Bracing yourself for higher taxes

In 2013 a slew of new and increased taxes are set to be unleashed on individual taxpayers. Two of these taxes are the result of the 2010 Health Care legislation and will directly impact many of our clients.

Beginning January 1, 2013 an additional 0.9% Hospital Insurance (HI) tax will be imposed on “high-income” taxpayers who are defined as single individuals with $200,000 or more of wages or self-employed income per year, $250,000 for married filing joint and head of household filing statuses and $125,000 for married filing separate individuals. This tax effectively raises the current employee-portion of the medicare tax from 1.45% to 2.35% for wages or self-employed income earned in excess of the above limitations. The additional tax is required to be withheld when an individual taxpayer’s wages are more than $200,000, but that does not take into account a spouse’s earnings. Situations in which both spouses work but neither reach the $200,000 level individually may find themselves owing an additional 0.9% on their salaries come tax time. An adjustment of current withholding levels may be necessary, especially in dual income households, for taxpayers that may be subject to this additional tax. Read more

Making the most out of a Non-Profit Organization’s Tax Return

The IRS Form 990, Return of Organization Exempt from Income Tax, is one of the most important documents that a non-profit organization prepares. The 990 provides reporting to the IRS on an organization’s programs, revenue sources, contributions, expenses and governance. One of the most important things about an organization’s 990 is that it is available for public review. Potential donors often download the organization’s 990 to gather more information before deciding to make a contribution and Press will often review the form when preparing articles about the non-profit. As you can see, it’s important that the 990 is accurate and complete.  Read more

Payroll Tax Cut Temporarily Extended

The 2% cut in social security withholding in effect during 2011 has been extended until February 29, 2012. The Temporary Payroll Tax Cut Continuation Act of 2011 was signed by President Obama on December 23, 2011. The temporary cut means that employees will only have 4.2% of their wages withheld for social security as opposed to the normal 6.2%. Employers are required to comply with the law by January 31, 2012. Any social security tax over withheld before the employer has complied will then be adjusted in the employee’s pay by March 31, 2012. Read more

IRS Announces Round 3 of OVDI

Yesterday the IRS announced a third round of their highly successful Offshore Voluntary Disclosure Initiative (OVDI) program. The OVDI was highly publicized with the 2009 revelation that several large Swiss banks, including UBS, were going to be cooperating with the IRS in disclosing the names of US citizens and residents holding Swiss bank accounts. Read more

Reporting of Foreign Assets Required

On December 14, 2011 the IRS released form 8938 for reporting certain specified foreign assets. Per IRC §6038D, individual taxpayers holding an interest in a specified foreign asset must report that interest on their tax return if the combined value of all specified foreign assets is $50,000 or more. A specified foreign asset includes the following:

• Any financial account maintained by a foreign institution
• Stocks issued by a non US entity that are not held in an account maintained by a financial institution
• An interest in a foreign entity not held in an account maintained by a financial institution
• Notes, bonds, or debentures issued by a foreign person not held in an account maintained by a financial institution
• An interest in a foreign trust not held in an account maintained by a financial institution Read more