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2012 Tax Law UpdateBrought to you by:Presented by:Mike DavolioSenior Tax AnalystIntuit Accounting Professionals Division
Mike Davolio, CPA              Senior Tax Analyst• With Intuit / Lacerte since 1987• Monitor legislative and regulatory  a...
Agenda•   2012 Tax Law Changes•   Health Care Act Changes for 2013•   Tax Reform•   Internal Revenue Service Initiatives  ...
2012 Tax Law Changes
3% Withholding Repeal &Job Creation Act (PL 112-56, 11/21/11)    • Revised work opportunity credit for employers      (For...
Extender Legislation    Congress    • Many tax measures expired at end of 2011 or will expire      at end of 2012 unless g...
Individual provisions that expired on             12/31/11• Alternative Minimum Tax Patch  • Increased exemptions (will de...
Individual provisions that expired on         12/31/11 (cont.)• Credit for energy-efficient improvements• 100% exclusion f...
Business provisions that expired on             12/31/11• Research credit• Employer wage credit for activated reservists• ...
Business provisions that expired on         12/31/11 (cont.)• Accelerated depreciation for Indian reservation property• Sp...
Depreciation• 50% bonus depreciation • PIS after 12/31/11 & before 1/1/13• Section 179 limit set at $139,000 with $560,000...
Provisions that will expire on 12/31/12 Tax cuts • Tax rates: 10%, 15%, 25%, 28%, 33%, 35%   • Will increase to 15%, 28%, ...
Provisions that will expire on 12/31/12                 (cont.) Itemized deductions and personal exemptions not   phased o...
Roth IRAs & Designated Roth Accounts• ½ of 2010 Roth conversion or rollover and  rollover to designated Roth account inclu...
Schedule D / Form 8949• For TY12, Form 8949 will support the following:  • Schedule D (Forms 1040, 1120, 1120S, 1065,    1...
Form 1099-K Reporting• No direct reporting of amounts from Form 1099-  K (Payment Card and Third Party Network  Transactio...
Informational reporting of employer-sponsored group health plan coverage• Reporting of cost on Form W-2 optional if:  • Em...
Partnerships• Partnerships allowed to provide Schedule  K-1 electronically to partners• Recipient must affirmatively conse...
2012 Standard Mileage RatesBusiness• 55.5 cents/mileMedical and moving• 23 cents/mileCharitable• 14 cents/mile            ...
Inflation Adjustments                                                  2011            2012Elective Deferral Plan Limits  ...
Health Care ActChanges for 2013
Increased tax for high-earning workers and               self-employed   • New law: additional 0.9% (2.35% in total)     h...
Surtax on unearned income of higher-         income individuals• New law: Medicare tax will apply to investment  income  •...
Higher threshold for deducting medical              expenses • New law: raises floor from 7.5% of AGI to 10% • AGI floor f...
Dollar cap on contributions to health FSAs  • FSA (flexible spending arrangement): tax-    advantaged account that can be ...
Tax Reform
Budget Control Act of 2011 (PL 112-25,               8/2/11) • Initial $1T deficit reduction (2012-   2021) without raisin...
Budget Control Act (cont.)• If JSC fails to approve a report, across-the-  board reductions must be implemented  • 50% def...
President Obama’s Tax Plan• Individual tax rates  • Retain 10%, 15%, 25%, 28% rates  • Raise top two rates to 36% and 39.6...
President Obama’s Tax Plan (cont.)• Alternative Minimum Tax  • Index 2011 exemption amounts to inflation  • Endorses Buffe...
Tax reform proposals to limit or eliminate          itemized deductions  • Obama    • Limit the benefit for higher income ...
Tax reform proposals (cont.)• Bipartisan Policy Center  • Eliminate itemized deductions and standard    deduction  • Allow...
Internal Revenue Service        Initiatives
IRS marks third anniversary of Return          Preparer ReviewMandatory registration and use of PTIN• Anyone who is paid t...
Return Preparer Review (cont.)Competency Test• Available at more than 260 vendor testing  centers• Certain preparers requi...
Return Preparer Review (cont.)Continuing Education• The roughly 340,000 preparers who have  testing requirement also must ...
