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Instead of complex calculations for allocating expenses, the simplified method allows $5 a square foot for up to 300 square feet for the home office. The deduction is capped at $1,500 a year. Under the simplified method, no depreciation of the home is allowed, but all business expenses not related to the home (such as advertising, supplies, and employee wages) are still fully deductible.

• EXTENSION OF MARCH 1 DEADLINE. Farmers and fishermen aren’t required to make quarterly estimated tax payments if they file their tax return and pay taxes due by March 1 of the following year. Because this year’s tax

filing has been delayed while the IRS makes changes necessitated by the late passage of the recent tax law, the Service has extended this March 1 filing deadline to April 15.

The filing extension will apply to all farmers and fishermen, not just to those who had to wait for late-released IRS forms. To qualify as a farmer or fisherman for 2012, at least two-thirds of a taxpayer’s gross income for 2011 or 2012 must have come from farming or fishing.

For details or assistance, give us a call.

Reminder, tax season is here!

Please bring your tax return documentation to us soon! Be aware that additional rush fees of 20-50% may apply for returns and late information received after March 31st. Thank you for your business!

Best Regards,

The Staff at K.P. Monaco & Associates

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Don’t overlook any that apply to you or your business. Here’s a quick overview:

EXTENDED FOR INDIVIDUALS:

* The optional deduction for state and local sales taxes in lieu of deducting state and local income taxes.

* The above-the-line deduction for up to $4,000 for qualified tuition and related expenses.

* The above-the-line deduction for up to $250 for classroom supplies purchased by teachers.

* The deduction for mortgage insurance premiums.

* Allowing taxpayers 70½ or older to make tax-free contributions of up to $100,000 from an IRA to a charity.

* The exclusion from income for cancellation of mortgage debt of up to $2 million on a principal residence.

EXTENDED FOR BUSINESSES:

* An increase to $500,000 in the Section 179 first-year expensing option for the purchase of new or used business equipment, with an investment limit of $2,000,000.

* 50% bonus depreciation on purchases of new business equipment.

* The research tax credit and the work opportunity tax credit.

* 15-year depreciation for leasehold improvements, restaurant property, and retail space improvements.

For assistance in identifying and applying all the deductions and credits that lower your taxes – both for 2012 and 2013 – please contact our office, 817.460.3143

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Here are some of the changes that could affect you this year.

• Medical expense itemized deduction. The 7.5% income threshold for deducting unreimbursed medical expenses increases to 10% for taxpayers under age 65. Those 65 and older may continue to use the 7.5% threshold through the year 2016.

• FSA contributions. The limit on contributions to health care flexible spending accounts (FSAs) is lowered to $2,500.

• Medicare tax on earned income. A 0.9% Medicare surtax will be imposed on wages and self-employment income exceeding $200,000 for singles and $250,000 for married taxpayers filing a joint return.

• New Medicare tax on unearned income. A new 3.8% Medicare tax will be imposed on unearned income (investment income such as interest, dividends, and capital gains) for single taxpayers with adjusted gross income exceeding $200,000 and for couples with adjusted gross income exceeding $250,000.

These changes may affect your 2013 withholding or quarterly estimated tax payments. Take the changes into account as you begin your 2013 tax planning. For more information and planning assistance, contact our office, 817.460.3143, or respond to this email.

Reminder, tax season is here!

Please bring your tax return documentation to us soon! Be aware that additional rush fees of 20-50% may apply for returns and late information received after March 31st. Thank you for your business!

Best Regards,

The Staff at K.P. Monaco & Associates 

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Here is a summary of the major provisions of the new law.

• Payroll tax rates

In 2011 and 2012, taxpayers enjoyed a “payroll tax holiday” in the form of 2% lower social security taxes on wages and self-employment earnings. The new law did not extend the lower rate beyond 2012, and taxpayers will once again pay social security tax at a 6.2%, not 4.2%, rate.

• Income tax rates

The Bush-era tax rates are extended permanently. However, for taxpayers whose income exceeds $400,000 (single), $425,000 (head of household), $450,000 (married filing joint), there is a new top tax rate of 39.6% on income above those levels.

• Capital gains and dividends

The new law also sets a 20% tax rate on long-term capital gains and qualified dividends for those who fall into the top 39.6% tax rate. All other taxpayers will continue with the 2012 rates – 15% for most people and 0% for those in the 10% and 15% ordinary income brackets.

