The South Bay Tax Report
November 30, 2011
Wayland & Vukadinovich LLP
Named as the 2011 South Bay's
Best Tax Preparer
by The Daily Breeze
We Can Smell Tax Season in the Air!
Here at Hermosa Beach's favorite CPA firm,
Wayland & Vukadinovich LLP,
we're preparing for the 2011 tax filing season.
We've received tax software updates, taken classes on new developments, reviewed materials on everything from the new estate tax rules to educational deductions.
We're ready to help you!
Help us - make your appointments early, organize your tax information, consider using one of our organizers (we have a one page organizer that we will mail early next week, a longer paper organizer that you can order from Gina in our office that contains last year's data as a reference point and - our favorite - an e-version of the longer organizer that allows you to input your information using your computer), and file early (especially if you are seeing a nice refund!)
Time to Consider Capital Gains and Dividends
The 2010 Tax Relief Act temporarily extended favorable tax rates on long-term capital gains and qualified dividends that have been in effect since 2003. The extension on dividend taxes alone is expected to save individual investors almost $75 billion in 2011 and 2012.
Because these tax rates are scheduled to become significantly higher in 2013, this might be a good time to consider how potential tax changes could affect you.
Under current provisions, long-term capital gains and qualified dividends are taxed at a 0% rate for taxpayers in the 10% and 15% Federal income tax brackets and at a 15% rate for taxpayers in higher brackets.
Long-term capital gains are profits from investments held for more than one year.
Qualified dividends must be received from a domestic corporation.
Unless there is further legislation (and we know that's always possible!!), tax rates on capital gains and dividends will revert to pre-2003 levels after 2012.
If this occurs, the maximum rate on long-term gains will rise to 20% (10% for taxpayers in the 15% tax bracket). Qualified dividends will be taxed as ordinary income and because the top Federal income tax rate is scheduled to rise to 39.6% after 2012, this could mean a huge increase in taxes on qualified dividends for taxpayers in the highest tax bracket.
Did you get an email from the IRS?
We've said it before, but we will say it again - the IRS does not use email to communicate with taxpayers. If you receive an email from the "IRS" indicating they have a refund for you, that you need to file a return, or that they need to speak with you, it's NOT the IRS that is trying to reach you -
DO NOT REPLY..
Give Flexible Spending Accounts Another Look
You may be able to reduce what you send the IRS in 2012 if your employer offers a flexible spending account ("FSA") in its benefits package and you sign up during open enrollment periods in November and December.
Here's how it works - You can allocate a portion of your wages to a FSA. There are two types of FSA
- For paying qualified dependent care expenses such as day-care for children or
- For paying qualified medical expenses.
Your taxable income is reduced by the amount you contribute and during the year, you use the account to pay qualified expenses, which will vary depending on the type of FSA.
Using an FSA can be a great way to take advantage of a tax savings opportunity. Be aware, however, that any unused portion of this account that remains at year end is forfeited.
Cost Basis Rules will Impact Your 2011 Tax Reporting
With the implementation of new tax-reporting legislation, this year your investment advisor / stock broker will begin reporting cost basis information for stock / bond sales you make to you and to the IRS on your Form 1099-B.
Prior to year end, you should (a) make sure you understand how your broker will report your cost basis (will they use average costs, LIFO, FIFO?) and (b) confirm that costs your broker has for your investments are, in fact, correct.
Social Security Will Increase....
Social Security recipients will get a raise in January 2012 - their first since 2009. It is expected to be 3.6%.
There was no raise in 2010 or 2011 because inflation was too low.
Some of the increase in January will be lost to higher Medicare premiums, which are deducted from Social Security payments.
Monthly Social Security payments average $1,082 or about $13,000 a year. A 3.6% increase would amount to an additional $38 a month or about $455 per year.
Unclaimed Property
The California State Controller's Office is currently in possession of more than $6.1 billion in unclaimed property belonging to about 17.6 million individuals and organizations.
You can see if you are one of those 17.6 million by visiting
www.naupa.org
or the more complicated
www.scoweb.sco.ca.gov
where you will find searchable data bases of all unclaimed property.
And You Thought Beverly Hills Was Rich!
Nine neighborhoods in the New York metropolitan area accounted for 0.2% of all Federal income tax filers in 2008 (the last year statistics are available) yet they paid 1.6% of all individual income taxes, eight times their proportionate share, according to data compiled by Bloomberg.
The $16.5 billion paid in the nine Zip Codes ranging from Manhattan to Fairfield County CN would be enough to buy a controlling interest in General Motors or match the combined economies of the Bahamas, Fiji and Tajikistan.
Many of you request that we provide copies of tax returns we file for you to banks, loan brokers or other financial organizations. Please note that, due to Federal privacy guidelines, we are not allowed to provide information to 3rd parties without a formal authorization with AN ORIGINAL signature. Therefore, we usually honor your requests by providing the tax return copies to you directly so that you can forward the information on to the 3rd party. Note also that we do not charge a fee for providing electronic copies of your tax returns, but it often takes at least one business day before you will receive a link to a secure portal which will provide you with the information you have requested.
Keep an Eye on your Estate Plan
It's quite likely that the new year will bring changes in estate tax rules - it will be a good idea to review your entire estate situation. Be sure to double check your beneficiary designations on employer-sponsored retirement plans, IRAs, insurance policies and annuities. In most cases, these designations WILL SUPERSEDE what you have stipulated in your will or trust, so if they are out-of-date, your estate plan may not function as intended.
This is also a good time to work with your estate planning attorney to help insure that your assets are correctly titled and you have executed all the basic estate planning documents including wills, durable powers of attorney, health care power of attorney, living will and revocable living trust
|