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Tax Changes for 2012: A Checklist
Welcome 2012! As the new year rolls around, it's always a sure bet that there will be changes to the current tax law and 2012 is no different. From health savings accounts to retirement contributions here's a checklist of tax changes to help you plan the year ahead.
The current tax rate structure ranging from 10% to 35% remains the same for 2012, but tax-bracket thresholds increase for each filing status. Standard deductions and the personal exemption have also been adjusted upward to reflect inflation. For details see Tax Brackets and Exemptions for 2012 below.
Alternate Minimum Tax (AMT)
For 2012, the net unearned income for a child under the age of 19 (or a full-time student under the age of 24) that is not subject to "kiddie tax" is $1,900, the same as 2011.
Health Savings Accounts (HSAs)
A qualified individual must be covered by a High Deductible Health Plan (HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care.
For calendar year 2012, a qualifying HDHP must have a deductible of at least $1,200 for self-only coverage or $2,400 for family coverage (unchanged from 2011) and must limit annual out-of-pocket expenses of the beneficiary to $6,050 for self-only coverage (up $100 from 2011) and $12,100 for family coverage (up $200 from 2011).
Medical Savings Accounts (MSAs)
Self-only coverage. For taxable years beginning in 2012, the term "high deductible health plan" means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,100 (up $100 from 2011) and not more than $3,150 (up $150 from 2011), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,200 (up $150 from 2011).
Family coverage. For taxable years beginning in 2012, the term "high deductible health plan" means, for family coverage, a health plan that has an annual deductible that is not less than $4,200 (up $150 from 2011) and not more than $6,300 (up $250 from 2011), and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $7,650 (up $250 from 2011).
Eligible Long-Term Care Premiums
Adoption Assistance Programs
The amount excludable from an employee's gross income begins to phase out under for taxpayers with modified adjusted gross income (MAGI) in excess of $189,710 and is completely phased out for taxpayers with modified adjusted gross income of $229,710 or more.
Taxpayers adopting children are eligible for both the adoption credit (see below) and the adoption assistance exclusion of adoption expenses paid for through an employer's adoption assistance plan. However, the same adoption expense cannot qualify for both the adoption credit and the adoption assistance exclusion.
Foreign Earned Income Exclusion
Individuals - Tax Credits
Child Tax Credit
Earned Income Credit
Additional Child Credit
Individuals - Education
Hope Scholarship - American Opportunity, and Lifetime Learning Credits
The modified adjusted gross income (MAGI) 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.
Interest on Educational Loans
Individuals - Retirement
Income Phase-out Ranges
For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple's income is between $173,000 and $183,000, up from $169,000 and $179,000.
The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011. For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000. For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
Standard Mileage Rates
Section 179 Expensing
Transportation Fringe Benefits
Work Opportunity Credit
While this checklist outlines important tax changes already in place for 2012, additional changes in tax law are more than likely to arise during the year ahead.
Don't hesitate to call us if you want to get an early start on tax planning for 2012. We're here to help!
Ensuring Financial Success for Your Business
Can you point your company in the direction of financial success, step on the gas, and then sit back and wait to arrive at your destination?
Unfortunately, the answer to this question is no. You simply can't let your business run on autopilot and expect good results. Any successful business owner knows that numerous adjustments--from decisions about pricing to hiring and investing--must be made along the way in order to achieve success.
So, how do you handle the array of questions facing you?
One way is through cost accounting.
Cost Accounting Helps You Make Informed Decisions
Cost accounting reports and determines the various costs associated with running your business. With cost accounting, you track the cost of all your business functions including raw materials, labor, inventory, and overhead, among others.
Cost accounting allows you to understand the following:
To monitor your company's costs with this method, you need to pay attention to the two types of costs in any business: fixed and variable.
Fixed costs don't fluctuate with changes in production or sales. They include:
Variable costs DO change with variations in production and sales. Variable costs include:
We Can Help
If you'd like to understand the ins and outs of your business better as well as create sound guidance for internal decision making, consider cost accounting.
If you need assistance we can help. We'll evaluate your business from top to bottom and determine the real cost of each component. With that as a foundation, we will help you draft budgets, adjust pricing, keep an appropriate level of inventory, and much more. Give us a call today!
How to Get Paid on Time
With the current economic conditions, the collection of accounts receivables is becoming more and more of a challenge. Strengthening your collection procedures may allow you to improve collection rates and shorten the aging days of your accounts receivables.
The following suggestions will help your business improve its cash flow and tighten up its credit and collections policies. Some of the tips discussed here may not be suitable for every business, but can serve as general guidelines to give your company more financial stability.
Define Your Policy. Define and stick to concrete credit guidelines. Your sales force should not sell to customers who are not credit-worthy, or who have become delinquent. You should also clearly delineate what leeway sales people have to vary from these guidelines in attempting to attract customers.
Clearly Explain Your Payment Policy. Invoices should contain clear written information about how much time customers have to pay, and what will happen if they exceed those limits.
