Tuesday, December 24, 2013

IRS announces automation of taxpayer resources, start of business filing season

IRS announces automation of taxpayer resources, start of business filing season 

By Sally P. Schreiber, J.D. 
December 23, 2013 

The IRS announced on its website that, beginning in 2014, it will stop providing a number of taxpayer assistance services in person or over the phone and will shift those services online. The move is designed to free up IRS employees to help taxpayers deal with issues, such as identity theft, that cannot be resolved through other avenues. The changes are being made in the following areas: (1) tax return preparation, (2) transcript delivery, (3) tax law assistance, (4) refund inquiries, (5) employer identification numbers (EINs), and (6) the Practitioner Priority Service.

Return preparation: In recent years, the IRS has provided limited tax return preparation services at its walk-in offices. There have been restrictions on where and when the help is offered and the IRS has required taxpayers to have income below the earned income tax credit thresholds to get help. This help will be further reduced beginning next year, as taxpayers are directed to the more than 13,000 volunteer tax preparation sites instead of the 250 IRS walk-in offices. The IRS also noted that Free File is available to taxpayers on the IRS’s website. 

Transcript delivery: Early in 2014, the IRS will debut its Get Transcript service, which will allow individual taxpayers to use their Social Security numbers to view and print a copy of their tax transcript. Get Transcript will be available for the following types of transcripts: tax account, tax return, record of account, wage and income, and verification of nonfiling. Taxpayers will still be able to request that a transcript be mailed to their address of record using the online tool or sending in Form 4506T, Request for Transcript of Tax Return

Tax law assistance: Most tax law questions the IRS receives during filing season are basic questions such as who qualifies as a dependent and who can take an exemption. The IRS will continue to answer these types of questions, but it will refer more complex questions to resources on the IRS website. 

Refund inquiries: The IRS says the most common questions taxpayers ask are related to the status of a refund. The IRS notes that for the first 21 days after a return has been filed electronically or for six weeks after paper filing, taxpayers should check the status of their refund on the IRS’s online tool, “Where’s My Refund?” Customer service representatives will be able to help only those taxpayers who filed electronically at least 21 days prior (six weeks or more in the case of a paper return) or who are directed to a representative by the Where’s My Refund? tool. 

EINs: According to the IRS, the EIN Online Assistant has been very successful, with more than 4 million requests processed per year. Beginning with the 2014 filing season, the IRS will handle all EIN requests using the Online Assistant, with only those with a previously assigned EIN being referred to an IRS representative. 

Practitioner Priority Service: The Practitioner Priority Service, which provides a way to resolve taxpayer account issues, is intended for tax professionals, but has been increasingly used by taxpayers. The IRS announced that, starting in January, use of the Practitioner Priority Service will be restricted to tax practitioners who are trying to resolve issues for their clients.

Filing season for business tax returns 
Last week, the IRS announced that the filing season for individual returns would begin Jan. 31. This is later than the originally planned start date of Jan. 21 due to the government shutdown in October. Filing season for business tax returns, however, will not be similarly delayed. The IRS announced that on Jan. 13, 2014, it will begin accepting both paper and electronically filed business and excise tax returns, including Form 1120, U.S. Corporation Income Tax Return; Form 1120S, U.S. Income Tax Return for an S Corporation; Form 1065, U.S. Return of Partnership Income; Form 1041, U.S. Income Tax Return for Estates and Trusts; Form 720, Quarterly Federal Excise Tax Return; Form 940, Employer’s Annual Federal Unemployment (FUTA) Tax Return; Form 941, Employer’s Quarterly Tax Return; and Form 2290, Heavy Highway Vehicle Use Tax Return
The IRS emphasized that this date does not apply to unincorporated small businesses that report their income on Form 1040 on Schedule C, Profit or Loss From Business (Sole Proprietorship), Schedule E, Supplemental Income and Loss, or Schedule F, Profit or Loss From Farming, which are subject to the Jan. 31 delayed start. 

Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.

Thursday, December 19, 2013

Great Letter from Jesus - I did not write this but it's right on point! Merry Christmas.

Dear children,

It has come to my attention that many of you are upset that folks are taking my name out of the season.  Maybe you’ve forgotten that I wasn’t actually born during this time of the year and that it was some of your predecessors who decided to celebrate my birthday on what was actually a time of a pagan festival.  No worries, I do appreciate the sentiment though and being remembered anytime.

I don’t really care what you call the day.  If you want to celebrate My birth just GET ALONG and LOVE ONE ANOTHER.  Now, having said that, let Me go on.

If it bothers you that the town in which you live doesn’t allow a scene depicting My birth, then just get rid of a couple of the Santas and snowmen and put up a small Nativity scene on your own front lawn.  If all my followers did that there wouldn’t be any need for a Town Square scene, because there would be hundreds of them all around town!

Please, stop worrying about the fact that people are calling the tree a “holiday tree” instead of a Christmas tree.  It was I who made all trees.  You can remember Me anytime you see any tree and at any time of the year.  Decorate a grape-vine and leave it up all year if you wish and remember I am the true vine, and my Father is the gardener.  I am the vine; you are the branches. If you remain in me and I in you, you will bear much fruit; apart from me you can do nothing.

If you want to give Me a present in remembrance of My birth here is my “wish list”.  Choose something from it.

1.  Instead of writing protest letters objecting to the way My birthday is being celebrated, write letters of love and hope to soldiers away from home.  They are terribly afraid and lonely this time of year.  I know, they tell Me all the time.

2.  Visit someone in a nursing home.  You don’t have to know them personally.  They just need to know that someone cares about them.

3.  Instead of standing by the water-cooler with your colleagues complaining about your boss and how stingy he was with the Christmas bonuses this year, why don’t you go into his office with a gift card and tell him that you’ll be praying for him and his family this year.  Then follow-up.  It will be nice hearing from you again.

4.  Instead of giving your children a lot of gifts they really don’t need, spend time with them instead.  Tell them a story of My birth, and why I came to live with you down here.  Hold them in your arms and remind them how much I love them!

