Two important tax deadlines approaching
March 15 – 2011 calendar-year corporation income tax returns are due. Extensions may be filed to give until September 17, 2012, to file.
March 15 – Deadline for calendar-year corporations to elect S corporation status for 2012.
April 2 – Deadline for payers who file electronically to send copies of 2011 W-2s to the Social Security Administration.
April 2 – Deadline for payers who file electronically to file 2011 information returns (such as 1099s) with the IRS.
Please contact Simons Bitzer & Associates at (317) 782-3070 or www.SimonsBitzer.com with questions or to schedule a complimentary consultation with one of our tax specialists.
Depreciation Rules, Cash Flow Best Practices, Unreimbursed Education Expenses Deduction
We’re posting our March eNewsletter.
Click here to read http://bit.ly/y34ii0.
Use Adjusted Tax Numbers for 2012 Planning
While you may still be in the preparation phase of your taxes, you must also be thinking strategically about your taxes for 2012. The IRS is required by law to adjust certain tax numbers each year. Below are some of the adjusted numbers you’ll need for your 2012 tax planning. Don’t miss the decrease in Section 179 advises Kevin Aaron, tax specialist at Simons Bitzer.
STANDARD MILEAGE RATE for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.
SECTION 179 maximum deduction decreases to $139,000, with a phase-out threshold of $560,000.
TRANSPORTATION FRINGE BENEFIT limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.
SOCIAL SECURITY taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.
KIDDIE TAX threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).
NANNY TAX threshold increases to $1,800.
HSA CONTRIBUTION limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.
401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).
SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).
IRA contribution limit remains at $5,000 ($6,000 for 50 and older).
ESTATE TAX top rate remains at 35%, and the exemption amount increases to $5,120,000.
ANNUAL GIFT TAX EXCLUSION remains at $13,000.
ADOPTION TAX CREDIT decreases to $12,650 for adoption of an eligible child.
ALTERNATIVE MINIMUM TAX (AMT) exemption decreases to $33,750 for singles and to $45,000 for married couples.
For assistance with your 2012 tax planning, please contact our office at (317) 782-3070 or visit our website at www.simonsbitzer.com.
Even if you don’t itemize, some deductions are available.
If you’ve given up itemizing deductions, you’re not alone. These days over half of all taxpayers find they’re better off using the standard deduction. Even if you take the standard deduction, you can also deduct some individual expenses on your 2011 tax return, including the following:
* IRA and HSA contributions:
On your 2011 tax return you may qualify to deduct up to $5,000 in contributions to a traditional IRA. That increases to $6,000 if you’re age 50 or older. Income limitations may apply in some cases. You cannot deduct contributions to Roth IRAs.
Health Savings Accounts (HSAs) are IRA-like accounts set up in conjunction with a high-deductible health insurance policy. The annual contributions you make to your HSA are deductible. Contributions are invested and grow tax-free. You are also allowed to withdraw money in the account tax-free to pay for your unreimbursed medical expenses. The HSA contribution limit for 2011 is $3,050 for singles and $6,150 for couples. An additional $1,000 may be contributed by those 55 and older.
* Student loan interest and tuition fees:
Deduct up to $2,500 interest on student loans for yourself, your spouse, and your dependents. For 2011, you can also deduct up to $4,000 of tuition and fees for qualified higher education courses. Income limitations apply and you must coordinate these deductions with other education tax breaks.
* Self-employment deductions:
If you’re self employed, you can generally deduct the cost of health insurance premiums, retirement plan contributions, and one-half of self-employment taxes.
* Other deductions:
Don’t overlook deductions for alimony you payand early savings withdrawal penalties. You may also be able to deduct certain moving expenses. To find out if your moving expenses qualify, visit IRS.gov and search for form 3903 suggests Joan Brockman, Tax Specialist at Simons Bitzer. Teachers can deduct up to $250 for classroom supplies that they purchased with their own money in 2011.
Contact Simons Bitzer at (317) 782-3070 for more information on these and other deductions you may be entitled to take on your 2011 tax return.
Don’t Ignore Health Care Coverage Tax Credit
Health care legislation passed in 2010 included a tax credit for small businesses that provided health care coverage for their employees. Recent surveys have shown that the majority of small companies that could qualify for the credit have failed to take it. The reasons given for ignoring the credit ranged from being unaware of it to finding the credit too complicated to compute.
