Tag Archives: tax advice

Gift and Estate Tax Changes Expected to Occur at the End of 2012

Posted on by

The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act which was signed into law in 2010 increased the amounts of the estate, gift and generation skipping tax exemptions and, at the same time, lowered the tax rates for each of these taxes. However, unless Congress takes some action before the end of the year, the estate tax benefit benefits provided by this law will expire on December 31, 2012. The major provisions of the 2010 Tax Relief Act are outlined below together the changes that will take place on January 1, 2013 if Congress does not take further action.

Gift Tax

  • Current

The gift tax exemption is $13,000 per year for gifts made by any one person to any number of people. There is a lifetime gift tax exemption of $5,120,000 for gifts made above the $13,000 limit.

  • January 1, 2013

The gift tax exemption will remain at $13,000 per year (with a possible increase for inflation) for gifts made by any one person to any number of people. The lifetime gift tax exemption for gifts made above the $13,000 limit is scheduled to revert to $1,000,000.

Generation Skipping Tax

  • Current

The GST exemption is $5,120,000 with a tax rate of 35% on amounts above the exemption limit.

  • January 1, 2013

The GST exemption is scheduled revert to $1,390,000 per year (with a possible increase for inflation) with a tax rate of 55% on amounts above the exemption limit.

Estate Tax

  • Current

The estate tax exemption is $5,120,000 with a tax rate of 35% on amounts above the exemption limit. Portability of unused estate tax exemptions of one spouse to the surviving spouse is allowed.

  • January 1, 2013

The estate tax exemption is scheduled revert to $1,000,000 per year with a tax rate of 55% on amounts above the exemption limit. Portability of unused estate tax exemptions of one spouse to the surviving spouse will no longer be allowed.

With January 1, 2103 fast approaching, taxpayers are anxious to see what, if any, action will be taken by Congress. If Congress does nothing, the exemptions for gift, generation skipping and estate taxes will revert to their 2009 levels and the tax rates for amounts above the designated exemption levels will increase to 55%. On the other hand, if Congress votes to extend the Tax Relief Act, the exemption limit for these taxes will remain at $5,120,00 with a possible inflation adjustment and the tax rate for amounts above the exemption limits will be held at the current 35%. Barring a full repeal of the estate tax, the third alternative would be the passage of some sort of compromise law that would place exemption limits and tax rates somewhere in the middle of the 2009 levels and those set by the Tax Relief Act of 2010.

If you owe back taxes due to a gift or inheritance, we can help you determine whether the assessed amounts are accurate based on past and current estate tax laws. Very often, the process of accurately interpreting the law and making use of tax benefits the law provides can result in a significant reduction in the tax amount owed. Following this analysis, our experienced tax settlement professionals will resolve any existing tax debt in the most effective way available. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (877)-889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.

Avoid IRS Penalties – Settle your IRS Tax Debt – Tax Settlement Tips

Posted on by

If you have been disregarding a notice from the IRS, tax filing deadlines, or ignoring tax liabilities, it is probably time to think about filing those back tax returns and paying outstanding tax balances. Even though the Obama Administration’s 2012 Budget request for increased funding for the Internal Revenues Service was not approved, the ability of the IRS to enforce tax compliance has improved over time. System modernization and software improvements have made it harder for a taxpayer to stay under the IRS radar by making it easier for this powerful collection agency to track down individuals who fail to file tax returns or owe back taxes.

When tax amounts are owed over an extended period of time, the financial burden can become overwhelming due to the continued accumulation of penalties and interest. It is not unusual for these additional amounts assessed by the IRS to total as much as 50% of the original tax amount owed.  The financial consequences of failing to file a tax return or owing back taxes are outlined below:

  • Failure to File Penalty The Failure to File Penalty is calculated on the tax balance due as shown on the tax return. This penalty is 5% of the tax amount due for each month the return is late, with a maximum penalty of 25%. Although it is seldom invoked, a taxpayer who fails to meet a filing deadline can also be charged with a misdemeanor, which carries a maximum fine of $25,000 and up to a one-year prison term.
  • Failure to Pay Penalty The Failure to Pay Penalty is calculated on the tax balance due as shown on the tax return. These penalty charges are assessed at the rate of 0.5% for each month that the tax balance is not paid in full, beginning from the original April 15th filing deadline. The Failure to Pay Penalty has no limit on the maximum percentage amount that can be assessed.
  • Interest Interest is charged on the balance of any tax liability for each day the back tax balance is not paid in full. The interest rate, which is variable and set quarterly, is currently 4%.