Return Preparer Review (cont.)Ethics and Tax Compliance• Ethical requirements that previously applied  only to CPAs, EAs a...
Return Preparer Review (cont.)Registered Tax Return Preparer (RTRP)• Preparers who pass competency test and tax  complianc...
Return Preparer Review (cont.)Public Database• IRS will create a publicly searchable database• Allows taxpayers to see if ...
Intuit ResourcesIntuit & National Association of Tax Professionals (NATP) team up for professional development• http://www...
Tax-Related Identity TheftGeneral• IRS distributed about 250K Identity Protection  Personal Identification Numbers (IP PIN...
Tax-Related Identity Theft (cont.)New IP PIN each year• IRS mails out unique 6 digit identifiers for use in  current seaso...
Tax-Related Identity Theft (cont.)System not infallible• Difficult to issue quick refunds and check for  fraud• IRS never ...
IRS revises return preparer penaltiesHigh impact penalties• $50 for each failure to furnish taxpayer a completed copy  of ...
Greater due diligence requirements for     earned income credit claims• Paid Preparers Earned Income Credit Checklist (For...
Modernized e-File (MeF)• Represents next generation• Built on internet-based platform• Benefits  • Faster processing time ...
IRS & Social MediaIRS2Go• Smartphone application for iPhone, iTouch and  AndroidYouTube• Short, informative videos on vari...
IRS helps college-bound students with   financial aid application process• IRS Data Retrieval Tool allows applicants to tr...
Thanks for viewing!
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Intuit Presents Tax Law Changes for Tax Year 2012

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Get the very latest on important tax law changes that will impact returns for Tax Year 2012 from Intuit's Mike D'Avolio. These changes seem to come later and later each year. Let’s us do the legwork and keep you up to speed on current status of tax law changes and extensions.

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  • Great article. Thanks for the info, it’s easy to understand. BTW, if anyone needs to fill out a IRS form 14039 pdf, I found a blank form here
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  • Thanks for sharing information about 2012 tax law update. Can you please provide me the latest informatio about 2013 tax law.
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  • Internal Revenue ServiceAMT patch (exemptions and special credit ordering rules) could affect more than 60M taxpayers Leaving core systems as-is If no AMT patch, serious repercussions for taxpayers (long delays, etc.)Extenders (tuition and fees deduction, etc.) not as complex 2010: Congress extended in mid-December; delayed opening of filing season by 4 weeks for about 9M taxpayers Similar outcome this year
  • 50% bonus depreciationPIS after 12/31/11 & before 1/1/13Reduced from 100%Section 179 limit set at $139,000 with $560,000 phase-out thresholdTY beginning after 12/31/11Reduced from $500,000 limit with $2,000,000 phase-out threshold
  • Forms 1120, 1120S, 1065 and Schedules C, C-EZ, E, FLine items eliminated for TY12; will revert to TY10 reporting
  • Current law: wages subject to 2.9% Medicare payroll tax Workers and employers pay 1.45% eachSelf-employed people pay both halvesLevied on all wages without limit
  • Current law: Medicare payroll tax only applies to wages
  • Current law: taxpayers can take an itemized deduction for unreimbursed medical expenses only to extent that expenses exceed 7.5% of taxpayer's AGI
  • Current law: no limit on contributions to health FSA
  • Almost 850,000 preparers have registered
  • IRS urges an estimated 340,000 preparers required to take test
  • To date, over 4,800 people have become RTRPs 
  • Crime surge due to increase in refundable tax credits Program not widely publicized so identity thieves don’t adapt their strategies
  • Program only designed to prevent repeat offenses
  • Represents next generationReplaces older legacy systemBuilt on internet-based platformTransaction based system allows originators to transmit in real-time (instead of batches)
  • IRS2Go Smartphone application for iPhone, iTouch and AndroidGet refund status and tax updatesYouTubeShort, informative videos on various tax-related topics English, American Sign Language and a variety of foreign languagesTwitter (@IRSnews) Tax-related announcements, news for tax professionals and updates for job seekersAudio files for podcasts Useful information on one tax-related topic per podcast Available on iTunes or through Multimedia Center on IRS.gov
