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Year End Tax Planning. Do You Know the difference between Tax Avoidance and Tax Evasion?. 30 Years (In Prison). What’s New In 2012. What is an Accountant? Someone who solves a problem you didn’t know you had in a way you don’t understand at a price you cannot afford.

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what s new in 2012
What’s New In 2012

What is an Accountant?

Someone who solves a problem you didn’t know you had in a way you don’t understand at a price you cannot afford.

Standard Deduction 2012

Single - $5950 (up $150)

Add $1150 if over age 65

MFJ - $11900 (up $300)

Add $1450 if over age 65

HOH - $8700 (up $200)

Add $1150 if over age 65

MFS - $5950 (up $150)

Add $1150 if over age 65

but wait there s more
But Wait….There’s More

Personal Exemption

$3800 (up $100)

Kiddie Tax Threshold

$1900

< 24 years old is taxed at parents rates if full time student

Changes in the tax brackets but not the tax rates

  • FICA Portion of Social Security Earning Limit
    • $110,100 up $3300
  • Mileage Rates
    • 55.5 cents per business mile
    • 14 cents per charitable mile
    • 23.5 cents per medical and moving mile
year end tax tips
Year End Tax Tips
  • 3 Basic Techniques – Due to New Proposals
  • Accelerate Income Into 2012
  • Defer Deductions Into 2013
  • Take Advantage of Expiring Tax Laws
accelerate income into 2012 the goal is to lock in k nown t ax r ates
Accelerate Income into 2012The Goal is to Lock-in Known Tax Rates
  • This can be achieved by….
    • Asking employers to pay 2012 bonuses by 12/31/12
    • Sell Stocks and Investments to lock in historically low 15% tax on gains or harvest losses
    • Take distributions from IRA’s if over 59 ½.
    • Rollover Traditional IRA to Roth to lock in known rate.
    • Redeem U.S. Savings Bonds
defer deductions into 2013
Defer Deductions into 2013
  • Defer Certain Payments into 2013
    • Medical Bills
    • Charity
    • Property Taxes
take advantage of expiring tax laws
Take Advantage of Expiring Tax Laws
  • 10% Tax Bracket ($7000 for singles, $14000 for MFJ) becomes 15% after 2012.
  • No Limit on over all Itemized Deductions in 2012
    • 2013 Phases out at 3% of total AGI when it exceeds $254,350 MFJ or $169,500 Single.
  • Child Tax Credit
    • $1000 per eligible child lowers to $500 in 2013
  • Debt Forgiveness on a principle residence in foreclosure on a mortgage workout is not taxable. This expires after 2012
crazy times for planning bush era income tax rates capital gains rates
Crazy Times For PlanningBush-era income tax rates & Capital Gains Rates
  • One of Four Directions
    • Complete Sunset for all taxpayers
    • Complete extension for all taxpayer
    • Sunset for Higher Income Individuals only
    • Sunset for Millionaires only
slide11
2013
  • The Proposed rate for L/T Capital Gains is 20% up from 15%.
  • New 3.8% contribution tax on net investment income (unearned income).
  • Affects Taxpayers with AGI of $250,000 or more MFJ. ($200,000 single filers)
    • Applies to the LESSER of Investment Income or AGI over $250,000. ($200,000 for single)
      • AGI $140,000 + Capital Gain $120,000 = AGI $260,000
      • $260,000 - $250,000 = $10,000 x 3.8% = $380 (Lesser)
    • This Levy applies to taxable interest, dividends, rents, some annuities, royalties, and capital gains.
      • Includes sale of Home after $500,000 exclusion. ($250,000 for single)
2013 continued
2013 Continued
  • New 0.9% Medicare Tax on earned income
    • On self employment earnings or wages in excess of $250,000 MFJ or $200,000 single. (From 1.45% to 2.35%)
  • Dividends will be taxed at ordinary income tax rate regardless of bracket (15%-39.6%)
  • Medical Deduction Increase from 7.5% of AGI to 10% AGI
    • Remains 7.5% for taxpayers 65 years or older until 2016
  • 2012 Payroll tax holiday is scheduled to expire 12/31/12
    • from 4.2% back to 6.2%
tax mess deepens
Tax Mess Deepens

2008-2012 (MFJ)

2013

estate taxes the death tax
Estate Taxes (The Death Tax)
  • 2012
  • 5.12 Million Per Person Exemption (indexed for inflation)
    • 5.12 MM Taxpayer
    • + 5.12 MM Spouse
    • 10.24 Could Avoid Estate Tax
    • Maximum rate is 35% beginning at $500,000
    • Lifetime Gifting is 5.12
  • 2013
  • Proposed 1.0 Million Per Person Exemption (Not indexed for inflation)
    • Maximum rate is 55% beginning at 3 Million
    • Lifetime gifting 1 Million.
  • Regular Gifting Without Gift Tax Remains @ $13,000 per person
smiley cpas
Smiley CPAs
  • Melody J. Smiley CPA
  • 1650 Murfreesboro Rd Ste. 100
  • Franklin, TN 37067
  • Phone 615-794-8881
  • Fax 615-791-5532
  • Smileycpas.com
  • melody@smileycpas.com