5.  Pick someone who has hurt you in the past and forgive him or her.

6.  Instead of griping about a retailer in town saying “Happy Holidays”, be patient with the people who work there.  Give them a warm smile and a kind word and even if they aren’t allowed to wish you a “Merry Christmas” that doesn’t keep you from wishing them one.  Think about those who have to work over the holidays and bring them a plate of cookies to tell them you appreciate them for their hard work.  Take it one step further…when you go out to eat after church on Sundays, rather than look down your nose at all the people who “missed church” because they had to work, when that waitress takes your order, pray for her and thank her for her service to you and then leave her a good tip…not the chintzy ones you have been leaving.  My children should always be generous!

7.  There are individuals and whole families in your town who not only have no “Christmas Tree”, they have no presents to give or receive.  If you want to make a difference this Christmas, support a local charity that provides clothes, food, and shelter to those who are homeless or who help families in crisis.  Don’t just send them a cheque at Christmas either, support them year round.  If you can’t afford to support them with a monetary donation, give them your time.  Volunteering your time is just as helpful!

8.  Support a missionary, especially one who takes My Love and Good News to those who have never heard My Name.

9.  Finally, if you believe that I am the real “reason for the season”, how about spending more time with Me rather than spending time complaining about how commercial Christmas has become?  Live every day like you believe that I am THE WAY, THE TRUTH and THE LIFE, and remember I am with you always!

All My Love,


Tax Season Starts January 31

Tax Season Starts January 31

Friday, December 6, 2013


The Internal Revenue Service today issued the 2014 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.
Beginning on Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
56 cents per mile for business miles driven
23.5 cents per mile driven for medical or moving purposes
14 cents per mile driven in service of charitable organizations

Tuesday, December 3, 2013

Insurance Cancellation

Well, I figured this would happen eventually. It's official, we received our health insurance cancellation notice in the mail. This is after the insurance company told me that they would not cancel my policy until my renewal next August. I figured this would happen so I already went out to the open market and found another policy for the family. Of course my current company is willing to give me a new policy, but the rates and deductible are a little higher. Well, in fact, they rate is tripled and the deductible has increased to $12,000 per year. Got to love the affordability of the Obama Care. I have yet to meet anyone who is saving money under this new scheme - must have heard wrong when the President said we could keep our current insurance and also we would see cost savings.

Here's the best part of all. For the past 8 years we have budgeted our medical expenses taking a hard look at each and every expense, seeking generic medications and always making a second thought of whether to go to the doctor. That all changes January 1, 2014. Since I am forced into a "better" plan, I plan to take full advantage of it from the very start. My deductible will only be $1800 for the year so it's going to be a race to get to my out of pocket maximum. I have already spoken to my Doctor and let them know that we will now require only brand-name medications, should probably get all those elective tests and when the sniffles hit on the weekends, here comes the Emergency Room. I just hope their are still doctors to meet my increased demand. If I have to pay for it, I will be using it.

Let the games begin!

Thursday, November 28, 2013

Happy Thanksgiving!

On this day we give thanks for the many blessings we all have in our lives. I am thankful first to our Lord for loving us even as we are his enemy and the scourge of sin remains with us, but we have the blessed assurance that if we believe in him we will be washed white as snow when we stand before the father. I am thankful for our United States where the dreams of our forefathers still resound loudly throughout the streets of America and as we may never have a perfect union, we strive for life, liberty and the pursuit of happiness for all. I am thankful for my wife who has dedicated her life to me, our children, and our new little (well not so little) German Shepherds. Her love for us is a daily reminder of the commitment she made when we stood before God and vowed to love each other until we live no more. I am thankful for my sons who I cherish daily and though they may not realize it, I am in profound honor to be called their father and I strive each day to live up to the responsibility which God has placed in my hands. I am thankful for my family, who have shown me love and demonstrated christian discipleship in the home. I am thankful for my friends, my clients, my employees, and my neighbors. Today I give thanks to all and pray that The Lord of mercy and strength will sustain us all and wrap his loving arms around us and protect us from the storms of life until we reach those beautiful shores of roads paved in gold and worship in thunderous acclaim at the feet of the master. May almighty God bless you and keep you and may his face always shine upon you. 

Monday, November 11, 2013

2014 Tax Deposit Requirements

We have many clients receiving notices from the Internal Revenue Service in reference to the tax deposit requirements for 2014. Normally clients are required to make their federal tax deposits the 15th of the month following the payroll month, but when your annual tax deposits reach $50,000 in the look-back period, the IRS requires that taxes be paid semi-weekly. This means that tax deposits must be made within three business days of the posting of payroll. For example, if you have payroll posted to your employees on Friday, then your payroll taxes are due by Wednesday of the next week. These requirements are not negotiable and significant penalties may be assessed for not meeting the requirement. Please be on the look-out for these letters and forward to them as soon as possible.

If you not a client of Saggio Accounting+PLUS and have questions about payroll or payroll taxes, feel free to contact us for more information. As a full-service accounting firm, we prepare payroll in-house for our clients.

Thursday, November 7, 2013

Does your QuickBooks file take a long time to open?

This is commonly caused by having multiple windows and/or reports open within QuickBooks which must be loaded each time you open your file. To speed up the time it takes to open your file, you can change your settings in your preferences to not save your Desktop View when exiting.  Doing so will close all the open windows/reports you have open when exiting QuickBooks. 

Closing all your windows/reports close on exit helps QuickBooks open quickly and prevents reports from becoming corrupt.

To change the setting in your preferences select Edit>Preferences>Desktop View.  Select Don't save the desktop and click Okay.

Friday, October 25, 2013

Obama Care - No Big Surprise

Well, we are in the midst of the roll-out of Obama care and I have personally been affected by the new law. I figured that my premiums would rise once the law was approved, but I have to admit that I was totally amazed at the increase in premium. I figured I would call my insurance company after October 1st to determine what I needed to do in reference to my insurance coverage moving into 2014. We started with this plan back in 2005, at that time we selected a high deductible plan to attempt to limit our monthly expense. I recall the premium being about $300 per month for our family plan with an annual deductible of $3500. This year, for the same coverage, our premium has risen to near $500 per month and our annual deductible is now $10,500.00. So here's the Obama care news for us - to keep the same level of coverage our monthly premium has risen to $1100 per month and the annual deductible is now $12,000. The increase represents an increase of over 110%. Sticker shock!