• AMT

The alternative minimum tax (AMT) has a permanent “fix” that is inflation adjusted annually and is retroactive to January 1, 2012. The 2012 exemption amounts are $50,600 (single) and $78,750 (couples).

• Deductions and exemptions

Itemized deductions and personal exemptions are limited or phased out for higher-income taxpayers. For those with income above $250,000 (single) and $300,000 (couples), deductions are reduced by 3% of the income over the threshold, with an 80% limit on reductions. Personal exemptions are phased out above the same income thresholds, without the 80% cap.

• Families

Several provisions affecting families were set to expire at the end of 2012. The new law extends or makes permanent the following credits:
* The child tax credit of $1,000 per qualifying child under age 17.
* Enhancements to the earned income credit.
* The adoption credit and the income exclusion for employer-paid or reimbursed adoption expenses, indexed annually for inflation.
* The 35% credit for child and dependent care, with expenses capped at $3,000 for one individual and $6,000 for two or more.

• Education tax breaks

The new law extends the American Opportunity Tax Credit, with a $2,500 maximum credit, through 2017. The above-the-line deduction for up to $4,000 of qualified tuition and related expenses is made retroactive for 2012 and extended through 2013. The 60-month limit for deducting up to $2,500 of student loan interest is permanently eliminated. The maximum contribution allowed for Coverdell education savings accounts is permanently set at $2,000 a year. The exclusion from income for employer-provided education assistance of up to $5,250 is made permanent.

• “Extenders”

The new law once again extends a number of the individual taxpayer “extenders” through 2013. The items include the following: an optional deduction for state and local sales tax in lieu of state and local income tax, the $250 deduction for classroom supplies paid by teachers, and the IRA-to-charity transfer of up to $100,000 by taxpayers age 70½ or older.

• Miscellaneous

The new law extends through 2013 the exclusion from income for cancellation of mortgage debt of up to $2 million on a principal residence. It allows for the deduction of mortgage insurance premiums and the tax credit for making energy improvements to a home.

• Estate and gift tax

The estate tax exemption was scheduled to drop in 2013 to $1 million with a top tax rate of 55%. The new law permanently sets the exemption at $5 million and sets the top tax rate at 40%. The exemption will be adjusted annually for inflation.

• Business provisions

There are a number of provisions in the new law that will affect businesses.
* The first-year expensing option (Section 179) was increased retroactively for 2012 and extended through 2013 at $500,000 for new and used equipment. The investment limit is set at $2,000,000.
* The 50% bonus depreciation was extended through 2013 and applies only to new equipment.
* The research tax credit is extended through 2013.
* The Work Opportunity Tax Credit is extended through 2013. This credit is available to businesses that hire individuals from targeted groups, such as veterans.
* About two dozen more business “extenders” are available for both 2012 and 2013 tax returns.

The American Taxpayer Relief Act of 2012 contains several other provisions that could affect your personal and business tax situation. Keep in mind that Congress will have a very busy 2013 in addressing additional tax matters, possibly including a complete overhaul of the income tax code. Stay in touch with us for updates on what Congress is doing. We are here to help you pay no more tax than the law requires. Please contact us if you have questions on this latest law, 817.460.3143 or respond to this email.

Reminder, tax season is here!

Please bring your tax return documentation to us soon! Be aware that additional rush fees of 20-50% may apply for returns and late information received after March 31st. Thank you for your business!

Best Regards,

The Staff at K.P. Monaco & Associates

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At the Holiday Season, our thoughts turn gratefully to those who have made our progress possible. Thank you and warmest wishes for the holiday season!

From all of us at,

K.P. Monaco & Associates!

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Here’s a quick update that covers provisions in the health care legislation that have already gone into effect and those that, absent any changes made in the coming months, will go into effect in 2013 and thereafter.

The following provisions have already taken effect:

• A 10% tax is assessed on indoor tanning services.
• Small businesses with fewer than 25 full-time employees may qualify for a tax credit for the cost of purchasing health insurance for their employees.
• Children can remain on their parents’ insurance policies up to age 26. Private lending for student loans is replaced with loans directly from the federal government, cutting loan fees.
• A 50% discount on brand-name drugs for those with Medicare drug coverage helps to offset costs  in the “donut hole.”
• Over-the-counter medications can no longer be paid for with funds in health savings accounts (HSAs), flexible spending accounts (FSAs), and health reimbursement accounts (HRAs).
• The additional tax on nonqualified distributions from health savings accounts (HSAs) increases from 10% to 20%.

