The IRS announced on Friday that due to the extended processing time for many tax forms, that the deadline for any farmers and fishermen who were counting on the March first deadline for not having to make estimated tax payments has been extended to April 15, 2013.
The farmer or fisherman will have to fill out form 2210-F, which they did in the past for filing prior to March 1. There is a waiver box on the form which must be checked.
The elective deferral (the contribution you make) for employees who participate in 401(k), 403(b), most 457 plans, and the government’s Thrift Savings plan is increased to $17,500 for 2013 from $17,000 for 2012. If you are age 50 or older, you can contribute up to $23,000.
The contribution limits for SIMPLE plans increase from $11,500 to $12,000. If you are over 50 the contribution limit is $14,500.
The maximum compensation used to determine contributions increases to $255,000.
The limits for an IRA for 2013 are $5,500 and $6,500 if you are over 50. this is up $500 from 2012. IRA phaseouts begin if your adjusted gross income is over $59,000 for singles and $95,000 for married filing jointly.
Contributions to a Health Savings Account (HSA) are used to pay current of future medical expenses of the account owner, his or her spouse, and any qualified dependents. Medical expenses must not be reimbursable by insurance or other sources and do not qualify for the medical expense deduction on a federal income tax return.
A qualified individual must be covered by a high deductible health plan (HDHP) and not be covered by other health insurance with the exception of insurance for accidents, disability, dental care, vision care, or long-term care. In general HDHP’s will have lower premiums helping you to lower the cost of your health care.
For calendar year 2013, a qualifying HDHP must have a deductible of at least $1,250 (up $50 from 2012) for self-only coverage or $2,500 (up $100 form 2012) for family coverage. and must limit annual out-of-pocket expenses of the beneficiary to $6,250 for self-only coverage and $12,500 for family coverage.
The amount an individual can contribute to the HSA is a maximum of $3,250 for self-only coverage and $6,250 for family coverage. These contributions can be made pre tax by an employer or are tax deductible if made yourself.
The funds in the HSA can be withdrawn to pay medical expenses or they can be allowed to accumulate tax free and the earnings can accumulate tax free. Like an IRA, the funds belong to the individual and stay with the participant even after a job change or retirement. After retirement, the funds can be used to pay medical expenses or treated like a retirement account.
An HSA can be a great way to supplement your retirement planning and over several years accumulate a significant amount of money in addition to providing a tax free way to pay medical expenses. It is strongly recommended that anyone who has the opportunity maximize the contributions to their HSA. We often recommend that people pay their medical expenses from other funds if possible to allow the HSA to continue to build.
We thought it might be time for just a little more humor. These are an outgrowth of the Jeff Foxworthy you might be a redneck if… jokes.
You might be a CPA if:
The Alternative Minimum Tax (AMT) has been “fixed”. Actually fixed would be repealed, but it now applies to individuals with incomes over $50,600 for single and $78,750 married filing jointly. These amounts are indexed for inflation for future years. This was scheduled to affect 45% of taxpayers in 2013 but now will affect less than 1%. This tax was implemented in 1969 and was intended to apply to 155 specific millionaires who did not pay taxes. In 1969 millionaires referred to people well above middle income. These were very wealthy people. It now applies only to many middle and upper-middle income taxpayers. A total of about 5 million of them even after the “fix”. The tax shelters and things those 155 people were taking advantage of have since been fixed, which is what should have been done in the first place. But the AMT has been left in place to be a burden the middle income taxpayers. And not just in taxes paid. Reporting and understanding the AMT is quite complex.
A few tax law changes you should be aware of for businesses
Here are a few changes to the tax laws for 2013 which you should be aware of:
The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low and moderate income workers is $59,000 for married couples filing jointly, up from $57,500 in 2012. It is $44,250 for head of household and $29,500 for single or married filing separate
If you have bank accounts or other foreign financial assets there may be reporting requirements you are not aware of. There is a requirement called FBAR (Foreign Bank account report) which is due June 30 and applies if the total value of your foreign accounts is over $10,000 at any time during the calendar year. The form which must be filed is TD F 90-22-1 and is filed separately from your income tax return. There are hefty penalties for not reporting properly. There is also a reporting requirement called FACTA (Foreign Account Tax Compliance Act). This requires taxpayers who have foreign financial assets with a total value greater than $50,000 to report information about those assets on a new form (form 8938) that must be attached to your annual tax return.
The IRS has sent out a notice that it will begin processing income tax returns and accepting electronically filed tax returns on January 30, 2013. This is 8 days later than the original plan. This delay was caused by the recently passed tax law changes which came too late for the IRS to modify its computer programming and update the forms in time to accept returns before January 30. By itself, this does not inconvenience many of us taxpayers as most of us do not receive all the information necessary to prepare our tax returns prior to February 1.
Of larger inconvenience is the fact that the IRS has said that certain forms will still not be available then and they will not have them ready for filing until late February or perhaps even until sometime in March. Returns which have those forms cannot be filed electronically until the IRS decides they can be filed. They may not be paper filable until the forms are ready either. The most significant form they say will not be available is the depreciation form, but there are also a number of other mostly business related forms. Almost all of us who have rental property or have business activities reported on our tax returns have a depreciation form. So the lack of these forms could inconvenience many of us.
Most significantly, those of you who are farmers and must file your returns by March 1 to avoid penalties for late payment of estimated payments could have a problem if you cannot file your return because the IRS forms are not yet ready. The IRS has not said if they will offer an extension to farmers because of this yet. Hopefully they will.
We thought it would be a good idea to inject some humor into these posts, so we are going to throw out a listing of several reasons someone might want to become a CPA
1. Nobody gets an Academy Award until we say so.
2. You have Credentials People Admire.
3. I am a bit rebellious at times. My Mama wanted me to be a rock star, so it was my way to rebel.
4. Only accountants know what a widget is.
5. Nobody ever asks “How do you spell that?”
6. In Scrabble, accountant (14) is worth more than either doctor (9) or lawyer (12).
7. You get to experience 5 seasons per year: summer, fall, winter, spring, and tax.
8. You get to work the standard 70 hour work week.
9. Free physical fitness program for audit staff required to carry 20 pound audit bags.
10. Your debits and credits are always equal. (you probably need a little accounting background to get that one.)
11. The secret handshakes and club jackets are the coolest.
12. You have the opportunity to become a client’s number one trusted advisor.
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