None of this comes as a surprise based on the basic review of Obama care. Insurance is a business where the carriers need to make a profit, so when they are forced to carry the costs of more covered services it's not shocking that the rates would need to increase, but to double the premium - that is just nuts!

I would try to shop my other options on the Obama care web site, but I have tried repeatedly to gain access to no avail - another big shock there. It's all rather pointless anyway since I have already seen some of the expected premiums and they are also higher. I personally have not spoken to anyone who has seen a decrease in their premium.

My advice to my clients and friends, better check with your insurance carrier or your employer and see where this is going to affect you. Better plan a change to your budget because I guarantee your costs are going up. You may want to consider this for budget planning for 2014.

Feel free to contact my office with any specific Obama Care questions as they relate to tax issues.

Thursday, October 24, 2013

Startup of the week / A tiny cloud computer can be yours for $45 - Start-up of the Week Israel News | Haaretz

Startup of the week / A tiny cloud computer can be yours for $45 - Start-up of the Week Israel News | Haaretz

Fire Prevention

October is Fire Prevention Month: All Is Not Lost If You’ve Lost Tax Records
by Claire Berlin | Oct 23, 2013 

Fire, flood, tornados, or your own unorganized closet: Any number of disasters can mean you can’t find tax documents when it’s time to file. 
The National Society of Accountants (NSA) offers this list of important documents you should track and what to do if they should ever be destroyed or lost.

Documents You May Need

Personal data such as Social Security numbers and dates of birth for yourself, spouse, and dependents; a child-care provider’s tax ID or Social Security number; and any changes to address, job title, phone number, etc.
Employment and income data such as forms W-2, K-1 and 1099; Employer Identification Numbers (EINs); alimony received and the Social Security number of the payor; and W2-G, 1099-MISC, 1099-G, 1099-SSA, 1099-INT, 1099-DIV, and 1099-B.
Homeowner/renter data, such as forms 1098, 1099-S, 1099-A, 1099-C or HUD-1; final escrow closing statements; property taxes paid; rent paid during the tax year and the landlord’s name, address and phone number; and lists and receipts for moving expenses.
Deductible items, such as forms 1098-E, 1098-T; alimony paid, including the amount paid and the name and Social Security number of the recipient; vehicle license fees from DMV renewals; letters from charities for cash contributions or a detailed log for non-cash contributions with the value of items donated, date donated, amount originally purchased for and date of original purchase; mileage logs and copies of reimbursements from employers; miscellaneous deduction receipts for such items as uniforms, union dues, investment expenses and job-hunting expenses; child-care expenses; and medical expense receipts.
Business, farm and rental information, such receipts or documentation for business-related expenses, inventory reports and payables and receivables ledgers; receipts for all major purchases such as machinery, equipment and furniture; business, farm or rental income and expenses; auto mileage logs; and documentation for self-employed health insurance premiums.
Taxes paid, such as estimated tax payments with the date and amount of each tax payment made; and state taxes paid.
It’s quite a list, and working with a tax preparer can help ensure protection of these and other records or speed their recovery if they’re lost.

How to Retrieve Lost Documents

Despite your best efforts, documents are sometimes destroyed or lost. What do you do? Here’s some advice:

Earnings Statements – Copies of many wage statements can be secured from your employer. If you’ve misplaced your W-2, for instance, request another copy from your employer’s HR department as soon as possible (you may have to fill out a form to request the replacement). If you don’t receive your replacement W-2 even after reminding your employer, contact the IRS (800/829-1040) and have them prompt the company. You can also substitute IRS Form 4852 and refer back to your last pay stubs to fill in needed information. 
Originals of the Form 1099 can go missing even easier than the W-2. You receive a 1099 from any company that paid you more than $600 during the tax year – and given the current economy’s love of freelance and contract work, some taxpayers may have more than a few 1099s to collect. Banks also send 1099s if account holders earn a certain amount in annual interest; many banks permit downloading 1099s from their customer service Web sites, and local branches also often issue copies.

Past Tax Returns – Last year’s tax return may be one of the easiest documents to recover. If you used a tax preparer, you can request it from that person. Or you can request a free transcript of your return (exact copies are $57) from the IRS by filing Form 4506 or 4506-t, by using the Service’s online “Order a Transcript” system (http://www.irs.gov/Individuals/Order-a-Transcript) or by calling the IRS (800-908-9946).

Student Tax Forms – Students’ tax forms, such as 1098-T forms or Tuition Statements, can be replaced. Schools often allow students to download an extra copy, and many will have a copy of your 1098-T online. Lenders are the best source for 1098-E Forms or the Student Loan Interest Statement, though if you paid less than $600 in interest, you will not be sent a 1098-E.

Stock Statements – Almost all holdings companies can help provide, via online, records of stock statements and cost-basis calculations (cost basis is an historical analysis and calculation to determine if a taxpayer who sold stock recognized a taxable gain or a loss in the sale). If you need a past stock price, Yahoo has an online research tool at http://biz.yahoo.com/r/.

Credit Card and Other Receipts – Receipts are the bread-and-butter documentation of a tax year’s deductions, especially for the self-employed and taxpayers who have a supplemental business besides their regular job. Receipts – which come in a maddening variety of shapes and sizes of paper – also seem to be the trickiest to completely pull together come tax time. 
Technology and the Internet have made it much easier to recover receipts. If you can’t find a receipt for a certain expense, for example, see if you can use bank and credit card statements to prove the expense. The statements should show as many details as possible (recipient’s name, date, the amount) to maximize the validation of the expense as a deduction. 
Some businesses also may be willing to issue copies of receipts. Most banks can also quickly mail copies of past checks if you know the approximate date, if not the actual check number, of the expense.
If you paid the expense using a debit card, check with your bank to see if they offer a receipt-replacement feature with your card. A growing number of banks offer this largely unknown service to cardholders.

