Tax Filing Begins Today

irs efile provider

The IRS is now officially open to begin processing 2012 tax returns for individuals. Let the fun begin!

Will New Tax Law Increase Divorce Rate?

DivorceInteresting article on Forbes giving examples of the effect of the new tax law on married couples versus single taxpayers.  I don’t think tax planning should include marriage counseling or visa versa. I am sure there are those out there that may use this as a basis to consider divorce, but I would think they were probably headed in that direction all on their own.

I wonder why Congress thought penalizing married couples would be good for America…surely they looked at the numbers for cause and effect before they voted on the new tax law! If they didn’t, shame on them. If they did, shame on them.

Want to Save on Taxes? Get a Divorce.

New Simplified Option for Claiming Home Office Deduction

Breaking News

Just in from the The Internal Revenue Service who announced a simplified option that many owners of home-based businesses and some home-based workers may use to figure their deductions for the business use of their homes. In tax year 2010, nearly 3.4 million taxpayers claimed deductions for business use of a home (commonly referred to as the home office deduction). The new optional deduction, capped at $1,500 per year based on $5 a square foot for up to 300 square feet, will reduce the paperwork and recordkeeping burden on small businesses by an estimated 1.6 million hours annually.

“This is a common-sense rule to provide taxpayers an easier way to calculate and claim the home office deduction,” said Acting IRS Commissioner Steven T. Miller. “The IRS continues to look for similar ways to combat complexity and encourages people to look at this option as they consider tax planning in 2013.” The new option provides eligible taxpayers an easier path to claiming the home office deduction. Currently, they are generally required to fill out a 43-line form (Form 8829) often with complex calculations of allocated expenses, depreciation and carryovers of unused deductions.  Taxpayers claiming the optional deduction will complete a significantly simplified form.

Though homeowners using the new option cannot depreciate the portion of their home used in a trade or business, they can claim allowable mortgage interest, real estate taxes and casualty losses on the home as itemized deductions on Schedule A. These deductions need not be allocated between personal and business use, as is required under the regular method. Business expenses unrelated to the home, such as advertising, supplies and wages paid to employees are still fully deductible. Current restrictions on the home office deduction, such as the requirement that a home office must be used regularly and exclusively for business and the limit tied to the income derived from the particular business, still apply under the new option.

The new simplified option is available starting with the 2013 return most taxpayers file early in 2014. Further details on the new option can be found in Revenue Procedure 2013-13, posted on IRS.gov. Revenue Procedure 2013-13 is effective for taxable years beginning on or after January 1, 2013, and the IRS welcomes public comment on this new option to improve it for tax year 2014 and later years.

Holt Pros wants to remind you, although the new option provides taxpayers a simple method to claim the home office deduction, it could potentially limit the available tax deduction for many taxpayers. Tax deductions offer a reduction in taxable income, and thus reduce your tax liability. When making your selection, be sure you give consideration on which will offer you the most tax savings.

Estimated Tax Payments Due 1/15/13

man carrying bag of money for taxes cartoonEstimated tax payments for fourth quarter 2012 are due January 15, 2013. If paying electronically through EFTPS, you are required to process your payment one business day in advance of the due date. Check your state electronic tax payment system requirements. Georgia‘s requirements are the same as federal.

Tax Adjustments for 2013 Recap

newsThe Internal Revenue Service announced annual inflation adjustments for tax year 2013, and other tax changes from the recently passed American Taxpayer Relief Act of 2012.

Recap of items with greatest interest to most taxpayers:

  • New tax rate of 39.6 percent added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return).
    • The other marginal rates — 10, 15, 25, 28, 33 and  35 percent — remain the same as in prior years.
  • The standard deduction rises to $6,100 ($12,200 for married couples filing jointly).
  • New limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).
  • The personal exemption rises to $3,900. Beginning 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $250,000 ($300,000 for married couples filing jointly). It phases out completely at $372,500 ($422,500 for married couples filing jointly.)
  • The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly).
  • The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children.
  • Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000.
  • Monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245.

Specific details for these adjustments and others are available in Revenue Procedure 2013-15 available on the IRS website on January 28, 2013.

Stay informed by subscribing to the Holt Pros blog to keep informed of the details as they become available to tax professionals. We have got you covered!

National TaxPayer Advocate Delivers Annual Report to Congress

newsNational Taxpayer Advocate Nina E. Olson released her 2012 annual report to Congress. Top of the list is TAX REFORM, IRS FUNDING and IDENTITY THEFT. Ms. Olson expressed concern that the IRS is not adequately funded to serve taxpayers and collect tax. She also found that the IRS is not doing enough to assist victims of tax-related identity theft and return preparer fraud.

I really liked the specifics on Tax Reform…the annual report designates the complexity of the tax code as the #1 most serious problem facing taxpayers and recommends Congress take significant steps to simplify it. I would say the tax rate might be the #1 most serious problem facing taxpayers not the tax code. Since 2001, Congress has made nearly 5,000 changes to the tax code, an average of more than one a day and the number of words in the code appears to have reached nearly four million. And we are relying on CONGRESS to simplify it?!!

On IRS Funding, Olson stated, ” The plain truth is that the IRS’s mission trumps all other agencies’ missions, because without an effective revenue collector, you can’t fund those other agencies.” We all know they are special!

Identity Theft is taking over with cases increased by more than 650 percent from 2008 to 2012. She calls for “one-stop shopping” for taxpayers to receive a single point of contact to resolve all issues in their cases. Ms. Olson also thinks the IRS needs a “traffic cop” to make sure all units complete their actions and parts of cases do not fall through the cracks. She states 6 months is an unacceptable period of time to expect taxpayer-victims to wait. Six months is actually a relatively short time for them to complete anything!

The whole report, for your reading pleasure, is available at the National Taxpayer Advocate website. Their motto is “Your Voice at the IRS”.

So let’s recap…they want to make things simple, make the IRS more efficient, get the IRS to do their jobs in a reasonable amount of time and be given more money so they can expand their services…think Congress can handle that?

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