Indiana Governor Has Signed Inheritance-Tax Bill

Governor Mitch Daniels signed a bill (SB 293) on March 20th to phase out Indiana’s inheritance tax. Earlier this month, legislators approved a measure that will decrease the inheritance tax in stages beginning next year until it is eliminated after 2021. In addition, the exemption level (the amount not subject to the tax for the immediate family) is increased from $100,000 to $250,000.

According to The Tax Foundation, “the long phase out period is designed to give policymakers ample time to deal with the revenue impact.” Lawmakers suggest that this impact will be offset by an agreement to begin taxing Amazon.com in 2014. The inheritance tax currently brings in about $145 million annually, or 1% of total taxes.

“Because the exemption levels are so small, even small businesses will benefit. It is a positive move for anyone who has assets that they want to pass to their heirs,” says Kevin Aaron, Tax Specialist at Simons Bitzer

2012 Business Leader Survey

     CCH, a Wolters Kluwer business, is a leading global provider of tax, accounting and audit information, software and service. The company commissioned an independent survey to learn more about how accounting firms can maintain customer retention.
     As part of this survey, businesses were asked what financial and tax issues concerned them the most. These are the top 5 responses:
1. Minimizing taxes
2. Complying with regulations
3. Better business management
4. Payroll compliance
5. Avoiding an audit

     Simons Bitzer & Associates is conducting a Business Leader Survey to learn what issues are most pressing to business owners in Central Indiana. Respond to our survey on or before April 19th and be entered to win a new iPad. http://svy.mk/GMWMZK

     We look forward to hearing from you and sharing the results!

It’s Tax Payback Time!

If you took certain actions in a prior year, you may now have additional taxes due on your 2011 tax return.  Here are the details:

HOME BUYER CREDIT:  If you bought a home in 2008 and took the first-time home buyer credit, you have another repayment installment due with your 2011 tax return.  The 2008 tax credit was an interest-free loan that you have to pay back over a 15-year period.

ROTH CONVERSIONS:  If you converted a traditional IRA to a Roth IRA in 2010 and opted to split the tax due from the conversion between 2011 and 2012, your first half of the tax is due on your 2011 tax return.

If you have questions regarding either of these two repayments, please contact our office at (317) 782-3070 or visit www.simonsbitzer.com.

There is still time to cut your 2011 tax bill

Are you still dealing with your 2011 tax return?  Do you owe a bigger tax bill than you expected?  Are you missing a tax break because your adjusted gross income is too high?  Would you like a bigger refund?

Don’t despair.  You might still have time to make some changes.  For example:

* You have until April 17th to make a tax-deductible IRA contribution for 2011. If you qualify, you could contribute up to $5,000 and have it count as a deduction against last year’s taxes. If you were 50 years old or older last year, your maximum contribution is $6,000.

* Even if you’ve already made your 2011 contribution to a Roth IRA, it may not be too late to make a change.  You may be able to recharacterize your contribution as a traditional IRA contribution and take the deduction.  You’ll need to set up a traditional IRA, make a trustee-to-trustee transfer, and report it on your 2011 tax return.  Please contact your CPA and/or our office prior to making this change.

*If you’re self-employed, there’s still time to set up a SEP-IRA for your business.  You have until the due date of your return, including extensions, to set up the plan and make a contribution from 2011 earnings.  SEP-IRAs are relatively easy to establish and flexible to manage.

Contact our office if you’re interested in any of these ideas. We can help determine whether you qualify and guide you through the process. You can reach us at www.simonsbitzer.com or (317) 782-3070.

Deadline for electing S corporation status is March 15

If you own a small business, you have until March 15, 2012 to choose S corporation status for this year. In order to become an S corporation, you’ll need the unanimous approval of all shareholders.

The principal advantage of an S corporation is that you avoid paying double taxes. In a traditional C corporation, profits are taxed at the corporate level and then they’re taxed again when paid to individual shareholders as dividends. In an S corporation, there are no taxes on earnings at the corporate level. Instead, profits or losses flow directly through to the shareholders. They pay taxes only once, when they report their share of earnings on their individual tax returns.

Another advantage: Doing business as an S corporation can be attractive in the early, unprofitable years of a start-up business. That’s because operating losses flow through your personal taxes, perhaps offsetting other taxable income.

There are some trade-offs for these tax benefits, though. If you’re an owner-employee and own more than two percent of the company, you’ll receive less favorable tax treatment for some fringe benefits. There are also ownership limitations. The company can have only one class of stock, there can’t be more than 100 shareholders, all of the shareholders must be U.S. citizens or residents, and the corporation must meet other restrictions.

Despite these drawbacks, doing business as an S corporation can still offer some tax planning advantages. If you can meet the ownership requirements, it might be well worth considering an S corporation election. Contact Simons Bitzer at www.SimonsBitzer.com or (317) 782-3070 for an in-depth analysis of the pros and cons for your company.