Becky Murphy and Mark Przybysz gave this presentation at the Women's Business Center of North Alabama's POWER lunch on January 12, 2012.

1. A Global Reach with a Local Perspective
www.decosimo.com
POWER to the Tax People!
MARK PRZYBYSZ, CPA – MARKPRZYBYSZ@DECOSIMO.COM
BECKY MURPHY, CPA – BECKYMURPHY@DECOSIMO.COM

2. DECOSIMO 2012 TAX UPDATE
 WHAT IS IN, WHAT IS OUT AND HOW DOES IT
AFFECT YOU?

3. OVERVIEW
 Tax Relief Act of 2010
 Expired Provisions
 Bonus Depreciation
 Section 179 Expensing
 Alabama Highlights
 1099 Filing Requirements
 Items of Interest

4. EXTENDED FILING DATE
 April 17, 2012
 Extended due to
 15th falls on Sunday
 Monday is a holiday in D.C.

5. EXPIRED PROVISIONS

6. EXPIRED PROVISIONS - 2010
Individuals
 Making work pay credit
 Self employed health insurance premium
deduction for SECA tax purposes
 65% subsidy for payment of COBRA health
care coverage continuation premiums
(5/31/10)
 First time homebuyers credit
 Purchase of OTC via HSA accounts

7. TAX TIP
 Ask your doctor for a prescription for the OTC

8. EXPIRED PROVISIONS - 2010
Business
 5 year NOL carryback
 Enhanced deduction limit and phase-out for
start-up expenditures
 Reduced from $10,000 to $5,000
 Organizational Costs

9. TAX TIP
 Organizational costs and start-up costs are not the
same

10. PAYROLL TAX UPDATE
 Employer – Side Payroll Tax Forgiveness
 2% payroll tax cut
 Extended to February 29, 2012
 Recapture Provision
 Individuals earning > $18,350
 Add-on to 2012 tax liability

11. A Global Reach with a Local Perspective
2010 Tax Relief Act
www.decosimo.com

12. EXPIRING DEDUCTIONS - 2011
 100% bonus depreciation
 Above-the-line deduction for qualified tuition
 Deduction for State and local general sales
taxes
 Premiums for mortgage insurance
 Nontaxable IRA transfers to eligible charities
 Enhanced charitable contributions

13. TAX TIP
 Keep you charitable donation records!

14. EXPIRING CREDITS - 2011
 AMT patch
 Credits allowed against regular tax and AMT
 Extenders
 Research credit
 New market credit
 Work opportunity credit
 Personal energy property credit

15. TAX TIP
 Research and experimentation
 Design, develop, or improve

16. HIGHLIGHTS
Two Year Extensions
 Bush tax cuts; Individual tax rates remain the
same
 LTCG and qualified dividend tax rates
 No 3%/80% limitation on itemized deductions
 No phase-out of personal exemptions

17. TWO-YEAR EXTENSIONS
Non-Refundable
 Child tax credit
 Adoption credit
 Dependent care credit
 Education credits ($1,500 of $2,500)
Refundable
 Additional CTC
 Earned income credit
 Education credits ($1,000 of $2,500)

18. TWO-YEAR EXTENSIONS
 Extenders/Extensions for Business
 Child Care Facility Credit for up to $150,000
 Bonus depreciation deduction drops to 50%
 Section 179 expensing reverts to “Pre-Bush”
 For a full list of expiring provisions see, “List
of Expiring Federal Tax Provisions,” at
www.jct.gov

19. DEPRECIATION

20. CELL PHONES – NO LONGER
“LISTED PROPERTY”
Cell phones and similar devices used primarily for business are
removed from the “listed property” category.
 Effective starting with the 2010 tax year
 So…employees should not have to
document personal vs. business use
under the heightened substantiation rules
for listed property
 Depreciation rules that apply to listed
property no longer apply to cell phones
 However, personal use of an employer-
provided cell phone may still result in
taxable income to the employee
20

21. BONUS DEPRECIATION
 „Qualified‟ property eligible for 100% depreciation
 Qualified Property Includes
 New original use property
 20 yr or less class life
 Leasehold improvements to non res buildings > 3 yrs old
 Qualified retail and restaurant property eligible for 15-yr class
life, thereby, eligible for 100% bonus
 Highlights
 No AMT adjustment entire recovery period
 Not limited to taxable income
 Watch-out for
 Passenger auto limits – generally $11,060

22. SECTION 179 EXPENSING
 Applies to new or used property
 Includes 15-yr property:
 Qualified leasehold improvement
 Qualified restaurant property
 Qualified retail improvement property
 Note: The 179 property expensing for 15-yr
property is only for 2011 and does not extend
to 2012

23. SECTION 179 EXPENSING
 Amounts
 Max $500,000 (2011) and $139,000 (2012)
 If qualified real property
 Maximum $250,000 (part of $500,000 above)
 Phase-out of deduction when qualifying
property placed in service exceeds
$2,000,000
 Limited to amount of taxable income for entity

24. TAX TIP
 S Corp owners can add back W-2 wages in determining
taxable income for purposes of Section 179 deduction.
 MFJ return – business income(loss) from both spouses
is aggregated even though Sec. 179 relates to the
activity of only one spouse
 Overall taxable income of ALL trades or businesses is
combined for the income limitation.
 Taxpayers with multiple pass-thru entities could exceed
limits

25. ALABAMA UPDATE
25

26. LEGISLATIVE HIGHLIGHTS
 CORPORATE INCOME TAX
 Qualifying small businesses may deduct 100% of the
amount the pay as health insurance premiums on
behalf of qualifying employees (HB 61, 4/21/11).
 APPORTIONMENT
 The sales factor in the apportionment formula for
business income is double-weighted and provides
rules for sourcing income other than personal
property (HB 434, 6/9/11).
26