Follow Through on Your Stated Terms. If your policy stipulates that late payers will go into collection after 60 days, then you must stick to that policy. A member of your staff (but not a salesperson) should call all late payers and politely request payment. Accounts of those who exceed your payment deadlines should be penalized and/or sent into collection, if that is your stated policy.
Train Staff Appropriately. The person you designate to make calls to delinquent customers must be apprised of the seriousness and professionalism required for the task. Here is a suggested routine for calls to delinquent payers:
Tax Brackets, Deductions, and Exemptions for 2012
In 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation.
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:
We'll be glad to help with all of your tax planning needs in 2012. Give us a call today!
IRS Announces 2012 Standard Mileage Rates
Beginning January 1, 2012, the standard mileage rates for the use of a car (also vans, pickups, or panel trucks) became:
The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.
The standard mileage rate are based on an annual study of the fixed and variable costs of operating an automobile.
Let us know if you have questions about which driving activities you should monitor as tax year 2012 begins.
Receive a Faster Refund with Direct Deposit
The New Year has arrived, which means . . . it's tax time!
This year, do you want your refund faster? Have it deposited directly into your bank account. More taxpayers are choosing direct deposit as the way to receive their federal tax refunds. More than 78.4 million people had their tax refunds deposited directly into their bank accounts last year. It's the secure and convenient way to get money in your wallet faster.
You can also electronically direct your refund to multiple accounts. With the new "split refund" option, taxpayers can divide their refunds among as many as three checking or savings accounts and three different U.S. financial institutions. The split refund option, using Form 8888, is also available for paper returns.
To request direct deposit, just ask us. We are happy to assist you.
Filing Requirements for Dependents
Whether a dependent has to file a return generally depends on the amount of the dependent's earned and unearned income and whether the dependent is married, is age 65 or older, or is blind.
Even if you are not legally required to file, you should file a federal tax return to get money back if any of the following apply:
Contact us for further information. We'll advise you about your particular situation.
Customer Refunds: Are You Doing Them Right?
Refunds. You probably wince at the word. Some -- like customer refunds for returns -- are fairly uncomplicated, thanks to QuickBooks' tools. Others, not so much. You may find yourself unable to balance your accounts receivable.
There are numerous scenarios that necessitate the use of credit memos, including overpayment, order cancellations and bad debt write-off. It's critical that these are entered correctly. If they aren't, you may lose a lot of the time that QuickBooks helped you save as you try to chase down a few dollars.
Figure 1: QuickBooks helps you identify refunds quickly.
Sending money back
Let's say a customer pays for an order but cancels before it ships. You could:
Click Customers | Create Credit Memos/Refunds. Select the correct customer and job (and A/R account, if you have more than one). Enter the items just as they appear on the invoice.
When you're finished, click Save & New. The Available Credit window opens, displaying your options:
Figure 2: The Available Credit window displays your credit balance options.
You would select Give a refund and click OK. The Issue a Refund window opens and should already be filled in. If everything is correct, click OK. The refund check has now been entered in the checking register, ready to be processed.
WARNING: If the invoice was paid with a credit card, it gets complicated. Your instructions will depend on whether you are using Intuit Merchant Service for QuickBooks or another merchant account service. You'll also have to deal with transaction fees. We can help you deal with this.
Other refund options
If the customer has open invoices, you may want to choose Apply to an invoice in the Available Credit window. A list opens; just select the correct invoice. Or if you want to have those extra funds available for other invoices but don't want to apply them immediately, click Retain as an available credit. When you want to use them, click the Apply Credits button in the lower right corner of the invoice.
Figure 3: When issuing a refund, QuickBooks can hold those funds to be applied to invoices later.
Sometimes, customers overpay an invoice or statement charge, or make a down payment for which there is no invoice. This is easy to fix. Open the Customer Payment screen (Customer Center | Transactions | Received Payments) and double-click the related payment. In the screen's lower left corner, you'll see this:
Figure 4: Click the correct option here.
Click the correct button, then Save & Close. The Issue a Refund window opens; you'd treat it the same way you did when you dispatched a return refund.
You can also use credit memos to write off bad debt if you are using the accrual method of accounting.
If you don't already have a Bad Debt item in your item list, set up a new item as an Other Charge. Name it "Bad Debt" and match it to the correct account.
Open the Credit Memo window and select the customer, then select Bad Debt as the item. You'll get a message saying that the item is associated with an expense account; click OK. Enter the write-off amount minus sales tax if taxable (be sure the Tax column is correct) and click Save & Close.
WARNING: Enter two lines on the credit memo if it combines both taxable and non-taxable items (both charged to the Bad Debt account), one for each type. Be sure that the Tax Columns are correct.
The Available Credit window opens. Select Apply to an invoice. Put a check mark next to the correct one and click Done.
Make refunds make sense
It seemed easier in the days when you just wrote a check for a refund or made an entry in a paper ledger, didn't it? Using QuickBooks credit memos, though, helps you maintain records that follow standard accounting procedures and simplifies our understanding of your files. We'll be glad to help you make sure that this sometimes-complex task is done right from the start.
Tax Due Dates for January 2012
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