With the downturn of the economy, even more taxpayers have missed filing deadlines or have found themselves with outstanding tax balances that they are unable to pay. When these tax debts or unfiled tax returns are left unresolved, the IRS will initiate collection activities to enforce compliance and collect the tax amounts owed. Unpaid tax debt or unfiled tax returns will result in collection efforts by the IRS. These collection activities begin with the assessment of interest and penalties and are followed by more aggressive actions including the filing of tax liens or tax levies and the initiation of wage garnishments. On a positive note, there are many tax settlement options available to taxpayers who are unable to pay the tax balances they owe. The important thing is to begin the resolution process immediately before penalties and interest accumulate further or the more severe consequences of owing the tax debt are imposed.

A licensed tax professional will be familiar with all of the tax settlement alternatives available and can be invaluable asset to a taxpayer who is the subject of collection attempts by the IRS. If you have failed to meet tax filing deadlines or have an unresolved tax liability, our experienced tax professionals can help you become tax compliant. For more information about our tax settlement services, visit www.professionaltaxresolution.com. The members of our staff have a thorough understanding of tax law together with the experience to know which tax settlement option will most effectively resolve your specific back tax issues. Contact us today at (877) 889-6527 or info@protaxres.com to receive a free, no obligation consultation.

 

Tax Settlement Advantages Set to Expire in 2012

Posted on by

The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 was designed to provide temporary stability and continuity to the economy by extending tax rates, estate tax laws and certain tax credits, tax deductions, and business tax incentives that had been put in place under the Bush Administration. Some of the provisions of the Tax Relief Act expired at the end of 2011, while others will run out on December 31, 2012. This gives accountants and tax professionals less than a year to make use of the tax planning and tax settlement advantages this legislation provides.

The following tax advantages provided by the Tax Relief Act will expire or revert to previous levels at the end of 2012:

Tax Rates

  • Personal tax rates will increase from a range of 10% to 35% to a levels ranging from 15% to 39.6%.
  • Long term capital gains tax rates will increase from 0% and 15 % to 10% and 20%.
  • Dividends will be taxes at ordinary tax rates instead of 15 %.

Tax Credits

  • The American Opportunity Tax Credit, which provides a credit of up to $2500 for each of the first four years of undergraduate education, will expire.
  • The Child Tax Credit, which provides up to $1000 in tax credits for minor children, will revert to the previous $500 maximum.
  • The Earned Income Tax Credit will revert to allowing a maximum of two dependents, rather than three.
  • The Adoption Tax Credit will revert from a limit of $12,650 back to its previous maximum of $5000.
  • The Dependent and Child Care Tax Credit will revert from a maximum of $3000 for one child and $6000 for two or more children to maximums of $2400 and $4800 respectively.

Tax Deductions

  • The limit on itemized deductions for higher income earners will be reinstated.
  • The phase out for personal tax exemptions will be reinstated.
  • The tax deduction for student loan interest will revert to the previous tax law that only allows it as a deduction for the first 60 months of repayment.

Estate Tax Provisions

  • The estate tax exemption will revert from $5 million back to 1 million.
  • The gift tax exemption will revert from $5 million back to 1 million.
  • Certain provisions that allow more assets from family owned businesses to pass along to beneficiaries will expire.

Business Tax Incentives

  • The 50-percent bonus depreciation allowance for property placed in service will expire.
  • The expensing limit will revert from $125,000 to $25,000.
  • The expensing limit will revert $500,000 to $200,000.

The provisions of The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 that are still in effect for 2012 provide significant tax saving and tax settlement opportunities. Experienced tax professionals understand the ramifications of this important piece of legislation and are focused on taking advantage of the remaining tax credits, tax deductions, tax exemptions, and tax incentives for their clients before the window of opportunity closes at the end of 2012. (Clonazepam)

If you are in need of any type of tax planning, tax preparation or tax settlement services, our experienced tax professionals can provide you with the tax help you need.  Our tax specialists are familiar with all of the current and impending changes to the IRS tax code and can ensure that these changes are used to give you the maximum tax advantage for your specific financial situation. For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at (949)-596-4143 or by email at info@protaxres.com to receive a free, no obligation consultation.

 

What is the 1099-K?–What New IRS Form 1099-K Means for Your Tax Return

Posted on by

As tax season is underway and you receive W-2s and 1099-MISCs in the mail, you may notice something new this year: Form 1099-K. Preparing your taxes and filing Form W-2 and 1099-MISC may be more familiar, but what is this Form 1099-K? It is important to know because the Merchant Card and Third Party Network Payments form, or 1099-K, must either be filed electronically to the IRS by April 2, 2012, or on paper to the IRS by February 28, 2012. Timeliness is vital if you want to avoid a delinquent return.

