Tag Archives: Mahtomedi

2013 Exemptions and Rates

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The IRS released the inflation-adjusted amounts for 2013 individual tax returns.

  • The standard deduction increases to $6,100 single and $12,200 married filing jointly.
  • The personal exemption increases $100 to $3,900.  Those with adjusted gross income (AGI) of more than $150,000 single and $300,000 married filing jointly will see their exemption reduced.
  • The maximum Earned Income Tax Credit increases slightly to $6,044.
  • The new 39.6% top tax rate applies to individuals with taxable income of more than $400,000, $450,000 for those married filing jointly.  All other rates remain the same as 2012.
  • Those with AGI of $250,000 single and $300,000 married filing jointly will see their itemized deductions reduced by up to 20%.

These changes present some significant planning issues for those who will have income in any of the ranges mentioned above.  We’re here to help take the guess work out of your tax situation, and to help reduce your tax exposure as much as possible.

Protecting Yourself – And Your Returns

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Lately, it seems like there is a news story every week about problems with tax returns.  One of the largest providers of tax software to home users, as well as professional accounting firms, had numerous issues correctly completing Minnesota tax returns.  The largest commercial tax preparer in the country had tens of thousands of returns prepared incorrectly, causing delays in their customers getting their refunds.  Both of these happened within the last two weeks, and point to an unsettling problem: tax preparers expecting their software to be smarter than they are.

More disturbing though are the stories of tax preparers cheating and defrauding their clients.  These stories are usually far less publicized – we learn about them through professional publications.  A tax attorney in New York recommended fraudulent deductions to clients – to the tune of $7 billion.  A former tax partner in a national accounting firm was arrested for stealing payments his clients made to his firm.  Numerous preparers have been arrested for claiming fraudulent deductions on client’s returns and pocketing the additional refunds for themselves.

Given all this, choosing a competent, trustworthy tax professional is crucial to keeping you in compliance with the law, and getting you the most accurate tax return.  Below are a few steps to take when choosing a preparer.

  • Get referrals from friends and family whose opinions you value.
  • Be leery of anyone who promises outcomes that seem too good to be true.
  • Check with the Board of Accountancy in your state to see if the preparer you are considering is currently licensed, and if they have had any disciplinary action taken against them.
  • Never be afraid to get a second opinion if you think something doesn’t seem right.
  • Use a search engine, like Google, to see if anyone has posted reviews or comments about the firm online.

As always, we’re here to help, as we have been for over 30 years.

Tax Season Update

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Tax season moves quickly, and at the end of this week, there will be a short four weeks left until the individual tax deadline is upon us.   There have been a number of developments since our last posting, so below you’ll find some of the highlights you may have missed.

  • The IRS has gotten its computer systems up to date with the “Fiscal Cliff” legislation, passed in early January. This means all tax returns can now be filed, as the final forms have been released, and tax software providers have gotten their updates in place. This is a full three weeks faster than anyone expected.
  • Intuit, the maker of TurboTax, as well as several professional-grade tax software programs, ran into significant issues with the Minnesota tax return, leading to about 10,000 tax returns being delayed. Intuit had until today to get the issues corrected, and says they have notified anyone who was affected.  We use a different software provider.  This is a great example of the importance of having a tax professional working for you – the software can’t always be trusted to get the right result.
  • Governor Dayton removed the “business to business” sales tax from his proposed budget, which is great news. If left in place, professional services, like accounting and legal services would have been subject to sales tax.
  • The Standard Mileage Rate for business miles driven in 2013 is 56.5 cents per mile.

Corporate taxes are due by this Friday, March 15th, and as always, we’re here to help with your tax and accounting needs.

Keeping Your Best Employees

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As the economy continues to show sluggish signs of improvement, more businesses, including small businesses, are seeing their employees move on to other opportunities.  This can cause a big issue of those leaving are the ones you count on to be the current and future leaders of your business.

Inc. Magazine gives some great methods to keep your best and brightest engaged and present in your organization.

Questions Remain on Business Tax Issues

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As the end of the year approaches, there are a significant number of tax breaks and deductions remaining in limbo for businesses.  Congress and the President are working to resolve these and many others before the end of the year, which is now a short three weeks away.

Below are some of those most likely to affect our readers.

  • The 50% bonus depreciation allowance for new equipment expires at the end of 2012.
  • The Research and Development Tax Credit, which expired at the end of 2011.
  • The 15-year depreciable life for qualified leasehold, restaurant and retail improvements, which expired at the end of 2011.
  • The Section 179 deduction, which allowed up to $139,000 in deductions for capital equipment placed in service in 2011, will be reduced to $25,000 (plus a small inflation increase) for 2012.

These are in addition to the individual items covered in last week’s blog posting.

The acting commissioner of the IRS has warned Congress several times that failure to resolve the expired and expiring provisions by the end of the year may delay the filing of most business and individual tax returns.  Even if Congress and the President reach an agreement by year end, there may still be delays as the IRS rushes to update their computer systems, along with tax software providers.

To add to the complexity and uncertainty, most states use some form of the taxable income amount determined on the federal tax return as a starting point for state taxes.  This means once the federal tax code is determined, the states will have to scramble to adopt all, some, or none, of the new federal laws and also retool their computer systems for the changes.

We’ll be keeping up on the latest, and as always, we’re here to help you navigate the ever-changing landscape.