If your business or nonprofit organization might be eligible, perhaps you should take another look at the requirements. If you qualify, you can use this tax credit to offset your federal income tax liability by up to 35% of the cost of health insurance premiums you pay for employees. Since this is a tax credit, not a deduction, it will reduce your tax bill dollar-for-dollar.
In general, the credit is available to employers that have fewer than 25 full-time equivalent (FTE) employees paying average annual wages of less than $50,000 per employee. Eligibility is based partially on FTEs, not the number of employees; therefore, an employer with fewer than 50 half-time workers could also qualify for the credit. The maximum credit goes to those employers with ten or fewer employees who pay annual average wages of $25,000 or less.
When you’re self-employed, either as a partner or a sole proprietor, or if you own more than 2% of an S corporation, you’re not considered an employee for purposes of the credit.
Tax-exempt organizations can use the credit to offset payroll tax liability (up to 25% of qualified premiums paid).
For assistance in determining eligibility for this tax credit or for making the calculations to obtain the credit, contact Simons Bitzer at (317) 782-3070.
Upcoming Tax Deadlines
Don’t miss these deadlines if they apply to your business:
February 15 – Brokers must provide 2011 Forms 1099-B and 1099-S to customers.
February 28 – Send Forms 1099 with Form 1096 to the IRS. If you file these forms electronically, you have until April 2 to file with the IRS.
February 29 – Send Copy A of employee W-2s for 2011, along with Form W-3, to the Social Security Administration. If you file electronically, you have until April 2 to file.
March 1 – Farmers and fishermen who did not make 2011 estimated tax payments must file 2011 tax returns and pay taxes in full.
With questions or for assistance in your tax planning and preparation, please contact Simons Bitzer at (317) 782-3070.
Be Diligent About Saving Your Tax Records
You’re probably getting ready to sort out last year’s financial records and prepare for this year’s recordkeeping. But what should you keep and what can you throw away? Here are some suggestions.
Keep records that directly support income or expense items on your tax return. For income, this includes W-2s, 1099s, and Form K-1s. Also keep records of any other income you might have received from other sources. It’s also a good idea to save your bank statements and investment statements from brokers.
For expense items, keep documentation that supports any itemized deductions you claim. This includes acknowledgments from charitable organizations and backup for taxes paid, mortgage interest, medical deductions, work expenses, and miscellaneous deductions. Even if you don’t itemize, keep records of expenses for child care, medical insurance if you’re self-employed, and any other expenses that appear on your return.
The IRS can audit you routinely for three years after you file your return. In cases where income is underreported, however, they can audit for up to six years. To be safe, we suggest keeping your tax records for seven years.
Keep certain other records even longer. These include records relating to your house purchase and any improvements you make. Also keep records of investment purchases, dividends reinvested, and any major gifts you make or receive. Finally, keep copies of all your tax returns and W-2s in case you ever need to prove your earnings for social security purposes.
Recordkeeping is required for charitable deductions
Don’t forget to obtain the documentation you need for all of your 2011 charitable contributions. Without this documentation, you risk losing the deduction. Even gifts under $250 require a bank record or receipt from the charity.
With questions or for help in preparing your 2011 taxes, please contact our office at (317) 782-3070 to schedule a complimentary consultation with one of our tax specialists.
Gather Documents for your 2011 Tax Return
If you haven’t started already, consider gathering the items you need to file your 2011 tax return including W-2s, 1099s, and other forms you receive from your employer, broker, banker, etc. Review the documents carefully. If you detect errors, contact the sender immediately for a corrected copy.
With questions or for assistance preparing your tax returns, contact Simons Bitzer at (317) 782-3070 for a complimentary consultation with one of our tax specialists.
Does Your Child Need To File a 2011 Tax Return?
You should determine whether or not your child needs to file a 2011 tax return. A return is needed if wages exceeded $5,800, your child had self-employment income over $400, or investment income exceeded $950. If the child had both wages and investment income, other thresholds will apply.
With questions, please contact our office at (317) 782-3070 and schedule a complimentary consultation with one of our tax specialists.
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