Good Future Moves
Start working now to make next year’s document collection easier by preserving records with technology, knowing what to keep and what to toss, and consider hiring an experienced tax preparer who can archive your records for future reference.
Digitize receipts, tax returns and other important documents such as mortgage documents, property tax statements and acknowledgment letters from charities. Scan the documents as they come in and, if you’re worried about security on your hard drive, store the scanned documents on a thumb drive or a storage site such as Manilla.com or Dropbox.com. Most home tax-prep software also offers a feature for saving returns digitally. You can also snap photos of receipts with a smartphone, and some apps can then sort them as IRS-accepted images.
Keep, among other documents, all tax returns; records of your home’s purchase price and major home improvements for three years after you sell the home; records of stock and mutual fund purchases for as long as you own the stocks or participate in the mutual funds; Form 8606 (reporting non-deductible IRA contributions); and supporting tax documents for three years (six years if you have self-employment income). Also keep files with information on contributions and withdrawals from IRAs and 401(k) plans -- especially documents regarding nondeductible contributions, such as copies of IRS Form 8606, to avoid paying too much tax on withdrawals.
Toss most supporting tax documents (such as receipts) after three years; monthly bank and brokerage statements after you receive the year-end statements; ATM receipts and bank-deposit slips after they’re matched up with the monthly statement; pay stubs after matching them with W-2s. Shred all documents thrown out.

Sign up for online banking and bill paying, both of which create an electronic record of paid bills and banking documents.

Wednesday, October 23, 2013

Tax Season Delay

Filing season will be delayed, IRS says 
By Sally P. Schreiber, J.D. 

October 22, 2013 

The IRS announced on Tuesday a delay of one or two weeks in the start of the 2014 filing season as a result of the 16-day government shutdown to allow adequate time for the IRS to prepare and test systems. The return filing start date was originally going to be Jan. 21, 2014, but the IRS said it will now start accepting 2013 individual tax returns no earlier than Jan. 28 and no later than Feb. 4. The IRS says it hopes to shorten the delay and will announce the official start date in December. 
The government shutdown came at an inopportune time of year. Most of the work the IRS does to program, test, and deploy its return processing systems is done in the fall. “The adjustment to the start of the filing season provides us the necessary time to program, test, and validate our systems so that we can provide a smooth filing and refund process for the nation’s taxpayers,” Danny Werfel, the acting IRS commissioner, said in a news release. “We want the public and tax professionals to know about the delay well in advance so they can prepare for a later start of the filing season.”
No paper returns will be processed before the IRS begins accepting electronic filings. 
Despite the delay in the beginning of filing season, the IRS also reiterated that the April 15 tax return filing and payment deadline is statutory and cannot be changed by the IRS but that six-month extensions to file can be obtained by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, electronically or on paper. 
The IRS is apparently struggling to catch up after the shutdown. It says it received 400,000 pieces of correspondence during the shutdown, on top of the 1 million items that were already being processed. The IRS is urging taxpayers who need to contact it to wait if it is not urgent or to try to use automated systems on its website
The IRS announced on Oct. 17 that 2014 renewals of preparer tax identification numbers (PTINs) are also being delayed because of the government shutdown. The IRS will notify current PTIN holders when the renewal season will start.
This will be the second tax season in a row to have a delayed start. Last year’s filing season was significantly delayed because Congress passed the American Taxpayer Relief Act of 2012, P.L. 112-240, which contained many retroactive provisions, in January 2013 and the IRS needed time to update forms and program and test its processing systems. 
Sally P. Schreiber (sschreiber@aicpa.org) is a JofA senior editor.

Tuesday, October 22, 2013

Updating to the New OSX Mavericks on the Mac

Today is the launch day for OSX Mavericks on the Mac, so I am doing the update. We will see if Apple can get this right the first time out of the box. I certainly have more confidence in this program than Obama Care.

Thursday, October 3, 2013

Wednesday, August 28, 2013

Virtual Desktop

If you have never seen our Virtual Desktop, this is something you have got to try. Free 7 day trial when you go to www.virtualesuccess.com

Wednesday, June 5, 2013

Children and Money

The summer is a great time to teach your children the value of money. Let them start an allowance, but make them earn it and then make sure they cover all of their discretionary expenses. It will teach them the value of work and money at the same time. 

Fwd: Status of Refund Issuance

Update from the State of Delaware

Ralph V. Estep, Jr.
Saggio Management Group, Inc.
Sent from my iPhone

Begin forwarded message:

From: "Moffett-Batty, Angela (Finance)" <Angela.Moffett-Batty@state.de.us>
Date: June 5, 2013, 4:04:22 PM EDT
To: Undisclosed recipients:;
Subject: Status of Refund Issuance

Dear Tax Preparer,


You are most-likely already aware that this year the IRS delayed opening their EFile System by a full week. This delay also put the Delaware Division of Revenue a week behind our normal start-up date. As a large number of Delaware returns are processed through the IRS system first 68% this year the average time to issue a Delaware refund has risen.


As of June 3rd, the average time for Delaware to issue refunds is 19.5 days compared to last year's 14.7 days. Please know that the Division of Revenue is working diligently to process all refunds as quickly as possible.




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Sunday, May 5, 2013


In the final test of the new hosting server...great results thus far. Hoping to move all clients before the end of the day. Seeing improved performance.

Back to blogging....

There was a time when I was working to put something on this blog each day, but looking at the history of the blog it appears that I have not been doing such a great job. 

Now that we are past the "tax season" it's time to focus on working with clients in developing their businesses. One of the key business areas that I want to focus on moving forward is working with small to medium size business clients in building their business. I have learned that it's not necessarily the great accounting services that we offer that assist in client's business advancement, but rather the "business coaching" that assists clients in developing greater revenues, customer development, and other business enhancements. 

With my varied experience in the business realm, I have effective strategies to employ that will grow any business, refocus the concentration on core competencies and improve the business bottom-line. If you are interested in starting a dialogue about how to improve your business, whether you are an existing client or potential new clients, let me know and let's sit down together and build a success strategy. The only thing you have to loose is an opportunity to grow and improve your business, if you want to remain stuck in the mire of just holding on, then don't call me.

