New Identity Protection Service Offered by the SC Department of Revenue

Via the SC Association of Certified Public Accountants:
As a result of the 2012 South Carolina Department of Revenue (SCDOR) security breach, the state has partnered with CSID to provide eligible South Carolina taxpayers and businesses up to one year of CSID identity protection services for free. Individual taxpayers, their dependents, and businesses who filed electronic South Carolina tax returns between 1998 and 2012 may be eligible for these services.
Starting Oct. 24, eligible taxpayers can enroll at  www.scidprotection.com or call 855-880-2743 for more information. The deadline to enroll is Oct. 1, 2014. Click here to view the SCDOR-CSID fact sheet.

Employer Alert–Department of Labor information on the Affordable Care Act (Obamacare)

The October 1, 2013 deadline for employers that are covered under Section 18B  (as added by Section 1512 of the Affordable Care Act)  of the Fair Labor Standards Act (FLSA) to provide written notice to their employees informing them of the existence of the “Marketplace” (or Exchange), a description of the services the “Marketplace” will provide, the manner in which the employee may request assistance from the ‘Marketplace”, that the employee may be eligible for a premium tax credit, and that the employee may lose the employer contribution to any health plans offered by the employer if the employee purchases a qualified health plan through the “Marketplace” is fast approaching.  We have included links to several items that we feel may be helpful in guiding you through this requirement.  The first item is Technical Release 2013-02 which provides an overview of the requirements of Section 18B and for whom the requirement is applicable.  The other two items are model notices provided by the Department of Labor.  One model notice covers employers that offer a health plan and the second one is for employers that do not offer a health plan.  The information we have linked is available at the Department of Labor’s website.  That website address is www.dol.gov.  As always, we are available to discuss these matters with our clients so please do not hesitate to reach out to us with any unanswered questions you may have. 

 

Department of Labor – Technical Release 2013-02

Model Notice for employers who offer a health plan to some or all employees

Model Notice for employers who do not offer a health plan

FAQ on Notice of Coverage Options

New staff accountants at Burch Oxner Seale Co.

Burch, Oxner, Seale Co. would like to announce that David Mahn and Samantha Myers have joined the firm as staff accountants.  David and Samantha are working on completing the requirements for licensure as South Carolina Certified Public Accountants.  David is a recent graduate from Francis Marion University.  Samantha comes to us from New York where she received dual majors in accounting and finance.

2012 American Taxpayer Relief Act – How will it affect you?

US_Capitol_BuildingAfter weeks, indeed months of proposals and counter-proposals, seemingly endless negotiations and down-to-the-wire drama, Congress has passed legislation to avert the tax side of the so- called “fiscal cliff.” The American Taxpayer Relief Act permanently extends the Bush-era tax cuts for lower and moderate income taxpayers, permanently “patches” the alternative minimum tax (AMT), provides for a permanent 40 percent federal estate tax rate, renews many individual, business and energy tax extenders, and more. In one immediately noticeable effect, the American Taxpayer Relief Act does not extend the 2012 employee-side payroll tax holiday.

The American Taxpayer Relief Act is intended to bring some certainty to the Tax Code. At the same time, it sets stage for comprehensive tax reform, possibly in 2013. Moreover, it creates important planning opportunities for taxpayers, which we can discuss in detail.

Individuals

Unlike the two-year extension of the Bush-era tax cuts enacted in 2010, the debate in 2012 took place in a very different political and economic climate. If Congress did nothing, tax rates were scheduled to increase for all taxpayers at all income levels after 2012.  President Obama made it clear that he would veto any bill that extended the Bush-era tax cuts for higher income individuals. The President’s veto threat gained weight after his re-election.  Both the White House and the GOP realized that going over the fiscal cliff would jeopardize the economic recovery, and the American Taxpayer Relief Act is, for the moment, their best compromise.