As part of the Housing Assistance Tax Act of 2008, specific credit card or third party merchant payments for goods and services will need to be reported via the 1099-K. A transaction to be reported is when a credit card or gift card is accepted as payment or when you are paid by PayPal or another third party payment network. Not included are ATM withdrawals, credit card cash advances, issued checks from a payment card, or transactions where a payment card was accepted by merchant related to the card issuer.

In other words, if you have a merchant account for your credit card, or an electronic payment account like PayPal, you may receive a 1099-K from your service provider. This could affect consultants such as lawyers that receive payments online or by credit card for their services, freelancers who are paid via PayPal like eBay merchants and Etsy sellers, and small businesses who receive credit, debit, and PayPal payments for their merchandise.

When is reporting required for a 1099-K? When gross payments to the individual payee are over $20,000, and if there are more than 200 transactions. Therefore, if you are an occasional seller, you  don’t need to worry about receiving a 1099-K. However, successful online sellers will likely be receiving one this year. If this applies to you, make sure to plan for paying the taxes on this income.

Since 2012 marks the first year this form is required and it can cause some confusion, the IRS is offering 1099-K filing transitional relief this year, as long as the filer is making a “good faith effort” to file it accurately. This means that penalty provisions and withholding requirements will be delayed by the IRS until January 1, 2013. The reporting is what is moving forward in 2012.

The 1099-K is meant to improve tax compliance by businesses so the IRS can determine the completeness and correctness of their tax returns. This is a way for the government to tackle income that they think is underreported. As with a W-2 or 1099-MISC, receivers of the 1099-K are expected to report this income when completing their taxes.

Don’t let new forms like the 1099-K or updates to existing ones cause confusion and mistakes that can lead to penalties in the future. Get help with tax settlement from the team at ProfesionalTaxResolution.com. They have the expertise to help you with tax filing your tax returns.  Call (877) 889-6257 or email info@protaxres.com today for a free, no obligation consultation.

IRS Tax Tips – Tax Help – Retirement Plan Changes for 2012

Posted on by

The best way to avoid incurring an outstanding tax debt is to avoid owing the taxes in the first place. That being the case, contributing to a retirement plan is often one of the easiest and most effective ways of accomplishing this. In addition to allowing for the accumulation of retirement benefits, retirement plan contributions can provide taxpayers with a variety of tax saving opportunities including tax credits, tax deductions and a reduction in taxable income.

To maximize available tax and retirement benefits, taxpayers should be aware of some significant changes that will affect retirement plan contributions for the current tax year.

The following changes have already been initiated or are expected to occur during 2012:

• Increase in Contribution Limits
The contribution limit for 401(k) and 403(b) plans as well as the Federal Government’s Thrift Savings Plan has been increased by $500. The new limit for each of these plans is $17,000 for taxpayers under age 50 and $22,500 for taxpayers age 50 and over.

 • Increase in Income Limits for Tax Deductions
The income limits for allowing a tax deduction for traditional IRA contributions have been increased by $2000. The new income limits provide that deductions will be phased out between $58,000 and $68,000 for single taxpayers and between $92,000 and $112,000 for married taxpayers filing jointly.

 • Increase in Income Limits for Roth IRA Contributions
The income limits for making Roth IRA contributions will increase by $3000 for single taxpayers and by $4000 for married taxpayers filing jointly. The new limits are between $110,000 and $125,000 for single taxpayers and between $173,000 and $183,000 for married couples.

 • Increase in Income Limits for Receiving the Saver’s Tax Credit
The new limits provide a $1000 tax credit for single taxpayers with an adjusted gross income of up to $28,000 and a $2000 tax credit for married couples with an adjusted gross income of up to $57,500 when they contribute to a qualified retirement plan.

• Increase in Plan Transparency
Effective May 31, 2012, a Department of Labor regulation will increase retirement plan transparency by requiring that 401(k) plans disclose to plan participants the fees associated with participating in the plan as well as the cost of each investment option.

• Reinstatement of Matching Contributions by Employers
Employers are expected to continue reinstating matching 401(k) contributions.

If you are an individual or a small business looking for help with tax preparation, tax planning or tax debt resolution, visit us today at www.professionaltaxresolution.com to learn about our full range of tax and accounting services. Contact us by phone at (877) 889-6527 or by email at info@protaxres.com to receive a free, no obligation consultation.