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 | Suzanne LoBiondo, CPA
516-791-1303
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 | Chris Cheeseman, CPA
516-791-1303
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Dear Clients and Friends,
We would like to welcome our new subscribers from the Merrick Fall Festival last month. We enjoyed meeting you there and hope you enjoy our newsletter. A special congratulations to our raffle winner, Celestial Hakim!
November brings autumn leaves, colder temperatures, and turkeys! It also brings thoughts of year-end tax planning. We welcome your questions and are happy to prepare tax projections for you. Feel free to contact us for further information.
We at C&L have a lot to be thankful for this Thanksgiving, and hope that you do too. Wishing all of you a happy and healthy Thanksgiving season.
Very truly yours,
Suzanne LoBiondo and Christopher Cheeseman
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| Pension Plan Cost of Living Adjustments for 2012 | |
The Internal Revenue Service recently announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for Tax Year 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. The changes are summarized in the chart below.
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Plan Types |
2012 Limits |
2011 Limits | |
Defined contribution plans |
$50,000 |
$49,000 | |
Defined benefit plans |
$200,000 |
$195,000 | |
Deferred contribution plans - 401(k), 403(b)
and 457 plans: |
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Under age 50 |
$17,000 |
$16,500 | |
Age 50 and older |
$22,500 |
$22,000 | |
Simple plans: |
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Under age 50 |
$11,500 |
$11,500 | |
Age 50 and older |
$14,000 |
$14,000 | |
IRA, traditional and Roth: |
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Under age 50 |
$5,000 |
$5,000 | |
Age 50 and older |
$6,000 |
$6,000 | |
Other Thresholds |
2012 Limits |
2011 Limits | |
Annual compensation limit |
$250,000 |
$245,000 | |
Key employee in a top-heavy plan |
$165,000 |
$160,000 | |
Highly compensated employee |
$115,000 |
$110,000 |
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IRS May Request Electronic Files From Taxpayers Upon Audit | |
The IRS is now able to read many electronic software files and will be requesting electronic files such as QuickBooks back-up files from taxpayers under examination.
The problem with the IRS instituting this practice is that it usurps statute of limitation laws that were written to protect taxpayers from abuse and to limit the scope of the IRS's examination powers.
Intended or not, there is an efficiency gained in the examination process in limiting the scope of an examination to (generally) three years. If IRS's eyes are allowed to wander to years outside of the scope of the examination, this will create delays in completing the examination which could be costly to taxpayers.
In a recent memorandum to Small Business/Self-Employed Division (SB/SE) Examination Area Directors, Shenita L. Hicks, SB/SE Examination Director warns examiners "should only review data relevant to the year(s) under examination..." This is little comfort to taxpayers that all the information submitted is not being examined.
The AICPA is discussing with software developers and the IRS the possibility of having software limit the information provided to the IRS through a special back-up. However, the IRS has warned on its website that "If the taxpayer or representative creates or reconstructs a new company file, for example, by re-inputting the transactions for only the year under examination, this new file does not satisfy the requirements or needs of the Internal Revenue Service. The new or modified company file is not a copy of the books and records of original entry. The altered electronic file would not meet the requirements of the Information Document Request or a summons and the taxpayer's representative could be in violation of Treasury Department Circular No. 230."
Hopefully the pressure from the AICPA results in the IRS accepting limited information back-ups. As of now, there has been no word contrary that the IRS will accept any limited information back-up files, nor have any software vendors released plans of incorporating the ability to make such back-up files.
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| About C&L Tax and Accounting Services LLP |
 C&L Tax and Accounting Services LLP is a boutique CPA firm that specializes in meeting the tax and accounting needs of individuals and small businesses. Our experienced tax and accounting professionals offer clients insightful and strategic tax planning and compliance services that maximize savings year after year. C&L Tax and Accounting Services LLP's offers a wide range of tax and accounting planning, compliance and consulting services for both individuals and small businesses. We invite you to peruse our capabilities and contact us for a consultation. |
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