Happy Valentine’s Day to all you lovers out there. Say is today the day you're going to “pop the question”? Best wishes to you and yours! But wait…let’s talk taxes first. Suppose you were married today (instead of the single bliss you now enjoy) would the taxes that you and your sweetie now pay be more or less after you are married? Sorry to rain on your joy but it is something you may want to think about. Good news, however, is at hand. The Tax Policy Center, a non-profit organization, has a “marriage penalty calculator” available for you so you can calculate exactly what the penalty for being married will be based on your return and your sweetie’s return. And guess what, it’s called a “marriage penalty calculator” but it could turn out that you owe less taxes being married, making it a “marriage bonus” in the tax world. Check it out and let us know if it is a penalty or a bonus. If you're already married you can play along as well it's just
For the first time this tax season, the IRS's "Where's My Refund?" online tool will provide personalized refund timelines for taxpayers. Here is your link: http://www.irs.gov/Refunds
While politicians dither your 2012 tax liability is going up. No AMT patch will mean that as many as 100 million taxpayers (2/3 of all returns expected) could be affected. Most won’t be able to file their return until late March 2013! Call your Congressman and Senator - tell them to do something now about the AMT patch. Let the rest of the debate roll on, just get 2012 settled now.
The sales tax rates in California will go up on January 1, 2013. The new rates are posted at this State Board of Equalization Web site -
For those who can't wait here are the rates for Fort Bragg and around Mendocino County, again, beginning January 1, 2013:
City of Fort Bragg...........................8.625%
City of Point Arena.........................8.125%
City of Ukiah..................................8.125%
City of Willits..................................8.125%
Unincorporated Mendocino County...7.625%
For other counties in California drop on in to the State Board of Equalization site referenced above.
A week from today will be “Black Friday” the day when brave shoppers will brave cold, crowds and the weather to queue up at crazy-early hours in front of their favorite retailer awaiting the opening rush for sales, sales and sales. And all to save $20 on a Wii set or $40 on a television. Here’s a thought: what if the IRS had a sale and let you save thousands of dollars on your taxes? Would you wait in line for that sale? Well, the IRS isn’t going to be holding a sale, exactly, but you can still save, maybe thousands of dollars in taxes; and you don’t need to wait in line to do it either. But there are only 45 days left in this special “shopping season” for you to secure your savings. How do you do it? Planning, that’s how.
Tax planning is the key to paying the legal minimum in taxes and now, with the changes anticipated ahead for us, the “fiscal cliff” if you want, it is more important than ever to think and plan. Here is an article that we wrote to help you in planning for the year-end:
We’re here to help you if you need it. You can also call me today (707) 964-6325 for an appointment to review of your 2011 tax returns and discuss some ideas for reducing your 2012 income tax.
NEW CA TAX RATES
On election day, November 6, 2012 the California voters passed Proposition 30 and retroactively increased certain tax rates as of January 1, 2012. Pay attention now, you might need to consider these changes in your 2012 tax projections and planning.
The table below shows the increases passed as well as the level of income that will be impacted by the changes.
Governor's Ballot Initiative (Prop 30) changes:
10.3% (1% increase) on income of:
$250,001–$300,000 for single/MFS;
$340,001–$408,000 for HOH; and
$500,001–$600,000 for MFJ.
11.3% (2% increase) on income of:
$300,001–$500,000 for single/MFS;
$408,001–$680,000 for HOH; and
$600,001–$1,000,000 for MFJ.
12.3% (3% increase) on income of:
More than $500,000 for single/MFS;
More than $680,000 for HOH; and
More than $1,000,000 for MFJ.
(Note: Income in excess of $1 million is also subject to the 1% mental health surcharge.)
As you are no doubt aware there is some uncertainty in the tax planning field now. With the Bush-era tax cuts in line to expire at the end of this year the future of your tax rates will depend on who is elected in November and which party controls the US House and Senate. So the challenge today is to plan in a way that will minimize your tax exposure now as well as into the future all the time not knowing what the future will be bringing!
One thing is easy to see, for me anyway, and that is the lower tax rates for everyone will not be carrying forward. Maybe the lower rates will stay in place for individuals earning under $150,000 and maybe not. What I do believe, however, that the 2013 tax rates will not be lower than the 2012 tax rates so, with that in mind, it is probably a safe bet to implement a strategy to shift income into 2012. This could save considerable tax dollars and it is probably be a low-risk move.
A second area to look at is the tax rate on capital gains. For 2012 the long-term capital gain rate is 15% unless you are in the lower tax brackets (10/15% based on your taxable income), in which case the rate is 0%. If the Bush-era tax cuts are left to expire, the rate will be 20% (or 15% in the lower tax brackets). So there is a possible 5% to 15% difference in tax rates; this possibility existing, it could make sense to sell property with a gain now. If you so choose you could repurchase the property right away, thereby recognizing the capital gain when you make the sale (2012) and have the property back at a higher tax basis going forward. A caution here is in order: this strategy is based on tax considerations and you should not begin your investment philosophy with tax considerations but with economic realities. This is an idea only, but you need to consult with your investment advisor before you try any of the tax ideas here.
Dividends are another area to look at. For 2012 the maximum tax rate on qualified dividends is 15%, the same as the capital gain rate. With no changes, in 2013 dividends will be taxed at ordinary income tax rates, which could be as high as 39.5%. For regular corporations it may make good tax sense to authorize a special dividend payable before the end of 2012 to your shareholders.
There may be other moves you can make and the above are only ideas of what is possible. Before you implement any strategy it is advisable to consult your tax advisor (and your investment advisor) to be sure you are using strategies that are most effective and that you will be getting the benefits you need.
Don’t let the uncertainty of Congress, the elections or the tax code changes immobilize you into not considering your options!
Did you meet your goals for the year? Are you better off this December 31st than the previous December 31st? If your answers are No, or Maybe, or, how about this: Goals? I didn’t set any goals for the year! Then maybe you need to add a new section to your getting ready for the tax return procedures and add some realistic goals for 2012 to the program.
Here are some ideas for goals for 2012. First on the income side your goals will depend on where your income comes from. If you are an employee at a small business then maybe one goal is to discuss your position with the owner and assess how they feel about your work. Most small businesses should have an annual evaluation process so this discussion may happen as a part of that process, or, if not, you can set your goal to try and initiate the discussion. That’s right, take the initiative and the lead on this. Go into the discussion with some information you have developed such as the number of years you have been at the company; the length of time at your current position; your current rate of pay and for how long you have been there; your current fringe benefits, etc. Also consider your position and if there are any “certifications” or indicators of advancement in the position. Do you have any? Can you get some? How would the business feel about the additional knowledge you can document and possess?
If you own a small business your goals would be different in the specifics but maybe not in the direction. For a small to medium size business there are known metrics that can be applied to your operations and financial condition to gauge how you have done this past year as well as how you have fared over the past four or five years. Is your business operation getting stronger and better? Is the financial condition of the business improving, stabilizing or deteriorating? In short you have a lot of details at your fingertips and you should be using them to manage your business. And now is a great time of the year to sit down quietly and assess your progress.