With all the chatter in Washington about reforming our tax code, is it possible that some of our best tax deductions can go by the wayside? For years we’ve been hearing about concepts like the flat tax, the consumption tax and tax simplification. This article from Forbes looks into the possibility of some of our favorite tax deductions being eliminated or reduced.
By Steve Barlotta, CPA
Well, April 17th has come and gone and we’ve survived another challenging tax season. We’ve spent the better part of the last two days preparing extensions for our clients. The typical question I got over the past two days goes something like this: “my friend’s brother told him that if you file an extension on your income tax return it increases the odds of being audited by the IRS”.
To the best of my knowledge, I don’t think our friends over at the Internal Revenue Service publishes data on audit rates for extended tax returns. Check out this article from Forbes, wrtitten by a tax attorney who gives his opinion on this subject along with some tidbits about the extension process.
By Steve Barlotta, CPA
In last month’s blog I was very critical of Congress’ passing of a two-month stop gap measure extending the 2% payroll tax cut in Social Security and Medicare withholding taxes. Under the provision passed in late December 2011, the payroll tax cut was extended through the end of February and a confusing “recapture” provision was put in place that applied to employees who received more than $18,350 in wages during the two month period. I questioned our lawmakers’ logic and good sense because it seemed pretty evident to me, that once all the grand-standing was through, the payroll tax cut would be extended for all of 2012.
Well earlier this week this law was wiped off the books as both the House and Senate voted to extend the 2% cut in Social Security and Medicare withholding taxes to 4.2% through the end of the year. This means that employees will continue to pay 4.2% on wages and self-employed individuals will pay only 10.4% on self-employment income. According to Accounting Today, the estimated cost of this provision is $93.219 billion over 11 years. I’m still amazed by the blatant disregard our lawmakers in Washington have for the time and cost that was passed on to businesses who had no choice but to implement the “recapture” rules only to have them reversed. This another example of the inefficiencies of Washington directly affecting Main Street U.S.A.
This bill would also decrease the maximum number of weeks of unemployment insurance from 99 to 73 in some states. This change would be gradually phased-in, giving consideration to those areas of our nation that have been hardest-hit by the economic downturn.
We all know that everyone has to file a tax return and pay their taxes, but does that apply to children, too? Many people may have heard of what is often referred to as the kiddie tax. Find out who is subject to it and what it may mean for your family’s tax planning. http://www.moneymattersnj.com/story.cfm?sid=15563
Check out this article from Kiplinger; it lists their top twelve reasons why individuals are selected by the IRS for audits. Even though the overall individual audit rate is only about 1.11%, you should be aware of red flags that could draw the attention of the IRS.
By Steve Barlotta, CPA
Over the past few years, I have cautioned my S Corporation clients that the IRS are clamping down on owners that take a minimum salary. In fact, last year the IRS won a case in U.S. district court against a CPA, of all people, in Iowa who they determined received a salary that was exceedingly too low.
Continue reading
How many times have you asked yourself, “Have I got EVERYTHING I need to do my taxes?” This podcast covers all the data you might need and what you should do with it. http://www.moneymattersnj.com/story.cfm?sid=14577
With the New Year here, now is the perfect time to make some financial resolutions to help you ring in 2012 with confidence. While increasing savings and decreasing spending are always important goals and a great place to start, don’t feel like you have to stop there. http://www.moneymattersnj.com/story.cfm?SID=15544
By Steve Barlotta, CPA
Last week I alerted my followers on LinkedIn and Twitter that a compromise had been reached to extend the Social Security payroll tax cut through the first two months of 2012. This would effectively continue the reduction of the employee’s Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through February 29, 2012. The game plan is for Congress to reconvene in January and finally agree on to how to pay for the tax cut for the rest of 2012.
Continue reading