  • Transcript of "Intuit Presents Tax Law Changes for Tax Year 2012"

    1. 1. 2012 Tax Law UpdateBrought to you by:Presented by:Mike DavolioSenior Tax AnalystIntuit Accounting Professionals Division
    2. 2. Mike Davolio, CPA Senior Tax Analyst• With Intuit / Lacerte since 1987• Monitor legislative and regulatory activity• Circulate information to employees and customers• Analyze and test software• Train employees and customers• Government liaison• Public relations representative 2
    3. 3. Agenda• 2012 Tax Law Changes• Health Care Act Changes for 2013• Tax Reform• Internal Revenue Service Initiatives 3
    4. 4. 2012 Tax Law Changes
    5. 5. 3% Withholding Repeal &Job Creation Act (PL 112-56, 11/21/11) • Revised work opportunity credit for employers (Form 5884) • $5,600 credit for hiring veterans looking for work over 6 months • $9,600 for disabled veterans • Covers work beginning after enactment date • Credit extended 1 year for hiring veterans (2012) • Repeals 3% withholding requirement on government contractors • Stricter eligibility requirement for premium assistance credit for health insurance (2014)5 5
    6. 6. Extender Legislation Congress • Many tax measures expired at end of 2011 or will expire at end of 2012 unless government extends • First group impacts tax year 2012; second group impacts tax year 2013 and 2013 estimates and withholding tables Internal Revenue Service • AMT patch (exemptions and special credit ordering rules) could affect more than 60M taxpayers • Extenders (tuition and fees deduction, etc.) not as complex6 6
    7. 7. Individual provisions that expired on 12/31/11• Alternative Minimum Tax Patch • Increased exemptions (will decrease to $45,000 MFJ, QW; $33,750 Single, HH; $22,500 MFS) • Nonrefundable personal credits allowed to offset AMT• Deduction for educator expenses• Tuition and fees deduction• Itemized deduction for sales tax• Tax-free distributions from IRAs for charitable purposes• Refundable portion of adoption credit• Deduction for mortgage insurance premiums 7
    8. 8. Individual provisions that expired on 12/31/11 (cont.)• Credit for energy-efficient improvements• 100% exclusion for gain on small business stock• Contributions of capital gain property for conservation purposes• Qualified zone academy bonds• Deadline to claim low-income housing credits in GO Zone• Tax incentives for District of ColumbiaFootnote• The government could let certain provisions expire for upper income taxpayers and not expire for lower and middle income taxpayers 8
    9. 9. Business provisions that expired on 12/31/11• Research credit• Employer wage credit for activated reservists• Indian employment tax credit• New markets tax credit• Railroad track maintenance credit• Mine rescue team training credit• Reduction in S corporation recognition period for built-in gains tax• 15-year recovery period for leasehold improvements, restaurant property and retail improvements• Suspension of 100% of net income limit on percentage depletion 9
    10. 10. Business provisions that expired on 12/31/11 (cont.)• Accelerated depreciation for Indian reservation property• Special rule for contributions of food and book inventories• Special rule for corporate contributions of computer technology or equipment for educational purposes• Environmental cleanup costs deduction• Deduction for domestic production activities in Puerto Rico• Shareholder basis adjustment for stock of S corporations making charitable contributions• 7-year recovery period for motorsports entertainment complex property• Empowerment zone tax incentives 10
    11. 11. Depreciation• 50% bonus depreciation • PIS after 12/31/11 & before 1/1/13• Section 179 limit set at $139,000 with $560,000 phase-out threshold • TY beginning after 12/31/11• Off-the-shelf software qualifies as section 179 (through 2012)• Election to accelerate AMT credit in lieu of bonus depreciation (through 2012) 11
    12. 12. Provisions that will expire on 12/31/12 Tax cuts • Tax rates: 10%, 15%, 25%, 28%, 33%, 35% • Will increase to 15%, 28%, 31%, 36%, 39.6% • Marriage penalty: size of 15% bracket and standard deduction (MFJ and qualifying widow) • Will decrease to 167% Capital gain and qualified dividend rates • LTCG and dividends taxed at maximum rate of 15% • LTCG will increase to 20%; dividends will be treated as ordinary income 2% payroll tax holiday Estate, gift and generation skipping taxes • Rates, exemption levels 12