Tax rates.  The American Taxpayer Relief Act extends permanently the Bush-era income tax rates for all taxpayers except for taxpayers with taxable income above certain thresholds:
$400,000 for single individuals, $450,000 for married couples filing joint returns, and $425,000 for heads of households.  For 2013 and beyond, the federal income tax rates are 10, 15, 25, 28,
33, 35, and 39.6 percent.  In comparison, the top rate before 2013 was 35 percent.  The IRS is expected to issue revised income tax withholding tables to reflect the 2013 rates as quickly as possible and provide guidance to employers and self-employed individuals.

Additionally, the new law revives the Pease limitation on itemized deductions and personal exemption phaseout (PEP) after 2012 for higher income individuals but at revised thresholds. The new thresholds for being subject to both the Pease limitation and PEP after 2012 are $300,000  for  married  couples  and  surviving  spouses,  $275,000  for  heads  of  households, $250,000 for unmarried taxpayers; and $150,000 for married couples filing separate returns.

Capital gains.  The taxpayer-friendly Bush-era capital gains and dividend tax rates are modified by the American Taxpayer Relief Act. Generally, the new law increases the top rate for qualified capital gains and dividends to 20 percent (the Bush-era top rate was 15 percent). The 20 percent rate will apply to the extent that a taxpayer’s income exceeds the $400,000/$425,000/$450,000 thresholds discussed above. The 15 percent Bush-era tax rate will continue to apply to all other taxpayers (in some cases zero percent for qualified taxpayers within the 15-percent-or-lower income tax bracket).

Payroll tax cut.  The employee-side payroll tax holiday is not extended. Before 2013, the employee-share of OASDI taxes was reduced by two percentage points from 6.2 percent to 4.2 percent  up  the  Social  Security  wage  base  (with  a  similar  tax  break  for  self-employed individuals).  For 2013, two percent reduction is no longer available and the employee-share of OASDI taxes reverts to 6.2 percent. The employer-share of OASDI taxes remains at 6.2 percent. In 2012, the payroll tax holiday could save a taxpayer up to $2,202 (taxpayers earning at or above the Social Security wage base for 2012).  As a result of the expiration of the payroll tax holiday, everyone who receives a paycheck or self-employment income will see an increase in taxes in 2013.

AMT. In recent years, Congress routinely “patched” the AMT to prevent its encroachment on middle income taxpayers. The American Taxpayer Relief Act patches permanently the AMT by giving taxpayers higher exemption amounts and other targeted relief. This relief is available beginning  in  2012  and  going  forward.  The  permanent  patch  is  expected  to  provide  some certainty to planning for the AMT. No single factor automatically triggers AMT liability but some common factors are itemized deductions for state and local income taxes; itemized deductions for miscellaneous expenditures, itemized deductions on home equity loan interest (not including interest on a loan to build, buy or improve a residence); and changes in income from installment sales. Our office can help you gauge if you may be liable for the AMT in 2013 or future years.

Child tax credit and related incentives.  The popular $1,000 child tax credit was scheduled to revert to $500 per qualifying child after 2012.  Additional enhancements to the child tax credit also were scheduled to expire after 2012.  The American Taxpayer Relief Act makes permanent the $1,000 child tax credit. Most of the Bush-era enhancements are also made permanent or extended. Along with the child tax credit, the new law makes permanent the enhanced adoption credit/and income exclusion; the enhanced child and dependent care credit and the Bush-era credit for employer-provided child care facilities and services.

Education incentives. A number of popular education tax incentives are extended or made permanent by the American Taxpayer Relief Act. The American Opportunity Tax Credit (an enhanced version of the Hope education credit) is extended through 2017.  Enhancements to Coverdell education savings accounts, such as the $2,000 maximum contribution, are made permanent.  The student loan interest deduction is made more attractive by the permanent suspension of its 60-month rules (which had been scheduled to return after 2012). The new law also extends permanently the exclusion from income and employment taxes of employer- provided education assistance up to $5,250 and the exclusion from income for certain military scholarship programs.  Additionally, the above-the-line higher education tuition deduction is extended through 2013 as is the teachers’ classroom expense deduction.

