Happy New Year!

Welcome to our special "Fiscal Cliff" Edition of

The South Bay Tax Report

We hope everyone had a wonderful holiday season and you safely rang in the new year. 

Mike and Gary are still talking about all of the wonderful gifts they received - Mike got a leather-bound copy of the Internal Revenue Code, Gary got a brand-new straight edge which will only make sense if you've seen Gary sign tax returns.

We've spent the month of December eagerly getting ready for tax season, helping with last minute planning decisions, studying all of the latest IRS releases, ordering forms and supplies, and generally admitting until New Year's Day that we really had no idea what Congress, the President, and the government will be doing with the Internal Revenue Code - and your tax bill - in January.

Congress and the President stepped near - but not over - the fiscal cliff, so we bring you, within hours of the bill being signed, a special edition of the

South Bay Tax Report

outlining changes for 2012 and 2013.

What exactly did they do with my taxes?

Usually, the longer the bill, the shorter period Congress actually debates it.

The legislation this past weekend covered hundreds of pages and a number of topics and generated lots of debate BEFORE they took to the floor to vote. Here are high points:

• Tax rates beginning January 1, 2013 - A top rate of 39.6% (up from 35%) will be imposed on single taxpayers making more than $400,000 per year and married couples making more than $450,000 per year.
• Alternative Minimum Tax - Many of you (like much of Congress) only has a general idea as to what alternative minimum tax (AMT) really is. Congress has annually needed to "patch" AMT so it does  not hit many of us with lower earnings. Congress enacted a permanent AMT patch, adjusted for inflation, retroactive to January 1, 2012.
• Dividends and capital gains - For those of you taxed in the new 39.6% rate, your tax on capital gains and dividends will increase from 15% to 20%.
• Itemized deduction phase-out - The itemized deduction phase-out (where you lose a portion of your itemized deductions as your income increases) will be reinstated in 2013. The phase-out will start when a married couple has adjusted gross income over $300,000 or adjusted gross income over $250,000 if you are single.
• Estate tax - The estate tax will continue to provide an inflation adjusted $5 million exemption, $10 million for those of you married; however, the rate of tax has been increased from 35% to 40%. Remember, that means a married couple can leave as much as $10 million to their heirs with no estate tax.
• Personal tax credits - The $1,000 child tax credit (for those with children under 17) and the enhanced Earned Income Tax Credit (for those of you with earnings below $20,000) and the American Opportunity Tax Credit (for those with children in college) have been extended through 2013.
• Teacher deduction - Congress extended the $250 above-the-line teacher deduction for 2012 and 2013.
• Other items - they also extended certain provisions for debt discharge on the sale of your personal residence, bonus depreciation and immediate write-off of business equipment purchases.

Have you got all of that?

Our Appointments....

We can help with preparation of your tax returns several ways

You can -

Email us your information;

Mail us your information;

Send us a completed organizer or

Come in for an appointment.

If you'd like an appointment, call us soon as appointment times quickly fill up.

Fees for appointments have increased, you will likely want to speak to your tax return preparer regarding whether your fee has been increased. 

If you'd like one of our long-form organizers

(either the paper or electronic version),

call Gina in our office.

Gina, displaying the proper concern about privacy, will grill you to make sure you are who you say you are before she sends you the organizer.

If you've used a paper long-form organizer in the past, consider upgrading to an electronic version - they're easy to use and helpful for us.

Our regular, traditional 1-page organizers, the short-form version, went out in the mail at year-end.

Can I still send a gift to my children?

Yes, you can make a 2013 gift to your child; it can help if you anticipate that you have assets of more than $10 million. In 2013, you can  make a gift of $14,000. That gift is NOT deductible and your child need  not pay tax on the gift.

Don't Forget Those Foreign Assets

The Internal Revenue Service and the US Treasury Department are convinced you're hiding assets in some beautiful Caribbean island, so they want information on any  foreign financial assets you may own AND they require information regarding those assets to be reported annually on Form 8938.

The reporting threshold starts at $50,000 of value and the IRS CAN and WILL assess significant penalties for those who fail to comply.

Be sure you tell us so that we can make sure proper filings are completed.

The US Treasury also wants you to disclose any foreign bank accounts with a balance of at least $10,000 at sometime during the year over which you may have signature authority. Those disclosures are made on forms separate from your annual tax return - let us know if you wish us to assist in preparation of the forms.

Standard Mileage rates for 2013

Who says the IRS doesn't have a heart?

They've announced that standard mileage rates for use of a vehicle for business will increase by 1 cent per mile to 56.5 cents per mile for 2013.

1099s and W-2s

This month is a great time

(okay, not a great time but a really good time)

to review your payroll and outside contractor information to insure that you have everything correct.

You need to issue W2s and 1099s by January 31st and checking addresses, SSNs and other information now makes that process go much easier.