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Since 1968 |
Fall 2011 Newsletter |
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Greetings!
Thanksgiving is the perfect time to reflect and extend appreciation and gratitude for your fellowship, communications, confidence and willingness to allow Ciampi Tax and Financial Services, LLC to make a difference in your personal and business lives.
We appreciate the past and welcome the opportunity to continue our partnership in the future.
Best wishes for an enjoyable holiday season!
Sincerely,
Donald J. Ciampi Sr. EA |
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President Obama Recommends Tax Increases for High-Income Earners | |
In September, President Obama addressed Congress and explained the concept of the Buffett Rule, "People making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay".
The challenge is that President Obama does not actually write the bills that ultimately become the laws. Instead, the President only signs or vetoes bills passed by Congress.
Let's take a look at a high level overview of the recommendations made by the Obama Administration. Included in their report, the current Administration outlines their Principles of Tax Reform as follows: Read More... |
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 2012 Presidential Election Candidates' Positions on Taxes
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Republican presidential candidates recently released tax proposals with varying levels of detail. As they begin to take aim at each other's plans and analysts weigh in, here's a roundup of how several candidates propose to alter the current tax code.
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Individual Tax |
Allowed Deductions |
Investment Taxes |
Other | |
Herman Cain |
9% income tax
0% tax on income up to poverty level (based on family size) for all families
Federal individual income taxes as a % of GDP |
Maintain tax deduction for charitable donations; other deductions to be proposed later |
No tax on capital gains; dividends only taxed as personal income at 9% |
No income tax on Social Security benefits, eliminate the payroll tax | |
Newt Gingrich |
Optional flat tax of 15%
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Charitable donations, home-mortgage; personal deduction of $12,000 per individual |
No taxes on capital gains and dividends |
Replace payroll taxes with optional personal savings investment /insurance | |
Jon Huntsman |
Three brackets with rates of 8%, 14% and 23% |
Eliminate deductions |
No taxes on capital gains and dividends |
N/A | |
Ron Paul |
Extend Bush-era tax cuts |
Maintain current deductions |
End taxes on personal saving |
N/A | |
Rick
Perry |
Optional flat-tax rate of 20% |
Mortgage interest, charitable donations, state and local taxes |
No tax on dividends and long-term capital gains |
No income tax on Social Security Benefits | |
Mitt Romney |
Extend Bush-era tax cuts; supports broad tax overhaul resulting in a simpler individual tax code, a broader tax base and lower rates |
Maintain current deductions until tax overhaul |
No taxes on capital gains, dividends and interest for taxpayers with incomes under $200,000 |
N/A |
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2012 Retirement Savings Contribution Limits Increased | |
Contributing to a retirement plan is one of the best tax shelters available to you during your working years. Recently, the IRS announced that many of the retirement savings limits will increase for 2012.
2012 Maximum Retirement Account Contributions
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Retirement Savings Option
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Under the age
of 50 |
50 or older by December 31, 2011 | |
401(k) or 403(b)
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$17,000
($1,416.66/month) |
$22,500
($1,875.00/month) | |
SIMPLE IRA
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$11,500
($958.33/month) |
$14,000
($1,166.67/month) | |
SEP IRA
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$50,000
($4,166.66/month) |
$50,000
($4,166.66/month) | |
Solo 401(k)
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$50,000
($4,166.66/month) |
$55,500 or
($4,625.00/month) | |
IRA
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$5,000
($416.67/month) |
$6,000
($500.00/month |
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Where Do Bonds Go From Here? | |
In a year in which the stock market has seen extreme volatility, the bond market has played its traditional role as a safe haven. With stock market indices fluctuating wildly between positive and negative returns for the year, the Barclays Aggregate Bond Index is up almost 7% year-to-date. This positive performance has been driven by the Federal Reserve's policy of keeping short term rates extraordinarily low and by investor concerns about the direction of the stock market. Bond prices go up as interest rates go down, which has driven the positive returns on bond funds.
The question, then, is which direction are interest rates headed and how do bonds perform from here? The Fed has signaled that it is not likely to raise rates until 2013 given the uncertainty in the economy and stubbornly high rate of unemployment. This means that we should not see a significant rise in yields (and drop in prices) any time soon. At the same time, yields do not have much room to fall.
It seems likely then, that bonds will remain fairly stable for the foreseeable future. We believe that investors can take on some risk in the fixed income markets to produce income and to offset stock market risk without the immediate concern of a large fall in bond market values.
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Year End Tax Strategies
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As we approach the end of 2011, please find several strategies for you to consider:
#1: Increase your 401(k) and 403(b) contributions if you haven't been contributing at the maximum rate all year. This year you can put up to $17,000 into your 401(k) or 403(b) plan. Anyone 50 or older by December 31st can put away an additional $5,500.
#2: If you're self-employed, consider setting up a Solo 401(k) by 12/31/2011. A Solo 401(k) plan lets a self-employed person hit the $49k retirement plan max with less income than a SEP IRA, and also allows a person aged 50 or older to put away $54,500 into a retirement plan for 2011.
#3: Take a look at your payroll withholdings. It may be advisable to withhold additional Federal or State taxes, if you haven't had enough taxes withheld during the year to avoid getting hit with an underpayment penalty.
#4: Consider selling your investments held in non-retirement accounts that have decreased in value. This can be advantageous since your capital losses can offset other capital gains realized during the year.
#5: Send in your January 2012 mortgage payment early enough so it will be processed prior to 12/31/11. By sending in your payment a few weeks early, you can deduct the interest portion of that payment a full year earlier.
#6: Clean out your closets and donate your clothing and household items to a charitable organization, since "non-cash" contributions are deductible if you itemize.
#7: For gifts of money, making your donation by credit card before December 31st allows you to deduct the donation on this year's return, even if you don't pay your credit card bill until 2012.
#8: Pre-pay your projected state tax shortfall if you'll be itemizing your deductions and you are not subject to the alternative minimum tax.
#9: Pre-pay and pay off your medical bills if your total medical expenses exceed 7.5% of your income and you itemize.
#10: Evaluate whether you'll save any taxes by postponing 2011 income or deductions into 2012 or by accelerating 2011 income or deductions into 2012.
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Calendar of Dates
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Month |
Income Taxes |
Saving and Investing | |
December, 2011 |
- Send in State 4th quarter estimates by 12/31/2011
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- Self Employed Individuals establish Keogh plans and Solo 401(k)'s by 12/31/2011
- Fund 529 Plans by 12/31/2011 to take full advantage of this year's gift limit of $13,000 for grandchildren or other relatives.
- Maximize annual contributions to your 401(k) or 403(b) plan of up to $16,500, ($22,000 if 50 or older).
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January, 2012 |
- Forward Federal 4th quarter estimates due 1/18/2012
- Issue any W-2s or 1099s by January 31, 2012 to household employees or subcontractors.
- Review your Federal and State withholding for 2012, and, if necessary, file a new W-4 Form with your employer to adjust your withholding
- Schedule tax appointment
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- Increase your monthly contributions to your 401(k) or 403(b) plans. The maximum annual contribution for 2012 is $16,500. Anyone 50 or older can contribute an extra $5,500
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