Bailey & Thompson Tax & Accounting
 
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 The tax profession is undergoing major changes.  Preparer registration, increased penalties, disclosure statements, more frequent audits, not to mention the incredible amount of tax law changes the past few years, make it a challenging and somewhat exciting time to be in business.  We appreciate all of you who have been awesome clients for years and some for even decades.  We’re looking forward to seeing and hearing from you again very soon.  

 

Just a reminder that during the tax filing season, our office hours are 8:00am to 7:00pm, Monday through Friday, and 9:00am to 5:00pm on Saturday.  Please note that if your return has not changed much since last year you can drop your tax information off any time during office hours.  If we have any question we will call you. If you need to discuss it with one of us please do not hesitate to contact us. 

 

Most of you have surely seen, read, or heard talk about the fiscal cliff on the news over the last several weeks.  Thankfully, Congress finally came to an agreement and passed legislation which was signed by the President just last week.  Most of the tax legislation that was passed affects the tax rates and deductions for the coming year 2013, and not necessarily your 2012 income tax return that we will be preparing in the next few months.  However, there was one very important issue that was included in the legislation that affects the 2012 tax returns which involved Alternative Minimum Tax (AMT).  Fortunately, the patch for AMT which had expired 12/31/11 was retroactively reinstated back to the beginning of 2012 which will save many taxpayers additional taxes they would have otherwise not been accustom to paying in prior years.  This is obviously great news for those that would have been affected.

 

Other than the AMT being patched, there were no major changes that are expected to affect 2012 tax returns.   

 

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We’ve listed some of the changes for 2013 below that occurred as a result of the recent tax legislation.

  

  • Income tax rate increase? Not for you unless you make more than $400,000 ($450,000 for joint returns). It's an additional 4.6% and that applies only to the income above $400,000 ($450,000). So, a couple making $500,000 would pay an extra $2,300 ($50,000 at 4.6%). The rest of us are still paying under the old rates.
  • Payroll Tax Increase - Even if your rates stay the same, your check is going to be smaller in 2013. Facing a projected shortage in future funds to pay benefits, Congress had previously cut the employee half of the Social Security tax from 6.2% to 4.2%. Those who are self-employed also enjoyed a 2% reduction in their obligation. This payroll tax holiday ended in 2012.
  • Qualified dividends are still taxed at a reduced rate. For those at the $400,000/$450,000 income level, the top rate was increased from 15% to 20%. That's still a lot lower than the 39.6% dividend rate originally proposed by the Obama administration. "Qualified" dividends are those held for an extended period.
  • 3.8% Medicare surtax - This wasn't part of the fiscal cliff deal, but you better be aware of it if you earn more than $200,000 ($250,000 for joint filers). Any investment income (interest, dividends, rents, royalties, distribution from non-qualified annuities, income from passive activities, pass-through income from S-corporations, etc.) above that income level will be hit with an additional 3.8% Medicare surtax.
  • Capital Gains - The top tax on net long term capital gains also jumped from 15% to 20%, but only for those at the $400,000/$450,000 income levels. To qualify as "long term," the asset must have been held for more than one year. Exactly one year or less defines your gain as short term, subject to a rate as high as 35%, up to 39.6% for those at the $400,000/$450,000 level. For those in the 10% or 15% tax bracket, both qualified dividends and long-term capital gains continue to be taxed at a 0% rate.
  • Teacher’s tax deduction: From Jan. 1, 2002, through 2011, you got an above-the-line deduction (you didn't have to itemize) of up to $250 for expenses paid for books, supplies, computer equipment and supplementary materials if you qualified as an eligible educator. The IRS defines that as a kindergarten through grade 12 teacher, aide, instructor, counselor or principal in a school for at least 900 hours during the year.  The new tax deal extends this deduction for 2012 and 2013.
  • Benefits: The new law makes permanent the $5,250 exclusion for employer-provided education assistance for college and graduate school education. It also extends through 2013 the monthly exclusion from income for employer-provided mass transit benefits from $125 to $240, and makes permanent the $10,000 tax exemption for adoption expenses paid by your employer. Also made permanent was the $10,000 tax credit (a credit is a dollar-for-dollar reduction in your tax) for families that pay for their adoption expenses.
  • The new deal extends for five years the $1,000 child tax credit (which would have dropped to $500), the earned-income tax credit and the $2,500 American Opportunity Tax Credit for college tuition.

 

TAX SEASON IMPORTANT ACCOUNCEMENTS:

  • Please contact the office if you wish to receive a tax organizer. Your tax organizer includes information from your 2011 tax return which is helpful to gather the necessary tax.
  • If you wish to have a tax appointment, please call soon so we can best accommodate your schedule needs.
  • Please answer the questions included in your organizer, verify that your personal information is correct and provide us with up-to-date contact information.
  • The engagement letter, when signed by you, authorizes us to prepare your tax return. Please include it with your organizer or sign it when you come by the office.
  • The IRS matches information returns (1099’s, 1098’s, W2’s, K-1’s etc.) with amounts reported on tax returns.
  • Contact us as soon as you decide you require an extension. We will not prepare an extension if we do not hear from you prior to the tax return due date.
  • Filing an extension greatly reduces the amount of penalties you will owe on any unpaid tax liability. It is best to pay your estimated tax liability with your extension.          
  • We do accept credit cards (Visa, MasterCard, American Express and Discover) to expedite payment processing for our clients. We expect full payment at the completion of your tax return.
  • Referrals are always welcome.
  • Privacy laws require us to protect your information from your unauthorized release. Our privacy policy and record retention policy can be found on our website.

 

APRIL 10th - WE NEED YOUR PERSONAL TAX RETURN INFORMTION

In order to allow adequate time to prepare your tax return, we need your tax return information in our office before April 10th (in the case of corporations, March 1st). This is to make sure that your return is not hurried or rushed leading up to the deadline.  For returns received on or after April 10th, an automatic six month extension will probably be necessary.    

 

Thank you for your continuing confidence in our services.  As always we look forward to helping you navigate the tax changes smoothly. We invite you to contact us at your earliest convenience to set an appointment.   Also, should you have any questions or need directions to our office, please do not hesitate to call us at (501) 562-7679 or email us at tax@baileythompson.com.

 

Bailey & Thompson Tax & Accounting PA