    13. 13. Provisions that will expire on 12/31/12 (cont.) Itemized deductions and personal exemptions not phased out for higher income taxpayers Changes to rules for the following provisions • Child tax credit • Earned income credit • Dependent care credit • American opportunity tax credit • Adoption credit • Student loan interest deduction • Coverdell Education Saving Accounts • Exclusion for employer-provided educational assistance 13
    14. 14. Roth IRAs & Designated Roth Accounts• ½ of 2010 Roth conversion or rollover and rollover to designated Roth account included in income in 2012 • If taxpayer didn’t elect to include 100% in 2010 • Should have reported ½ in 2011 14
    15. 15. Schedule D / Form 8949• For TY12, Form 8949 will support the following: • Schedule D (Forms 1040, 1120, 1120S, 1065, 1065-B) • Form 8865 (Foreign Partnerships) will use Schedule D (Form 1065) and thus Form 8949 • Schedule D for Form 1041 will not be modified to use Form 8949 15
    16. 16. Form 1099-K Reporting• No direct reporting of amounts from Form 1099- K (Payment Card and Third Party Network Transactions) on tax return• Forms 1120, 1120S, 1065 and Schedules C, C-EZ, E, F• Form 1099-K still filed with IRS 16
    17. 17. Informational reporting of employer-sponsored group health plan coverage• Reporting of cost on Form W-2 optional if: • Employer required to file fewer than 250 W-2s for preceding calendar year • W-2 furnished to employees who terminate before end of a calendar year and request W-2 before end of that year (in writing) • W-2 provided by third-party sick-pay provider to employees of other employers• Chart: http://www.irs.gov/newsroom/article/0,,id=254 321,00.html 17
    18. 18. Partnerships• Partnerships allowed to provide Schedule K-1 electronically to partners• Recipient must affirmatively consent• Furnisher must provide a disclosure statement that details the arrangement 18
    19. 19. 2012 Standard Mileage RatesBusiness• 55.5 cents/mileMedical and moving• 23 cents/mileCharitable• 14 cents/mile 19
    20. 20. Inflation Adjustments 2011 2012Elective Deferral Plan Limits Base $16,500 $17,000(401(k), 403(b), SEPs, Thrift Catch-up $5,500 $5,500Savings, state & local) Total $22,000 $22,500 Base $11,500 $11,500408(p) Deferral Plan Limits Catch-up $2,500 $2,500(SIMPLE Plan) Total $14,000 $14,000 Base $5,000 $5,000IRA Deduction Catch-up $1,000 $1,000 Total $6,000 $6,000 Single/HOH $56,000-66,000 $58,000-68,000IRA Phase-Out Ranges MFJ/QW $90,000-110,000 $92,000-112,000 20
    21. 21. Health Care ActChanges for 2013
    22. 22. Increased tax for high-earning workers and self-employed • New law: additional 0.9% (2.35% in total) hospital insurance (HI) tax applies to wages received in excess of • $250,000 for MFJ; $125,000 for MFS; $200,000 for others • Employers collect extra 0.9% on wages exceeding $200,000 • Also applies to self-employment income 22 22
    23. 23. Surtax on unearned income of higher- income individuals• New law: Medicare tax will apply to investment income • Imposed on individuals, estates and trusts• Tax is 3.8% of lesser of • Net investment income, or • Excess of modified AGI over $250,000 for MFJ or QW, $125,000 for MFS, $200,000 for others• Net investment income: interest, dividends, royalties, rents, passive activity gross income and net gain from disposition of property • Reduced by deductions 23
    24. 24. Higher threshold for deducting medical expenses • New law: raises floor from 7.5% of AGI to 10% • AGI floor for individuals age 65 and older will remain unchanged at 7.5% through 201624 24
    25. 25. Dollar cap on contributions to health FSAs • FSA (flexible spending arrangement): tax- advantaged account that can be set up through cafeteria plan of employer • Allows employee to set aside a portion of earnings to pay for expenses as established in cafeteria plan (medical, dependent care, other) • New law: allowable contributions to health FSAs capped at $2,500 per year (indexed for inflation after 2013) 25 25
    26. 26. Tax Reform
