Personal Tax Clients and Friends:
Your “Tax Organizer for the Tax Year 2012″ which is designed to allow us to more efficiently review and process your individual income tax data will be arriving shortly. The “Organizer” is designed to help you accumulate information and remind you of items you could otherwise overlook. Your completion of this Organizer allows us to better serve your tax filing requirements in a more timely and cost-effective manner. If we prepared your income tax returns for 2011, the Organizer includes your 2011 tax data for comparison purposes.
APPOINTMENTS
If there have been no significant changes and you do not need an appointment, you can mail, e-mail, fax or drop off your completed organizer. We will call you when we receive it to discuss any questions or issues that arise.
If you have significant changes that you would like to discuss in person, please call and set up an appointment.
TAX HIGHLIGHTS FOR 2012
The 2012 Taxpayer Relief Act was signed into law which retains many of the favorable tax breaks that were scheduled to expire for certain taxpayers.
The following tax breaks were extended for 2012 by this Act:
Educator deduction – $250 tax deduction for educators is extended through 2013.
Itemized deduction for mortgage insurance premiums is extended through 2013.
Itemized deduction for state and local sales tax is extended through 2013.
Above-the-line deduction for tuition to qualified taxpayers is extended through 2013.
Non-business energy property credit on energy efficient improvements with a lifetime limit of $500 is extended through 2013.
Exclusion of Cancellation of Indebtedness on Principal Residence is extended through 2013.
Tax free distributions from individual retirement plans for charitable purposes is extended through 2013.
Child tax credit of $1,000 per qualifying child has been permanently extended.
Work Opportunity tax credit is retroactively extended two years through 2013.
Alternative Minimum Tax
The Act provided permanent AMT relief by increasing exemption amounts for 2012 and indexing them for inflation for tax years after 2012. Without the AMT “patch” in effect, approximately 60 million taxpayers would have been subject to the alternative minimum tax in 2012.
Depreciation
Bonus depreciation of 50% will apply to property placed in service in 2012 and 2013. The Section 179 expensing limit of $500,000 has been extended through 2013.
Federal Estate Gift and GST Taxes
The Act permanently sets the maximum federal estate tax rate of 40% and a $5 million exclusion which is annually adjusted for inflation. The gift tax exclusion increases to $14,000 for 2013.
TAX CHANGES AFFECTING 2013
Social Security tax increase
Tax Legislation that reduced employee social security payroll tax by 2% in 2011 and 2012 has expired. Therefore, beginning January 1, 2013, employee social security contributions will increase to 6.2%. The social security wage base has increased in 2013 to $113,700.
Higher Income Taxpayers
For those taxpayers with income exceeding $400,000 (single) or $450,000 (married) in 2013 the highest income tax bracket will be 39.6%, instead of the 35% bracket in 2012. In addition, for taxpayers over $400,000 (single) and $450,000 (married), capital gains and dividend rates will be 20% (up from 15%). There will also a 3.8% investment income tax for taxpayers with modified adjusted gross income over $200,000 (single) or $250,000 (married), applied to investment income including interest, dividends, capital gains and passive investment income. In 2013 there will also be an additional Medicare tax going into effect. For taxpayers with W-2 or self employment income over $200,000 (single) or $250,000 (married) they will be subject to an additional .9 percent.
Standard Mileage Rates
The standard mileage rate has increased to 56.5 cents for 2013 from 55.5 cents in 2012.
Charitable Contributions
The IRS has strict record keeping requirements for cash contributions. Taxpayers are required to have a record of all cash contributions in order to take a deduction. Substantiation can include cancelled checks, bank statements containing the name of the charity, or written communication from the charity which includes the date and amount of the contribution.
Foreign Transactions Reporting
The IRS requires reporting of many foreign transactions meeting certain dollar amount thresholds. These transactions include but are not limited to ownership in foreign bank accounts, interests in foreign entities, receipts of gifts from foreign persons, transfers of property to foreign entities, and signature authority over foreign accounts. If you are involved in any foreign transactions or have authority over foreign accounts please contact us to determine if you are subject to any additional reporting.
DEADLINE
The federal filing deadline for 2012 is April 15, 2013. It is essential that you submit your tax information to us as soon as possible in order to have your return processed before the deadline. Because of workload considerations and the many complexities of income tax return preparation, tax return information received April 1 or later may not be processed before the deadline, and probably will go on extension.
MASSACHUSETTS NON-RESIDENT EMPLOYEES
For individuals who work in Massachusetts and live in another state such as New Hampshire, please have a record of the total days worked in Massachusetts.
Taxpayer Spouse
Total days 365 365
Less:
Vacation days ( ) ( )
Holidays ( ) ( )
Sick days ( ) ( )
Weekends ( ) ( )
________ ________
Total work days
Allocate total workdays as follows:
Work days in Mass. .
Work days out of Mass. .
