January 2, 2012
RE: 2011 Tax Update
For the first year in many there are no real big sweeping tax laws changes to adjust to in 2011. Perhaps the biggest change will be how businesses report cash receipts on the tax return. Starting with this filing season credit card receipts and cash receipts need to be reported on separate lines and then added together to arrive at total gross receipts. So taxpayers will need to provide both numbers this year.
There will be no worker pay credit this year and all dual working families will not have the $800 credit this year. This may put some in a small penalty situation, depending on how employers withheld during the year. Workers did see social security lower this year and self employeds will see a 2% credit on self employment tax in 2011.
The focus will now turn to 2013 when the Bush era tax cuts expire. These will increase capital gain and dividend rates back up to a potential top rate of 20% for some taxpayers. Expensing of assets purchased under sec 179 and bonus depreciation elections are set to be drastically reduced. For 2012 bonus depreciation will drop from 100% to 50% on new assets purchased. The section 179 expensing is reduced to a maximum of $137,500 on assets of up to $500,000 placed in service during 2012.
Since 2012 is a general election year tax law changes could come in bunches. We are expecting to see some incentives passed this summer and into the fall election season. Many favorable benefits have expired here at 12/31/11 so Congress will be busy.
The Internal Revenue Service has put some reporting requirements in place for taxpayers have funds in foreign bank accounts or holding property in foreign lands. If you have over $10,000 at year end in a foreign account you will need to file form FBAR by 6/30/12. If you have over $50,000 of assets in a foreign land you will need to attach form 8938 to your 2011 tax return. Please alert us to this if it applies to you.
If you are a pastor, church trustee or involved in church leadership reporting of payments will need to be tightened. Churches must issue 1099s if more than $600 is given to an evangelist, missionary family or others when offerings are taken. If churches rent significant church related assets they may be required to report income on form 990T. If churches or mission organizations own foreign assets or have accounts located in foreign lands they too will need to file form FBAR and 8938 this year.
The standard mileage rates for 2011 for business are 51¢ from 1/1 to 6/30 and 55.5¢ from 7/1 to end of year. The rate for medical and moving mileage is 19¢ from 1/1 to 6/30 and 23.5¢ from 7/1 to end of year. Congress sets the charitable mileage and it remains at 14¢ a mile. Parking and tolls are in addition to mileage.
The standard mileage rates for 2012 on business mileage are 55.5¢. The rate for medical and moving mileage is 23¢. Congress sets the charitable mileage and it remains at 14¢ a mile. Parking and tolls are in addition to mileage.
Please don’t hesitate to call or send an e-mail if you have any questions for us or want further analysis on the information above. We look forward to visiting with you and preparing the best possible return for you in 2012!
Lawrence R. Yoder, CPA