To everyone, have a great Sunday, take some time to say Thank You and spend some quality time with your family. Then let's hit the groung running Monday morning. I am ready to assist you when you are ready for some successful coaching.

Friday, April 26, 2013

Tuesday, January 8, 2013

Tax Relief Act - Here's a great write-up and Review

Here is a great write-up and brief on the new tax act. Please feel free to contact the office with any questions.


American Taxpayer Relief Act (ATRA)

Table of Contents
This Summary does not include all provisions of the American Taxpayer Relief Act It primarily includes individual and small business provisions.  It is intended for the use of ClientWhys customers and any
other use or distribution is prohibited.

The following are highlights of the Act that impact individuals and small businesses:

Tax Rates - For tax years beginning after 2012, the 10% rate has been made permanent Thus income tax rates for individuals will stay at 10%, 15%, 25%, 28%, 33% and 35%, but with a 39.6% rate applying for income above the threshold of $450,000 for joint filers and surviving spouses; $425,000 for heads of household; $400,000 for single filers; and $225,000 for married filing separately. These dollar amounts are inflation-adjusted for tax years after 2013. The 2013 tax brackets are as follows:

HH                Joint                 MS

Personal Exemption Phaseout (PEP) for High Income Earners For tax years beginning after 2012, the Personal Exemption Phaseout (PEP), which had previously been suspended, is reinstated with a starting threshold for those with AGI of $300,000 for joint filers and a surviving spouse; $275,000 for heads of household; $250,000 for single filers; and $150,000 (one-half of the otherwise applicable amount for joint filers) for married taxpayers filing separately. These dollar amounts are inflation-adjusted for tax years after 2013.

Historical Exemption Phase Out - AGI Thresholds
Jt, SS
* Inflation adjusted after 2013.

Itemized Deduction Phaseout - For tax years beginning after 2012, the Pease limitation on itemized deductions, which had previously been suspended, is reinstated with a starting threshold for those with AGI of
$300,000 for joint filers and a surviving spouse, $275,000 for heads of household, $250,000 for single filers,
and $150,000 (one-half of the otherwise applicable amount for joint filers) for married taxpayers filing separately. Thus, for taxpayers subject to the “Peaselimitation, the total amount of their itemized deductions is reduced by 3% of the amount by which the taxpayer's adjusted gross income (AGI) exceeds the threshold amount, with the reduction not to exceed 80% of the otherwise allowable itemized deductions. These dollar amounts are inflation-adjusted for tax years after 2013. The following is a historic table listing the phase-out threshold values by year.

Tax Year
Joint, SS

* These amounts are inflation adjusted after 2013.

Capital Gains and Dividends - For tax years beginning after 2012, the top rate for long-term capital gains and qualified dividends will permanently rise to 20% (up from 15%) for taxpayers with incomes exceeding
$400,000 ($425,000 for head of household, $450,000 for married joint, and $225,000 for married separate taxpayers). For taxpayers whose ordinary income is generally taxed at a rate below 25%, long-term capital


gains and qualified dividends will permanently be subject to a 0% rate. Taxpayers who are subject to a 25%- or-greater rate on ordinary income, but whose income levels fall below the thresholds listed above, will continue to be subject to a 15% rate on capital gains and dividends. The table below summarizes the capital gains rates in effect beginning with the 2013 tax year.

Ordinary Income Bracket                                                         Long-Term

To the extent bracket is 10/% or 15%                                                  0%
To the extent the bracket is 25%, 28%, 33% or 35%                         15% To the extent income exceeds 39.6% bracket threshold*                  20%
(2013: $450K Joint, $425K HH, $400K Single, $225 MFS)

Recaptured Sec 1250 Gain                                                                25%

Qualified Small Business Stock - 50% of Gain                        Max 28% (AMT Pref) Collectibles                                                                                         28%
* thresholds are subject to inflation adjustment after 2013

Capital gains are included in investment income and may be subject to the 3.8% surtax on net investment income.

Marriage Penalty Relief - Th ATRA extends the marriage penalty relief for the standard deduction, the 15% bracket, and the EITC for taxable years beginning after December 31, 2012 For example, had this provision not been extended the standard deduction for married taxpayers filing jointly (and qualifiesurviving spouses) would have been 167% (rather than 200%) of the standard deduction for single taxpayers.

Dependent Care Credit - The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) increased the amount of eligible expenses from $2,400 for one child and $4,800 for two or more children to
$3,000 and $6,000, respectively and increased the applicable percentage from 30% to 35%.  The Act permanently extends these increased amounts.

Adoption Credit The Act permanently extends the increased adoption tax credit and the adoption assistance programs exclusion. Taxpayers that adopt children can receive a tax credit for qualified adoption expenses A taxpayer may also exclude from income adoption expenses paid by an employer The EGTRRA increased the credit from $5,000 ($6,000 for a special needs child) to $10,000, and provided a $10,000 income exclusion for employer-assistance programs, with both amounts inflation-adjusted The Patient Protection and Affordable Care Act of 2010 extended these benefits to 2011 and made the credit refundable. The ATRA extends, for taxable years beginning after December 31, 2012, the increased adoption credit amount and the exclusion for employer-assistance programs as enacted in EGTRRA.

Employer Expenses for Child Care Assistance The act permanently extends the credit for employer expenses for child care assistance. The EGTRRA provided employers with a credit of up to $150,000 for acquiring, constructing, rehabilitating or expanding property which is used for a child care facility. The ATRA extends this provision for taxable years beginning after December 31, 2012.

Child Credit The Act permanently extends the 2001 modifications to the child tax credit Generally, taxpayers with income below certain threshold amounts may claim the child tax credit to reduce federal income tax for each qualifying child under the age of 17 The EGTRRA increased the credit from $500 to
$1,000 and expanded refundability. The amount that may be claimed as a refund was 15% of earnings above
$10,000 These rates become permanent.

However the refund provision (15% of earnings above $10,000) is temporarily set at 15% of earnings above
$3,000 through 2017.