    27. 27. Budget Control Act of 2011 (PL 112-25, 8/2/11) • Initial $1T deficit reduction (2012- 2021) without raising revenue • Second $1.5T deficit reduction • Recommendations from Joint Select Committee on Deficit Reduction • May include fundamental tax changes • Possible Tax Changes • Lower individual and corporate rates • Cutback in individual breaks (mortgage interest) • Post 2012 expiration of Bush-era tax cuts • Eliminate accelerated depreciation, domestic production activities deduction, LIFO • International: territorial tax regime 27
    28. 28. Budget Control Act (cont.)• If JSC fails to approve a report, across-the- board reductions must be implemented • 50% defense & 50% domestic cuts in 2013 28
    29. 29. President Obama’s Tax Plan• Individual tax rates • Retain 10%, 15%, 25%, 28% rates • Raise top two rates to 36% and 39.6% for those earning over $250K MFJ, $200K Single• Deductions and credits • Reduce value of itemized deductions and other preferences to 28% for families with income over $250K• Investment income • Retain 15% rate for taxpayers with income under $250K • Raise rate to 20% for those making over $250K 29
    30. 30. President Obama’s Tax Plan (cont.)• Alternative Minimum Tax • Index 2011 exemption amounts to inflation • Endorses Buffet Rule: households making more than $1M pay at least 30%• Estate tax • $3.5M exemption; 45% tax rate• Corporate rates • Reduce top rate from 35% to 28%• Other • Eliminate industry specific tax breaks (oil and gas) • Overhaul research credit • Renew clean energy incentives 30
    31. 31. Tax reform proposals to limit or eliminate itemized deductions • Obama • Limit the benefit for higher income taxpayers to 28% of the deduction or exclusion • Fiscal Commission • Replace itemized deductions with a standard deduction • Replace certain favored deductions (mortgage interest) with nonrefundable credits • Simpson-Bowles • Eliminate nearly all tax expenditures • Restructure certain tax expenditures (replace mortgage interest deduction with 15% refundable credit) 31
    32. 32. Tax reform proposals (cont.)• Bipartisan Policy Center • Eliminate itemized deductions and standard deduction • Allow taxpayers to claim limited refundable credits for mortgage interest and charitable contributions• Wyden-Coats • Repeal certain itemized deductions and credits • Increase standard deduction ($30K MFJ, $15K Single) • Retain mortgage interest and charitable contributions 32
    33. 33. Internal Revenue Service Initiatives
    34. 34. IRS marks third anniversary of Return Preparer ReviewMandatory registration and use of PTIN• Anyone who is paid to prepare, or help prepare, all or substantially all of a federal tax return, including EAs• PTIN valid for a calendar year, renewed annually 34
    35. 35. Return Preparer Review (cont.)Competency Test• Available at more than 260 vendor testing centers• Certain preparers required to take test by 12/31/13• CPAs, EAs and attorneys are exempt from test• Certain non-signing preparers supervised by CPAs, EAs or attorneys are exempt, as are non- 1040 preparers• Determine if there is a test requirement; set a test date, time and location: www.irs.gov/ptin• More information: www.irs.gov/taxpros/tests and select RTRP test 35
    36. 36. Return Preparer Review (cont.)Continuing Education• The roughly 340,000 preparers who have testing requirement also must complete 15 hours of continuing education courses each year• 10 hours in federal tax law, 3 hours in federal tax law changes, 2 hours in ethics• Became effective January 2012; applies even if preparer has not taken the test• Hundreds of outlets offering IRS-approved CE courses (www.irs.gov/taxpros/ce) 36
    37. 37. Return Preparer Review (cont.)Ethics and Tax Compliance• Ethical requirements that previously applied only to CPAs, EAs and attorneys now apply to all paid return preparers• All paid preparers also will undergo a tax compliance check and are subject to standards for practice outlined in Treasury Department Circular 230 37
    38. 38. Return Preparer Review (cont.)Registered Tax Return Preparer (RTRP)• Preparers who pass competency test and tax compliance check• Beginning in 2014, only RTRPs, EAs, CPAs and attorneys will be authorized to prepare individual income tax returns for compensation 38
    39. 39. Return Preparer Review (cont.)Public Database• IRS will create a publicly searchable database• Allows taxpayers to see if preparers have met IRS standards or to find a preparer in their zip code area• Will show credentials held by preparer• Public education campaign to inform taxpayers to use only CPAs, EAs, attorneys or RTRPs if they pay to have taxes prepared 39
