance deduction to decrease their income tax liability. Qualified taxpayers can still claim this deduction on Form 1040. Premiums paid for health insurance covering the taxpayer, spouse and dependents usually qualify for this deduction.
Additionally, premiums paid to cover an adult child under age 27 at the end of the year, also qualify, even though the child is not the taxpayer's dependent.
As before, the insurance plan must be set up under the taxpayer's business, and the taxpayer cannot be eligible to participate in an employer-sponsored health plan.
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For tax-year 2011, the alternative minimum tax exemption increased to the following amounts:
$74,450 for a married couple filing a joint return and qualifying widows and widowers, rising from $72,450 in 2010.
$37,225 for a married person filing separately, increasing from $36,225.
$48,450 for singles and heads of household, rising from $47,450.
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This credit is related to 2010 hiring, but, it required retaining the employee for a minimum of 52 weeks to qualify for the credit, thus shifting eligibility for the credit to 2011.
In order to qualify for the credit, the employer is required to have paid wages in
the last 26 weeks equal to no less than 80% of the wages for the first 26
weeks. Use Form 5884-B to claim the credit. The amount will be the lesser of
$1,000 or 6.2% of the retained worker's wages during the period.
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Taxpayers are required to file their 2011 income tax returns and pay any taxes due or request a tax filing extension by April 17th. This also applies to 2011 IRA contributions. Taxpayers have additional time this year, because April 15th lands on Sunday and Emancipation Day, a holiday in Washington D.C. is observed the following day on Monday, April 16.
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The rate for business miles driven in 2012 will remain unchanged from the 55.5 cents per mile that became effective on July 1, 2011.
Rates for medical or moving activities will be .23 per mile driven.
Miles driven in the service of charitable organizations will be .14 cents per mile.
Taxpayers are not allowed to utilize the business standard mileage rate for a vehicle after using any depreciation method from the Modified Accelerated Cost Recovery System, or following a claim using a Section 179 deduction for that vehicle.
Furthermore, the business standard mileage rate cannot be utilized for more than four vehicles used concurrently.
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The gift tax maybe the most misunderstood tax of all taxes. First, this tax is owed by the benefactor of the gift, not the beneficiary of the gift.
The federal gift tax exists for one purpose: to prevent citizens from sidestepping the federal estate tax by giving away their assets before they die.
New rules related to the lifetime gift limit have increased the popularity of transferring real estate as a gift to family members. The IRS has increased their activity towards finding taxpayers who have failed to file and report such transactions on a gift tax return or those that have ...
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