27. LEGISLATIVE HIGHLIGHTS
 FULL EMPLOYMENT ACT OF 2011
 $1,000 credit against income or financial institution excise
tax liability
 Small employer < 50 employees
 New hire post June 9, 2011
 Hourly wage > $10 per hour
 12 consecutive months of employment
 Must have net increase in employment
 Available to corporations, pass-through entities and self-
employed business owners
 Repeals deduction for hiring individuals drawing
unemployment

28. PERSONAL INCOME TAX
 INCOME TAX DEDUCTION FOR RETROFITTING
HOMES AGAINST CATASTROPHIC WINDSTORM
EVENTS
 Individuals who retrofit their homes to be more
resistant against hurricanes, tornado or other
catastrophic windstorm events are entitled to a
personal income tax deduction, regardless of whether
the taxpayer itemizes income tax deductions in
calculating his income tax, that is equal to 50% of the
retrofitting cost incurred, up to $3,000 (SB 395,
6/9/11).

29. PERSONAL INCOME TAX
 TORNADO RECOVERY TAX INCENTATIVE
PROTECTION ACT OF 2011
 Protects the granting and extension of economic
benefits impacted by the April tornado outbreaks
 Wage and employee requirements of the capital credit
shall be tolled for a period of two years
 HOMEOWNERS and STORM VICTIMS PROTECTION
 Act expands definition of residential property to
include single-family dwellings and related lots under
construction for a period up to 2 years (HB 179,
9/1/11)

30. TAX TIP
 Casualty Losses
 Alabama does not conform with Federal
 Must claim loss in same year

31. PERSONAL INCOME TAX
 HEALTH INSURANCE PREMIUM DEDUCTION
 Qualifying employees may deduct 100% of the
amount the pay as health insurance premiums as part
of an employer provided health insurance plan (HB
61, 4/21/11).
 SMALL BUSINESS JOBS CREDIT
 Self-employed business owners can take advantage
of this incentive for job creation (HB 230, 6/9/11)
 VOLUNTARY TAX ASSESSMENT
 Are you crazy?

32. SALES TAX
 The Alabama Streamlined Sales and Use Tax
Commission is created to identify and develop the
programs necessary for Alabama to come into
compliance with the Streamlined Sales and use Tax
Agreement (SSUTA) in the event that Alabama
becomes a participating member of the SSUTA (HB
355, 6/9/2011).
32

33. TIPS & HINTS

34. ITEMS OF INTEREST
 Segregated reporting of merchant card gross
receipts
 IRS issues regulations requiring efiling
 Controversial 1099 reporting requirement repealed
on 4/4/11 when President Obama signed H.R. 4, the
“Comprehensive 1099 Taxpayer Protection and
Repayment of Exchange Subsidy Overpayments Act
of 2011.”
 IRS aggressively challenging charitable
contributions and documentation

35. RECORDKEEPING TIPS
 Records that support deductions
 3 years
 Tax returns and tax form packages
 7 years
 Records for large purchases including
homes, cars, stocks, etc. and business or
rental property records
 Indefinitely

36. PITFALLS
 Estimated tax payments
 Not paying or not paying timely
 Employee v. Independent contractor
 Choice of entity
 No internal controls/theft/fraud

37. OTHER BUSINESS CONSIDERATIONS
 Above the line deduction for health
insurance premiums
 Pay children without withholding
 Retirement Plans
 SEP
 Simple IRA
 Traditional IRA
 Mileage Rate

38. 2011 RATES
 Business Miles
 51 cents/mile Jan-June
 55.5 cents/mile June-December
 Personal Exemption $3,700
 Kiddie Tax Threshold $1,900
 Standard Deduction
 Single $5,800
38
 MFJ $11,600

39. TAX RATES
Type 2013 Health Care Combined 2013 2012
Tax Rates
Ordinary Income 39.6% 0.9% 40.5% 35%
36.0% 0.9% 36.9% 33%
28.0% 28.0% 28%
25.0% 25.0% 25%
15.0% 15.0% 10%
LT Capital Gains 20.0% 3.8% 23.8% 15%
and Qualified 18.0% 3.8% 21.8% 0%
Dividends 10.0% 10.0%
8.0% 8.0%
Interest, Rents, 39.6% 3.8% 43.4% 35%
Royalties and 36.0% 3.8% 39.8% 33%
Passive Activity 28.0% 28.0% 28%
Income 25.0% 25.0% 25%
15.0% 15.0% 10%

40. WRAP-UP

41. WHERE DO WE GO FROM HERE?
 Never easy – 29 new tax laws since 2001
 Take advantage of Bonus and Section 179
depreciation
 Credits Available – R & D, DPAD, Hiring
Veteran‟s and Worker‟s Retention Credit
 Considering likely return of higher tax rates
means deferring deductions and accelerating
income is a good idea

42. YEAR-END PLANNING
 Selling appreciated property
 Exercising stock options
 Pay dividends from C Corps
 Holding loss-stocks to 2013
 Cash basis taxpayers defer expenses

43. CONTACT US
Mark Przybysz, CPA
markprzybysz@decosimo.com
Becky Murphy, CPA
beckymurphy@decosimo.com
423-756-7100
The contents and opinions contained in this presentation are for informational purposes only. The
information is not intended to be a substitute for professional accounting counsel. Always seek the advice
of your accountant or other financial planner with any questions you may have regarding your financial
goals.