 What’s the summertime forecast? From a tax perspective, the outlook calls for planning now to prepare for changes gathering on the horizon – specifically, provisions currently expected to take effect in January 2013. Here are four new rules to think about during your mid-year tax review. A decrease in tax-free contributions to your flexible spending account. Starting in January 2013, the maximum you can contribute to your FSA will be $2,500. In addition, the “use it or lose it” feature of FSAs means you won’t be able to carry any 2012 excess remaining in your account into 2013 (unless your plan provides a 2½ month grace period for using prior-year funds). Planning move: Schedule elective medical procedures during the last half of 2012. An increase in the threshold for claiming the itemized medical expenses deduction. Do you itemize? For 2012, you can claim a deduction on your federal income tax return for qualified medical expenses that exceed 7.5% of your adjusted gross income (AGI). Beginning in 2013, if you’re under age 65, your medical expenses will have to exceed 10% of your AGI to be deductible. This is the same percentage applied to qualified medical expenses when calculating the alternative minimum tax. Planning move: Review your itemized deductions for 2012 to determine whether accelerating or delaying deductions makes the most sense for you. What to keep in mind: phase-outs and other limitations to itemized deductions that were in effect in prior years, as these may return in 2013. An increase in Medicare tax on certain wages. The amount of Medicare tax you pay on wages and self-employment income is scheduled to go up next year. When you’re single and your wages are greater than $200,000, your employer will withhold an additional 0.9% of Medicare tax from your paycheck. Are you self-employed? The tax applies when net self-employment income exceeds the threshold. The income threshold is $250,000 for married couples. Planning move: If you’re self-employed, review the way your business is organized. While you always want to pay yourself a reasonable amount of compensation, some entity types can allow for flexibility in the timing of wages or salary. A new Medicare tax on unearned income. You probably associate Medicare tax with earned income – that is, the 1.45% tax your employer deducts from your pay. But a provision in the 2010 health care laws extends the Medicare tax to certain unearned income, beginning in 2013. The new surtax is a flat rate of 3.8%, and will apply to interest, dividends, capital gains, annuities, royalties, and rents. It kicks in when your AGI exceeds $250,000 (for married filing jointly). When you file as single, the AGI threshold is $200,000. Planning move: Consider adding tax-exempt bonds to your portfolio. The interest is not subject to the new tax. Roth conversions and selling assets with capital gains may also be a wise move in 2012. Many other tax law changes are expected in 2013. Timely planning is essential for preserving tax- saving opportunities. Please give us a call to discuss strategies to put in place now to maximize your benefits. Add Comment  The e-mail from your bank gets your attention right away. It says you need to log into your account in the next 48 hours to continue your online privileges. Something about a system upgrade. You wonder, is it legitimate? How can you know for sure? Bogus e-mails designed to steal your identity, also known as phishing, are becoming a bigger problem these days. While they can take many different forms, most scams are designed to trick you into revealing personal information such as your social security number or online account password. Through clever use of logos and familiar-looking web addresses, these e-mails often appear to be an urgent message from your bank, mortgage lender, or e-mail provider. You may not realize it, but thieves are especially eager to gain access to your web e-mail account. Why? Once a scammer has access to your e-mails, he or she can often figure out where you bank and detect clues to passwords you might use. So what can you do to protect yourself? Take a moment and think before you click. Never respond to an e-mail asking for your social security number or birth date. You can almost bet that it is a scam. If an e-mail contains a website link that you are not familiar with, do not click on it. Instead, either go directly to the company’s trusted website, or contact them by phone. Also remember that e-mail scams become more prevalent following a significant public event, such as a natural disaster or sudden stock market drop. Thieves will prey on your sympathies or fears during these times, so be extra careful when responding to appeals for charity or notices to update your financial records. Be further leery of e-mails with demanding language or incorrect grammar – both are potential signs of a counterfeit e-mail. Don’t respond to e-mail appeals for charity. For preventive measures, try to use a different password for every online account, and change your passwords regularly. Make your passwords stronger by using combinations of letters, symbols, and numbers. Also, keep your computer anti-virus software up to date. Finally, do your part to thwart these crimes by reporting any suspected scam e-mails to reportphishing@antiphishing.org. If you receive a bogus tax-related e-mail, forward it to the IRS at phishing@irs.gov. And of course, feel free to contact our firm if you need a second set of eyes on any suspicious-looking e-mail. Filing Reminder For Tax-Exempts 05/11/2012
Tax-exempt organizations are required to file annual reports with the IRS. Those with gross receipts below $50,000 can file an E-postcard rather than a longer version of Form 990. The deadline for nonprofit filings is the 15th day of the fifth month after their year-end. For calendar-year organizations, the filing deadline for 2011 reports is May 15, 2012.  Tuesday, April 17, is the deadline for filing certain returns and taking certain tax-related actions. Here are the major deadlines:
Taxpayers who are struggling to pay their taxes may get some relief from the IRS’s expansion of its “Fresh Start” initiative, a program started back in 2008. The new Fresh Start provisions provide penalty relief to the unemployed and make installment agreements on taxes owed available to more people. Normally, a failure-to-pay penalty of one-half of one percent per month, up to a 25% maximum, is charged for overdue taxes. The “Fresh Start Penalty Relief” initiative gives eligible taxpayers a six-month extension to fully pay 2011 taxes – that is, until October 15, 2012, before the penalty begins to apply. Interest of 3% will still be assessed starting from April 17, 2012. The penalty relief is available to workers who have been unemployed at least 30 consecutive days during 2011 or 2012 and to self-employed individuals who experienced a 25% or larger reduction in business income in 2011 due to the economy. Income limits apply: the relief is not available to singles with adjusted gross income over $100,000 or to couples with income over $200,000. Also, taxes due cannot exceed $50,000. The Fresh Start program also changes the eligibility threshold for streamlined installment agreements from $25,000 to $50,000 and increases the maximum term from five to six years. For details or assistance, contact our office. Consider Better Ways to Use Your Tax Refund 04/03/2012
What are you going to do with your federal income tax refund this year? Instead of spending the money on things you may not need – you might put a sizeable refund to better use. Here are a few suggestions:
Take Steps to Build a Better Business 04/03/2012
 Business owners focus a lot of attention on building better products. When their products are hot, the company does well, despite other shortcomings. Certainly, new and better products are essential, but focusing on building a better business – one that readily adapts to change and quickly responds to crisis may be even more important. How can you build a better business? Consider the following strategies:
Rager, Lehman & Houck, P.C. is pleased to announce the following promotions:  Derick J. Groft, CPA – promoted to Tax Manager Derick graduated summa cum laude from Shippensburg University of Pennsylvania in 2004 with a BSBA in Accounting. He is a member of American Institute of Certified Public Accountants and the Pennsylvania Institute of Certified Public Accountants. Derick has seven years of Public Accounting experience including tax preparation and planning for all types of entities.  Megan E. Abbott – promoted to Senior Accountant Megan graduated from Shippensburg University of Pennsylvania in 2008 with a BSBA in Accounting. She is an Associate Member of the Pennsylvania Institute of Certified Public Accountants. Megan has three years of Public Accounting experience including tax preparation, audits, compilations and reviews of commercial, not-for-profit and governmental entities. Megan specializes in audits of Employee Benefit Programs and Single Audits. Rager, Lehman & Houck, P.C. is a regional firm, which provides a wide variety of services for our business and individual clients. With our extreme commitment to superior customer service, Rager, Lehman & Houck, P.C. helps clients to recognize and achieve their financial goals by providing exceptional resources through an outstanding team of professionals. Rager, Lehman & Houck, P.C., Certified Public Accountants and Business Consultants have three offices located in Westminster and Frederick, MD; and Hanover, PA. Visit the website at www.rlhcpa.com Payroll Tax Cut Extended Through 2012 03/06/2012
 Congress passed an extension of the 2% payroll tax cut that had been scheduled to expire at the end of February. The extension means 160 million working Americans will continue to pay social security tax on their wages at a 4.2% rate for the rest of 2012, rather than at a 6.2% rate. Because Republicans and Democrats were unable to agree on how to pay for the extended tax cut, the law included no spending cuts to offset the estimated $93 billion cost of this provision. The law also provides for long-term federal unemployment benefits, setting the maximum at 73 weeks in states with the worst unemployment and 63 weeks for other states. Another provision in the law includes the so-called “doc fix” that prevents a scheduled 27% reduction in Medicare payments to doctors. The unemployment benefits and doctor payments will be paid for by government sales of broadband spectrum, requiring federal workers hired after this year to contribute more to their pensions, and cuts in certain health programs. New Foreign Investment Reporting Requirement 03/06/2012
 If you own foreign investments, you may have an additional federal tax filing requirement this year. Form 8938, Statement of Specified Foreign Financial Assets, is due April 17, 2012, and is filed as part of your individual tax return. You’ll use Form 8938 to disclose interests in certain foreign financial accounts when your ownership exceeds the reporting requirements. What are the reporting requirements? They vary depending on where you live and your filing status. For example, say you’re married and live in the United States, and you’ll file a joint tax return for 2011. You’ll include Form 8938 with your tax return when the total value of your reportable assets on the last day of 2011 was more than $100,000, or if the value exceeded $150,000 at any time during the year ($50,000 and $75,000 for singles). Tip: In some cases, you may also need to file Form 8938 for tax year 2010. Reportable assets include investment accounts you own that are held in foreign financial institutions, interests in foreign entities, and stocks or securities issued by foreign individuals or companies. You’ve probably noticed the reporting requirements are similar to the Report of Foreign Bank and Financial Accounts (FBAR), a separate return you may already be filing. Be aware the new Form 8938 does not replace the FBAR, which you’ll still need to complete by June 30. Penalties for failure to file Form 8938 start at $10,000. We urge you to contact us so we can help you evaluate your filing requirements for foreign investments. | RLHCPA BlogRager, Lehman & Houck, P.C. and its predecessors have been in operation since 1943. Our Firm has three offices located in Hanover, Pennsylvania; Westminster, Maryland; and Frederick, Maryland. ArchivesMay 2012 CategoriesAll |
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