irs

Retirement Tax

Retirement Contributions Limits and Other Tax Benefits for 2012

The IRS has announced the maximum contribution limits for your 401(k) and other retirement plans for 2012. In general, many of the pension plan limitations will change for 2012 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged. Highlights include:

  1. Individuals Limits for 401(k): Annual compensation limit $250,000 in 2012 (up from $245,000 in 2011); maximum annual contribution $17,000 in 2012 (up from $16,500 in 2011) with a $5,500 contributions for age 50 and older.
  2. Savings Incentive Match Plan for Employees (SIMPLE): Contribution limit $11,500 with a $2,500 catch up clause for age 50 and older. Remains unchanged from 2011.
  3. Individual Retirement Plans (IRAs): Maximum contribution $5,000 with a $1,000 catch up contribution for those age 50 and older. The contribution can be split between a Roth IRA and a traditional IRA, but must not exceed $6,000. Remains unchanged from 2011.

Looking Ahead to 2012

The value of each personal and dependent exemption will increase $100 to $3,800 in 2012.

The new standard deduction is $11,900 in 2012 for married couples filing jointly. Individuals and married people filing separately will see the standard deduction rise to $5,950 and the standard deduction for head of household rises to $8,700. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions.

Annual gift tax exclusion remains at $13,000 in 2012. The basic exclusion from estate tax amount increases to $5,120,000, from $5,000,000 in 2011

Accounting Business Tax

Employers Must Now Report Health Care Benefits

Under the Affordable Health Care Act, employers are now required to report the value of health care benefits. Beginning in 2011, employers must report the value of health care benefits for each employee. This amount will appear on the new 2011 form W-2 to be issued in 2012. This is a reporting item and will not affect taxable income.

To give employers more time to update their payroll system, the IRS has made this requirement optional for 2011. For small businesses with fewer than 250 employees, it will remain optional for 2012.

If you have questions about this requirement, please contact our office.

Accounting Business Tax

Advantages of Keeping Good Records

You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. Good record-keeping will help you remember the various transactions you made during the year, which in turn may make filing your return less, well, taxing.

Records help you document the deductions you’ve claimed on your return. You’ll need this documentation should the IRS select your return for examination. Normally, tax records should be kept for three years, but some documents – such as records relating to a home purchase or sale, stock transactions, IRA, and business or rental property – should be kept longer.

In most cases, the IRS does not require you to keep records in any special manner. Generally speaking, however, you should keep any and all documents that may have an impact on your federal tax return:

  • Bills
  • Credit card and other receipts
  • Invoices
  • Mileage logs
  • Canceled, imaged, or substitute checks or any other proof of payment
  • Any other records to support deductions or credits you claim on your return

Good record-keeping throughout the year saves you time and effort at tax time. For more information on what kinds of records you should keep, call our office.

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