EITC –Under prior law, working families with two or more children qualified for an earned income tax credit equal to 40% of the family’s first $12,570 of earned income. The American Recovery and Reinvestment Act of 2009 (ARRA) increased the earned income tax credit to 45% for families with three or more children and increased the beginning point of the phase-out range for all married couples filing a joint return (regardless of the number of children) to lessen the marriage penalty The Act temporarily extends the third-child/45% credit rate and marriage penalty relief provisions through 2017.

Coverdell Accounts – The Act permanently extends the expanded Coverdell Accounts provisions which allow an annual $2,000 (was $500) contribution and includes elementary and secondary school expenses.


Employer-provided Educational Assistance The Act permanently extends the expanded exclusion for employer-provided educational assistance. An employee may exclude from gross income up to $5,250 for income and employment tax purposes per year of employer-provided education assistance.

Student Loan Interest Deduction - The Act Permanently extends the expanded above-the-line deduction for student loan interest deduction for qualified education loans up to $2,500. It also makes permanent the elimination of the 60 month deduction limit and the increased income phase-out of $55,000 to $70,000 ($110,000 and $140,000 for joint filers).

Scholarship Exclusions The Act permanently extends the exclusion from income of amounts received under certain scholarship programs The National Health Service Corps Scholarship Program and the F. Edward Hebert Armed Forces Health Professions Scholarship and Financial Assistance Program provide education awards to participants on the condition that the participants perform certain services The EGTRRA allowed the scholarship exclusion to apply to these programs.

American Opportunity Tax Credit - Temporarily extends the American Opportunity Tax Credit. Created under the ARRA, the American Opportunity Tax Credit is available for up to $2,500 of the cost of tuition and related expenses paid during the taxable year. Under this tax credit, taxpayers receive a tax credit based on 100% of the first $2,000 of tuition and related expenses (including course materials) paid during the taxable year and 25% of the next $2,000 of tuition and related expenses paid during the taxable year. Forty percent of the credit is refundable This tax credit is subject to a phase-out for taxpayers with adjusted gross income in excess of $80,000 ($160,000 for married couples filing jointly) The ATRA extends the American Opportunity Tax Credit for five additional years, through 2017.

Refund and Tax Credit Disregard for Means-Tested Programs The Act permanently extends refund and tax credit disregard for means-tested programs. The receipt of a tax credit would put a substantial number of families over the income limits for these programs in the month that the tax refund is received.

Permanent AMT Patch - Without this change, effective in 2012, a taxpayer would have received an AMT exemption of $33,750 (individuals) and $45,000 (married filing jointly, and would not have been allowed nonrefundable personal credits to be used against the AMT. The ATRA increases the exemption amounts for 2012 to $50,600 (individuals) and $78,750 (married filing jointly) and indexes the exemption and phaseout amounts thereafter The Act also allows the nonrefundable personal credits against the AMT The changes are effective for taxable years beginning after December 31, 2011.

Gift & Estate Tax - The Act prevents steep increases in estate, gift and generation-skipping transfer (GST) tax that were slated to occur for individuals dying and gifts made after 2012 by permanently keeping the exemption level at $5,000,000 (as indexed for inflation). However, the Act also permanently increases the top estate and gift tax rate from 35% to 40%.

Portability of Unused Estate Tax Exemption - The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (TRUIRJCA) allowed the executor of a deceased spouse’s estate to transfer any unused exemption to the surviving spouse for estates of decedents dying after December 31, 2010 and before January 1 2013.   The ATRA makes permanent this provision and is effective for estates of decedents dying after December 31, 2012 CAUTION – A Form 706 (Estate Tax Return) must be timely filed to obtain the portability.

Gift & Estate Exemption Reunification - Prior to the EGTRRA, the estate and gift taxes were unified, creating a single graduated rate schedule for both. That single lifetime exemption could be used for gifts and/or bequests The EGTRRA decoupled these systems The TRUIRJCA reunified the estate and gift taxes. The ATRA permanently extends unification and is effective for gifts made after December 31, 2012.

Mortgage Debt Relief – A Principal Residence Acquisition Debt Relief Exclusion was established by the Mortgage Debt Relief Act of 2007 and provided a COD exclusion of $2 million ($1 million MFS) limited to acquisition debt. Equity debt is considered the first debt relieved This exclusion is available even if the taxpayer is solvent. The 2012 Taxpayer Relief Act extends this exclusion for one year so that it applies to home mortgage debt discharged before 2014.

Teachers’ Above-the-line Expense Deduction The Act revives the deduction allowing up to $250 of a teacher’s qualified classroom expenses for 2012 and extends it through 2013.

 Mortgage Insurance Premiums as Qualified Residence Interest - Premiums for mortgage insurance contracts entered into after Dec. 31, 2006 on a qualified residence have been deductible as qualified residence interest The ATRA extends the ability to deduct the cost of mortgage insurance on a qualified personal


residence for two additional years, through 2013. The deduction is phased-out ratably by 10% for each
$1,000 by which the taxpayer’s AGI exceeds $100,000. Thus, the deduction is unavailable for a taxpayer with an AGI in excess of $110,000.

Tax Free Employer Mass Transit Benefits –The excludable employer-provided mass transit benefit is revived to $240 per month for 2012 and continues through 2013.

State & Local Sales Tax - The Act extends for two years the election to take an itemized deduction for State and local general sales taxes in lieu of the itemized deduction permitted for State and local income taxes.
The option to deduct State and local general sales taxes, which expired at the end of 2011, is revived for 2012 and continued through 2013.

Contributions of Capital Gain Real Property Made for Conservation Purposes - The special rule allowing a 50% (instead of 30%) of AGI limitation for contributions of conservation easement capital gain property and the 15 year carryover period if the conservation easement contribution exceeds the 50% of AGI limitation, which expired at the end of 2011, is now revived for 2012 and continued through 2013.

Above-The-Line Tuition Deduction - The above-the-line deduction for qualified tuition and related expenses, which expired at the end of 2011, is now revived for 2012 and continued through 2013.

