November 2011
Dear Clients and Friends:
Amazingly, the holiday season is upon all us and as always, tax season is just around the corner. Tax season literally just ended for all of us. With snow storms, earthquakes, hurricanes and flooding rains, tax season was extended until October 31, 2011 and was extremely stressful and trying for both our clients and ourselves. The federal and state governments are under extreme financial pressure and many states have raised taxes. Both federal and state governments have increased penalties and are using that increase as a way to increase revenue.
New York State has mandated that all tax returns must be e-filed and in many cases, especially with corporate entities, all payments of balance due and estimated tax payments must be made either on line or as a direct debit from your bank accounts. New York State has mandated that if a tax return is not e-filed both the preparer and the taxpayer will be penalized.
In terms of depreciation for businesses, bonus depreciation, which allows 100% of the new asset cost to be deducted, has been extended through 2011. Code Section 179 depreciation, which allows a taxpayer to expense rather than capitalize or depreciate tangible depreciable property has been increased to $500,000. In addition, for any tax year beginning in 2011, a taxpayer can elect up to $250,000 of the $500,000 Section 179 deduction limit for "qualified real property" which includes leasehold improvements, which are depreciable and acquired by purchase for the use in the active conduct in a trade or business.
New heavy SUV’s purchased in 2011 receive a huge tax break. As long as you purchased an SUV with gross vehicle weight over 6,000 pounds and used 100% for business, you can write off 100% of the cost
For our clients who are age 70½ and over, you must take a retirement distribution in 2011.
We continue to advise our clients to fully maximize allowable contributions to tax deferred retirement programs. For self-employed and corporate clients, you must open a profit-sharing plan by December 31, 2011, however, the plan contribution can be funded up to the due date of the tax return, including extensions. The maximum contribution to a profit-sharing plan and a SEP IRA in 2011 is $49,000. For 2012 the contribution limit will increase to $50,000. SEP IRA’s can be established and funded until the due date of the tax return including extensions.
IRA’s, on the other hand, must be funded by April 15, 2012. The maximum contribution to a traditional and Roth IRA is $5,000. An individual who is at least 50 years old by the end of the tax year is allowed to make an additional IRA contribution of $1,000. We always recommend a Roth IRA contribution, if you are able to do so.
Contributions to a Roth IRA are not tax deductible. In 2011, Roth IRA’s begin to phase out for single taxpayers with adjusted gross income exceeding $107,000 and married taxpayers filing jointly at $169,000. In 2012, the phase out will commence at $110,000 and $173,000, respectively.
401K plans are widely used. The maximum 401K contribution in 2011 is $16,500 and will increase to $17,000 in 2012. Individuals who will be at least 50 years old by the end of the year may contribute an additional $5,500.
The social security tax rate is presently 4.2%. If congress does not renew the payroll tax cut, the rate will revert to 6.2%. The wage base is increasing from $106,800 in 2011 to $110,100 in 2012. Basic Medicare Part B premium will rise to $99.90 per month in 2012. There will also be a 3.6% cost of living increase for Social Security benefits in 2012.
Energy savings tax benefits have been limited in 2011 to a lifetime credit on exterior windows, doors, furnaces, central air conditioning, water heaters and other complying fixtures to $500.
As an estate planning tool, the gift tax exemption is $5 million per person for 2011 and is $5,120,000 for 2012. It is scheduled to revert to $1 million per person in 2013. The annual exclusion for gifts remains at $13,000 per individual.
We will continue to require all individual and entity clients to sign an engagement letter with our firm. This engagement letter will clearly define what our role as your CPA firm is. Engagement letters are now standard amongst CPA firms.
As stated above, given the state of the economy, the government needs to look for additional revenue. Both Federal and State agencies are embarking on increasing tax enforcement, audits and penalties. Please be cognizant of the potential revenue raiser by the tax authorities.
Please remember, in order to have your tax returns timely filed by April 15, we must have your information in the office by March 25.
In order for us to prepare your 2011 tax returns, all previously filed returns have to be paid in full before we commence with the preparation of the current years work unless you have made other arrangements with the partner in charge. In addition, when we render our invoices to you for the preparation of your tax returns, we will be enclosing a credit card authorization to aide in your payment if you desire to remit payment to us by credit card.
We are a full service firm, here to assist in all aspects of your business and individual tax planning needs. We stay within the realm of our expertise. We utilize the knowledge and ability of other individuals on our team when the need arises. Over the years we have developed business relationships with many competent individuals who can assist you with your business and financial needs. These individuals include investment advisors, mortgage brokers, attorneys and insurance agents. By addressing your needs and giving you the service you require, we know that we have instilled a mutual sense of confidence and loyalty.
We thank you for your past business and hope that your faith in us will continue. We have always treated your referrals with the same courtesy, respect, and care that you have received from us.
We urge anyone who needs to go over their 2011 tax projections or requires any tax planning to make an appointment with us as soon as possible.
The whole team at LSHR CPA’s would like to wish you and your family a safe, happy, healthy holiday season and a prosperous New Year.
Very truly yours,
Lebenhart, Seckendorf, Hasson and Reilly CPA’s, LLC
TAX ADVICE DISCLOSURE
In order to ensure compliance with requirements imposed by the IRS on practitioners who render tax advice (IRS Circular 230), we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used for the purpose of (I) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.