|News You Can Use|
|Need a Year-End|
Tax Planning Appointment?
|If you haven't contacted us yet, we may be able to squeeze you in. Virtual video conferencing is available! You can call or email:
It's been awhile since we sent an update, but recently, the IRS announced some important information for 2012. Let's review the changes:
|2012 Contribution Limits...|
The IRS has announced the maximum contribution limits for your 401(k) and other retirement plans for 2012. Limits have gone up, adjusted for cost-of-living increases. Here are the changes:
- Individual Limits for 401(k): You'll be able to contribute up to $17,000 to your 401(k) plan in 2012 - up $500 from 2011. If you're age 50 and older, you can tuck away as much as $22,500 because the IRS is allowing older workers to make catch-up contributions worth as much as $5,500 over the individual limit next year.
- SIMPLE Limits: The contribution limit for Savings Incentive Match Plan for Employees remains at $11,500 with a $2,500 catch-up clause for workers age 50 and older (unchanged from 2011).
- IRA Limits: The maximum contribution to your Individual Retirement Plans remains unchanged from 2011 limits - $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.
Have questions about the amount you should stow away in 2012? Send us an email
|2012 Tax Deductions...|
Individuals are entitled to claim a personal exemption for yourself and any dependents you support. The personal exemption acts just like a tax deduction: it reduces your taxable income, so you end up paying taxes on less income. The personal exemption amount is indexed annually for inflation. For tax year 2012, the personal exemption amount is $3,800 - $100 more than in 2011.
For the nearly two-thirds of people who don't itemize and instead take the standard deduction when filing their taxes, the 2012 standard deduction for married couples filing jointly is $11,900 ($300 more than last year). Individuals and married people filing separately will see the standard deduction rise to $5,950 (up $150) and the standard deduction for head of household rises to $8,700 (up $200).
Annual gift tax exclusion remains at $13,000 in 2012. The basic exclusion from estate tax amount increases to $5,120,000, up from $5,000,000 in 2011
|Income from Foreign Sources...|
Many U.S. citizens (and some of our clients) earn money from foreign sources. But unless it is exempt under federal law, taxpayers sometimes forget that they have to report all such income on their tax returns.
U.S. citizens are taxed on their income regardless of whether they live inside or outside the United States. The foreign income rule also applies regardless of whether the person receives a Form W-2, Wage and Tax Statement, or Form 1099.
Foreign source income includes earned and unearned income, such as:
- Wages and tips
- Capital gains
But there is some good news. Citizens living outside the United States may be able to exclude up to $92,900 of their 2011 foreign source income if they meet certain requirements. This will increase to $95,100 in 2012.
If you're married and you and your spouse both work abroad and meet either the bona fide residence test or the physical presence test, each of you can choose the foreign earned income exclusion. Together, you can exclude as much as $185,800 for the 2011 tax year.
Caution: The exclusion does not apply to payments made to U.S. government employees or folks in the military living outside the United States.
If you earn income from outside the country, please be sure to meet with us about it. We can advise you on how to address all of the tax implications of this situation!
With less than two months remaining in the calendar year, it's a great time to double check your federal withholding to make sure enough taxes are being taken out of your pay.
Failure to adjust withholding could result in potentially smaller refunds or, in limited instances, a taxpayer may owe tax rather than receive a refund next year.
Certain folks should pay particular attention to their withholding. These include:
- Married couples with two incomes
- Individuals with multiple jobs
- Some Social Security recipients who work
- Workers who do not have valid Social Security numbers
- Retirees who receive pension payments
Taxpayers who wind up owing too much tax because not enough money was withheld from their paychecks during 2011 may qualify for special relief on a penalty that sometimes applies. Depending on their personal situation, some people could have less withheld from their paychecks than they need or want.
If you're not sure how much you need to withhold from your paycheck, go to our financial calculators page and it will figure it out for you!