Tax-Free IRA to Charity Contributions - Tax-free distributions (up to $100,000) made by taxpayers over age 70.5 from individual retirement plans for charitable purposes, which expired at the end of 2011, is now revived for 2012 and continued through 2013. Because 2012 has already passed, a special rule permits distributions taken in December 2012 that are transferred to charities before February 1, 2013 to be treated as a charitable distribution and therefore not taxed in 2012. Another special rule permits charitable distributions made in January 2013 to be deemed made on Dec. 31, 2012.

Research Credit Reinstated and Liberalized - The research credit equals the sum of: (1) 20% of the excess (if any) of the qualified research expenses for the tax year over a base amount, (unless the taxpayer elected an alternative simplified research credit); (2) the university basic research credit (i.e., 20% of the basic research payments); (3) 20% of the taxpayer's expenditures on qualified energy research undertaken by an energy research consortium. Under pre-Act law, the research credit didn't apply for amounts paid or accrued after Dec. 31, 2011 The 2012 Taxpayer Relief Act retroactively extends the research credit for two years so that it applies for amounts paid or accrued before Jan. 1, 2014.

For tax years beginning after Dec. 31, 2011, the Act also liberalizes the research credit rules for persons that acquire the major portion of either a trade or business or a separate unit of a trade or business of another person. It also revises the rules for allocating the research credit among members of a controlled group or members of a group of commonly controlled trades or businesses.

Low-Income Housing Tax Credit - 9% Credit Rate Freeze for the Low-Income Housing Tax Credit Program. The low-income housing tax credit program provides a tax credit over a period of ten years after the housing facility is placed-in-service The credit provided each year is determined by present-value formula based on the federal cost of borrowing.  Over the past few years, as the federal cost of borrowing has declined, so has the amount of tax credits that can be used to build a LIHTC project To deal with this, in 2008, Congress adjusted the formula and set a minimum credit amount of 9%, which is based on the original credit rate when the program was created and was effective for facilities placed-in-service before December 31, 2013 This ATRA extends the expiration date by changing the deadline to projects that have received an allocation before January 1, 2014.

Treatment of military basic housing allowances under low-income housing credit The ATRA extends a provision whereby a member of the military’s basic housing allowance is not considered income for purposes of calculating whether the individual qualifies as a low-income tenant for the low income housing tax credit program. The provision, which expired at the end of 2011, is continued for two additional years.

Indian Employment Credit Reinstated and Extended - The Indian employment credit for businesses is 20% of the excess, if any, of the sum of qualified wages and qualified employee health insurance costs (not in excess of $20,000 per employee) paid or incurred (other than paid under salary reduction arrangements) to qualified employees (enrolled Indian tribe members and their spouses who meet certain requirements) during the tax year, over the sum of these same costs paid or incurred in calendar year '93. The 2012 Taxpayer Relief Act retroactively extends the Indian employment credit for two years. It now applies to tax years beginning before Jan. 1, 2014.


New Markets Tax Credit Reinstated and Extended - The 2012 Taxpayer Relief Act retroactively extends the new markets tax credit two years, through 2013. It provides that a $3.5 billion cap applies for 2010, 2011, 2012, and 2013, but no amount can be carried over to any calendar year after 2018.

Differential Wage Payment Credit for Employers Reinstated and Extended - Eligible small business employers (less than an average of 50 employees during the year), with a written plan that pay differential wage payments to qualified employees (been an employee during the 91-day period immediately preceding the period for which any differential wage payment is made for periods that they are called to active duty with the U.S. uniformed services (for more than 30 days) that represent all or part of the wages that they would have otherwise received from the employer can claim a credit equal to 20% of up to $20,000 of differential pay made to an employee during the tax year The 2012 Taxpayer Relief Act retroactively extends the credit for two years. It applies for differential wages paid through Dec. 31, 2013.

Work Opportunity Tax Credit Extended - The work opportunity tax credit (WOTC) allows employers who hire members of certain targeted groups to get a credit against income tax of a percentage of first-year wages up to $6,000 per employee ($3,000 for qualified summer youth employees). Where the employee is a long- term family assistance (LTFA) recipient, the WOTC is a percentage of first and second year wages, up to
$10,000 per employee. Generally, the percentage of qualifying wages is 40% of first-year wages; it's 25% for employees who have completed at least 120 hours, but less than 400 hours of service for the employer. For
LTFA recipients, it includes an additional 50% of qualified second-year wages.

The maximum WOTC for hiring a qualifying veteran generally is $6,000. However, it can be as high as
$12,000, $14,000, or $24,000, depending on factors such as whether the veteran has a service-connected disability, the period of his or her unemployment before being hired, and when that period of unemployment occurred relative to the WOTC-eligible hiring date.

The 2012 Taxpayer Relief Act retroactively extends the WOTC so that it applies to eligible veterans and nonveterans who begin work for the employer before Jan. 1, 2014 Thus, the Act grants a two-year lease on life for the WOTC for eligible nonveterans, and a one-year lease on life for the WOTC for qualifying veterans.

7-Year Write-off for Motorsport Racing Track Facilities Reinstated and Extended - The 2012 Taxpayer Relief Act retroactively extends the 7-year straight line cost recovery period for motorsports entertainment complexes for two years. The quick write-off applies to qualifying motorsports entertainment complexes  placed in service through Dec. 31, 2013.

Business Property on Indian Reservations The accelerated depreciation for business property on an Indian reservation is retroactively extended through 2013.

Contributions of Food Iinventory - The Act extends for two years (through 2013) the provision allowing businesses to claim an enhanced deduction for the contribution of food inventory.

Section 179 Expensing Increased for 2012 and 2013 Under prior law the Section 179 expensing cap for 2012 was $139,000 and dropped to $25,000 in 2013. The 2012 Taxpayer Relief Act extends 2011 caps to both 2012 and 2013 Thus for both years the cap will be $500,000 with a $2,000,000 investment ceiling. The Act also provides that:

Off-the-shelf computer software is expensing-eligible property if placed in service in a tax year beginning before 2014 (a one-year extension).