Charitable giving.  Congress has long used the tax laws to encourage charitable giving.  The American Taxpayer Relief Act extends a popular charitable giving incentive through 2013:  tax- free IRA distributions to charity by individuals age 70 ½ and older up to maximum of $100,000 for qualified taxpayer per year.  A special transition rule allows individuals to recharacterize distributions made in January 2013 as made on December 31, 2012.  The new law also extends for businesses the enhanced deduction for charitable contributions of food inventory.

Federal estate tax.  Few issues have complicated family wealth planning in recent years as has the federal estate tax.  Recent laws have changed the maximum estate tax rate multiple times. Most recently, the 2010 Taxpayer Relief Act set the maximum estate tax rate at 35 percent with an  inflation-adjusted  exclusion  of  $5  million  for  estates  of  decedents  dying  before  2013. Effective January 1, 2013, the maximum federal estate tax will rise to 40 percent, but will continue to apply an inflation-adjusted exclusion of $5 million. The new law also makes permanent portability between spouses and some Bush-era technical enhancements to the estate tax.

Businesses

The business tax incentives in the new law, while not receiving as much press as the individual tax provisions, are valuable. Two very popular incentives, bonus depreciation and small business expensing, are extended as are many business tax “extenders.”

Bonus depreciation/small business expensing.  The new law renews 50 percent bonus depreciation through 2013 (2014 in the case of certain longer period production property and transportation property). Code Sec. 179 small business expensing is also extended through 2013 with a generous $500,000 expensing allowance and a $2 million investment limit.  Without the new law, the expensing allowance was scheduled to plummet to $25,000 with a $200,000 investment limit.

Small business stock.  To encourage investment in small businesses, the tax laws in recent years have allowed noncorporate taxpayers to exclude a percentage of the gain realized from the sale or exchange of small business stock held for more than five years.  The American Taxpayer Relief Act extends the 100 percent exclusion from the sale or exchange of small business stock through 2013.

Tax extenders.  A host of business tax incentives are extended through 2013.  These include:
Research tax credit
Work Opportunity Tax Credit
New Markets Tax Credit
Employer wage credit for military reservists Tax incentives for empowerment zones Indian employment credit
Railroad track maintenance credit
Subpart F exceptions for active financing income
Look through rules for related controlled foreign corporation payments

Energy

For individuals and businesses, the new law extends some energy tax incentives.  The Code Sec.
25C, which rewards homeowners who make energy efficient improvements, with a tax credit is extended through 2013. Businesses benefit from the extension of the Code Sec. 45 production tax credit for wind energy, credits for biofuels, credits for energy-efficient appliances, and many more.

Looking ahead

The negotiations and passage of the new law are likely a dress rehearsal for comprehensive tax reform during President Obama’s second term.  Both the President and the GOP have called for making the Tax Code more simple and fair for individuals and businesses.  The many proposals for tax reform include consolidation of the current individual income tax brackets, repeal of the AMT, moving the U.S. from a worldwide to territorial system of taxation, and a reduction in the corporate tax rate. Congress and the Obama administration also must tackle sequestration, which the American Taxpayer Relief Act delayed for two months. All this and more is expected to keep federal tax policy in the news in 2013. Our office will keep you posted of developments.

If you have any questions about the American Taxpayer Relief Act, please contact our office. We can schedule an appointment to discuss how the changes in the new law may be able to maximize your tax savings.

2012 Tax Organizers – available January 2013

2012 tax returnWe’ll be mailing out the 2012 Tax Organizer to our current clients in early January 2013.  We recommend that you use this organizer as a checklist to gather the tax documents that we will need to prepare your return.

Winter is here – Tax Season is around the corner

BOSCOSnowDay2011smallAnother tax season is upon us, and we’re busy planning for it. So should you! If you have any changes or concerns that may affect your 2012 tax return, let your CPA know before the end of the year. Planning ahead could save you tax dollars and avoid the dreaded IRS bill on April 15, 2013.