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2012 Ushers in New Tax Provisions

Tax PlanningNo Comments

2012 2 150x150 2012 Ushers in New Tax ProvisionsAccording to an article in the Journal of Accountancy earlier this week, 2012 has ushered in several changes in tax provisions.  These changes include:

Inflation Adjustments – Applicable amounts for many tax items increased on January 1 due to annual inflation adjustments, including contribution limits for pension plans and retirement accounts.

Capital Gain and Loss Reporting — Taxpayers now need to report both short-term and long-term gains and losses of certain capital assets utilizing schedule D on Form 1040, and must also file a new Form 8949, “Sales and Other Dispositions of Capital Assets,” in certain situations.

Veterans Work Opportunity Credits – Businesses that hire certain military veterans after November 20, 2011 and before January 1, 2013 are eligible for tax credits.

Foreign Asset Reporting – Under the Foreign Account Tax Compliance Act (FACTA), taxpayers have to report interest in foreign financial assets by filing a Form 8938, “Statement of Specified Foreign Financial Assets,” for 2011 tax returns.

Bonus Depreciation — A 50% bonus depreciation is available for property placed in service in 2012.

Estate Tax — Estates of decedents who died in 2010 have until Jan. 17, 2012 to elect not to have estate tax apply and to have heirs’ bases in assets they inherit determined under the modified carryover basis rules. The estate and gift lifetime exclusion tax increases from $5 million in 2011 to $5.12 million in 2012.

EITC Due Diligence — Failure to meet due diligence requirements of the earned income tax credit will incur a penalty of $500 for returns required to be filed after December 31, 2011.

Voluntary Classification Settlement Program – Allows eligible taxpayers to reclassify their workers as employees for federal employment tax purposes and receive relief from part of the tax liability of previously classifying these workers as nonemployees.

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