The provisions that will take effect in 2013 include the following:

FSA limits

• The amount that can be contributed to a health flexible spending account (FSA) is limited to $2,500 per year, indexed annually for inflation.

Medical expense deduction

• The 7.5% income threshold for deducting unreimbursed medical expenses increases to 10% for those under age 65. Those 65 and older may continue to take an itemized deduction for medical expenses exceeding 7.5% of adjusted gross income through the year 2016.

Executive pay limit

• The compensation deduction for certain health insurance companies is limited to $500,000 per year for high-level executives.

Medicare tax increase

• The payroll Medicare tax will increase from 1.45% of wages to 2.35% on amounts above $200,000 earned by individuals and above $250,000 earned by married couples filing joint returns. The income threshold levels are not indexed for inflation.
• A new 3.8% Medicare tax will be imposed on unearned income for single taxpayers with income over $200,000 and married couples with income over $250,000. Examples of unearned income: interest, dividends, royalties, rental income.

Medical device tax

• A 2.3% excise tax is imposed on the sale of certain medical devices.

Provisions scheduled to take effect in years after 2013 include the following:

Coverage required starting in 2014

• Individuals who are not covered by Medicare, Medicaid, or other government health insurance are generally required to maintain health insurance coverage or pay a penalty. Penalties are calculated using a percentage of the taxpayer’s income or a flat dollar amount. Subsidies and tax credits are available to help lower-income taxpayers pay for coverage.
• Health insurance exchanges are established by states to enable people to comparison shop for coverage.
• Large employers generally must provide coverage for employees or face penalties.
• Tax credits increase from 35% to a maximum 50% of premiums paid by qualifying small businesses that provide coverage for their workers. The credit available to nonprofit employers increases from 25% to 35%.

Health industry fee in 2014

• An annual fee is assessed on the health insurance industry, starting at $8 billion in 2014 and increasing over the following years.

Tax on “Cadillac plans” in 2018

• Insurance companies will be assessed a 40% excise tax on health insurance plans with annual premiums exceeding $10,200 for individual coverage and $27,500 for family coverage. An increase in the threshold amount is allowed for retired persons who are age 55 or older (an additional $1,650 for single coverage and $3,450 for family coverage). These increased thresholds also apply for plans that cover those engaged in high-risk occupations.

Certain provisions in the original health reform legislation have already been changed or repealed. For example, the law originally required Form 1099 reporting for payments over $600 made to corporations. That requirement has been repealed, and reporting is again generally required only for payments over $600 made to unincorporated businesses.

Congress may amend or repeal provisions in the health care reform law, either before their scheduled effective date or retroactively. Or the law may survive largely intact. Clearly, the massive law will affect every taxpayer. For guidance in your individual and business tax planning under the often-complicated health reform legislation, contact our office at 817.460.3143.

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With a better understanding of the rules, you may be able to avoid or reduce adverse tax consequences.

The AMT was set up in the 1960s to make sure wealthy taxpayers didn’t use deductions and exemptions to avoid paying any income tax. The AMT applies a 26% or 28% tax rate to income above a certain exempt amount. Because this exempt amount is not indexed for inflation, the AMT has begun to affect more and more middle-income taxpayers each year.

The AMT is a separate tax calculation that parallels the regular income tax, but it does not let you claim personal or dependent exemptions, the standard deduction, and certain itemized deductions. You compute your tax liability under the regular tax system; then you make the necessary adjustments for “tax preferences” and calculate your tax under the AMT rules. You compare your AMT liability to your regular tax liability and pay whichever tax is greater.

It’s wise to estimate your AMT exposure before year-end. Depending on your situation, it may make sense to avoid tax preference items or postpone certain deductions. Strategies might include adjusting when you make tax payments or charitable contributions, accelerating income, or changing how you exercise stock options.
 
For a review of your situation in relation to the AMT, give our office a call, 817.460.3143.

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Best Regards,

The Staff at K.P. Monaco & Associates

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