    40. 40. Intuit ResourcesIntuit & National Association of Tax Professionals (NATP) team up for professional development• http://www.natptax.com/intuit• More than 300 live nationwide workshops, facilitated online, self-study & webinar courses designed by tax professionals• Maintain CPA, EA, RTRP status with CPE courses• EA Exam Preparation Course• RTRP Exam Preparation Course 40
    41. 41. Tax-Related Identity TheftGeneral• IRS distributed about 250K Identity Protection Personal Identification Numbers (IP PINs) in 2012 filing season• Expanded pilot program to protect victims of previously confirmed cases of identity theft• IRS estimated that it stopped at least $1.4B in refund fraud in 2011• IRS has identified more than 460K taxpayers victimized since 2008 41
    42. 42. Tax-Related Identity Theft (cont.)New IP PIN each year• IRS mails out unique 6 digit identifiers for use in current season only• A taxpayer who believes he/she was victimized files Form 14039, Identity Theft Affidavit• IRS verifies the information, then flags any return filed under the taxpayer’s Taxpayer Identification Number, to make sure it is not filed fraudulently• Taxpayer then uses IP PIN on return 42
    43. 43. Tax-Related Identity Theft (cont.)System not infallible• Difficult to issue quick refunds and check for fraud• IRS never initiates contact by email or social media to request personal or financial information• Post office that delivers IRS notices is not secure• Taxpayer must keep the IP PIN private and secure 43
    44. 44. IRS revises return preparer penaltiesHigh impact penalties• $50 for each failure to furnish taxpayer a completed copy of return; up to $25,000 per preparer per year• $50 per failure to sign a return; up to $25,000 per preparer per year• $50 for failure to furnish a PTIN per return; up to $25,000 per preparer per year• $50 per failure to retain a copy or list; up to $25,000 for any return period• $50 per failure to file an information return (or include an item thereon); up to $25,000 for any return period• $500 per instance of a preparer endorsing a refund check issued to a taxpayer• $500 for failure to comply with EIC due diligence requirement 44
    45. 45. Greater due diligence requirements for earned income credit claims• Paid Preparers Earned Income Credit Checklist (Form 8867) • Must meet due diligence requirements in determining taxpayers eligibility and credit amount • Documentation for residency of qualifying child (e.g. school records) • Documentation for disability of qualifying child (e.g. doctor statement) • Existence of Schedule C business (e.g. Form 1099) • Retain all supporting documents (checklist, worksheets, etc.) for 3 years• Failure could result in a $500 penalty for each infraction 45
    46. 46. Modernized e-File (MeF)• Represents next generation• Built on internet-based platform• Benefits • Faster processing time • Improved error detection & more detailed rejection messages • Expedited acknowledgements sent within minutes • Attach PDF files • Standardized business rules• Individual returns: final year of phase-in period• Doesn’t change way practitioners transmit returns• Fully supported by Intuit products 46
    47. 47. IRS & Social MediaIRS2Go• Smartphone application for iPhone, iTouch and AndroidYouTube• Short, informative videos on various tax-related topicsTwitter (@IRSnews)• Tax-related announcements, news for tax professionals and updates for job seekersAudio files for podcasts• Useful information on one tax-related topic per podcast 47
    48. 48. IRS helps college-bound students with financial aid application process• IRS Data Retrieval Tool allows applicants to transfer tax return data to FAFSA (Free Application for Federal Student Aid) form• Tool is free, easy and secure; saves time and improves accuracy• Need a Federal Student Aid PIN (can apply for one through FAFSA process)• If cannot use DRT, may need to obtain official transcript from IRS• To order tax return or tax account transcripts, go to IRS.gov and select "Order a Transcript" or call toll-free Transcript line at 1-800-908-9946• IRS also offers money-saving information for college students and their parents about tax credits and deductions for qualifying tuition, materials and fees• Link: Students Page - College Bound 48
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