For tax years beginning before 2014 (also a one-year extension), an expensing election or specification of property to be expensed may be revoked without IRS's consent. But, if such an election is revoked, it can't be reelected.

For any tax year beginning in 2010, 2011, 2012, or 2013 (a two-year extension) up to $250,000 of qualified real property (qualified leasehold improvement property, qualified restaurant property, and qualified retail improvement property) is eligible for expensing.

For tax years beginning after 2013, the maximum expensing amount is scheduled to drop to $25,000 and the investment-based phaseout amount is scheduled to drop to $200,000.


MS Cap
Investment Limit
2 Million

Special Expensing Rules for Certain Film and Television Productions - The Act extends for two years, through 2013, the provision that allows film and television producers to expense the first $15 million of production costs incurred in the United States ($20 million if the costs are incurred in economically depressed areas in the United States).

Qualified Small Business Stock Exclusion – Normally 50% of the gain from QSBS is excluded from taxation (but is an AMT preference) Under prior law the 50% was increased to 100% for the exclusion of gain on certain small business stock acquired after Sept. 27, 2010 and before Jan. 1, 2012.   The 2012 Taxpayer Relief Act retroactively extends this provision for two years, through 2013.

CAUTION For California (CA) purposes the requirement that 80% of the business be conducted in CA to benefit from the CA exclusion and reinvestment was recently found to be discriminatory and all exclusions or reinvestments since 2009 have been invalidated. The FTB will be sending out tax due notices to affected taxpayers.

S Corporation Charity Basis Adjustment Provision Extended Prior to the Pension Protection Act of 2006 (PPA) shareholders made their pro-rata ownership basis adjustment based upon the FMV of property donated to charity PPA temporarily changed that to the adjusted basis of the property for tax years beginning before Jan. 1, 2010. The provision was later extended to years beginning before Jan. 1, 2012 The 2012 Taxpayer Relief Act retroactively extends the PPA rule for two years so that it applies for contributions made in tax years beginning before Jan. 1, 2014.

Reduction in S Corporation Recognition Period for Built-in Gains Tax - If a taxable corporation converts into an S corporation, the conversion is not a taxable event. However, following such a conversion, an S corporation must hold its assets for a certain period in order to avoid a tax on any built-in gains that existed  at the time of the conversion. The American Recovery and Reinvestment Act reduced that period from 10  years to 7 years for sales of assets in 2009 and 2010 The Small Business Jobs Act reduced that period to 5 years for sales of assets in 2011 The ATRA of 2012 extends the reduced 5-year holding period for sales occurring in 2012 and 2013 In addition, this Act clarifies rules for carryforwards and installment sales.

Empowerment Zone Tax Incentives - The Act extends for two years the designation of certain economically depressed census tracts as Empowerment Zones. Businesses and individual residents within Empowerment Zones are eligible for special tax incentives.

Bonus First-Year Depreciation Extended for One Year Under prior law, a bonus first-year depreciation was 50% of the adjusted basis of qualified property acquired and placed in service after Dec. 31, 2011, and before Jan. 1, 2013 (before Jan. 1, 2014 for certain longer-lived and transportation property). Bonus depreciation applies for both regular tax and AMT purposes, but is not allowed for purposes of computing earnings and profits. A taxpayer may elect out of additional first-year depreciation for any class of property for any tax year. The 2012 Taxpayer Relief Act extends 50% first-year bonus depreciation so that it applies to qualified property acquired and placed in service before Jan. 1, 2014 (before Jan. 1, 2015 for certain longer- lived and transportation property).

First-Year Depreciation Cap for 2013 Autos and Trucks Boosted by $8,000 – As a result of the one- year extension of the 50% bonus depreciation the yet-to-be determined luxury auto dollar limits for 2013 are increased $8,000 when the bonus depreciation is used.

15-Year Writeoff for Qualified Leasehold and Retail Improvements and Restaurant Property Reinstated and Extended - The 2012 Taxpayer Relief Act retroactively extends for two years the inclusion of qualified leasehold improvement property, qualified restaurant property and qualified retail improvement property in the 15-year MACRS class. Such property qualifies for 15-year recovery if it is placed in service before Jan. 1, 2014.

Energy-efficient Improvements to Existing Homes - The nonbusiness energy property credit under Code
Sec. 25C for energy-efficient existing homes is retroactively extended for two years through 2013. A taxpayer can claim a 10% credit on the cost of: (1) qualified energy efficiency improvements, and (2) residential
energy property expenditures, with a lifetime credit limit of $500 ($200 for windows and skylights).

Alternative Fuel Vehicle Refueling Property Credit - The alternative fuel vehicle refueling property credit under Code Sec. 30C is retroactively extended for two years through 2013 so that taxpayers can claim a 30% credit for qualified alternative fuel vehicle refueling property placed in service through Dec. 31, 2013, subject to the $30,000 and $1,000 thresholds.

Plug-in Electric Vehicles Credit - The credit for 2- or 3-wheeled plug-in electric vehicles under Code Sec. 30D is modified and retroactively extended for two years through 2013.

Credit for Energy-efficient New Homes - The credit for energy-efficient new homes under Code Sec. 45L is retroactively extended for two years through 2013.

Pension Provision Roth Transfers - For transfers after Dec. 31, 2012, in tax years ending after that date, plan provisions in an applicable retirement plan (which includes a qualified Roth contribution program) can allow participants to elect to transfer amounts to designated Roth accounts with the transfer being treated as a taxable qualified rollover contribution under Code Sec. 408A(e).

Roth Conversions for Retirement Plans - Under current law, a deferral plan under section 401(k) (including the Thrift Savings Plan), 403(b) or 457(b) governmental plan can have Roth accounts that allow participants to save on a Roth basis. That is, they can make after-tax contributions to the plan and all the principal and earnings are tax-free when distributedPlans can currently allow participants to convert their pre-tax accounts to Roth accounts, but only with respect to money they have a right to take out of the plan, usually because they have reached age 59½ or separated from service. The ATRA allows any amount in a non-Roth account to be converted to a Roth account in the same plan, whether or not the amount is distributable The amount converted would be subject to regular income tax.