Tax Tips for 2012
With congress enacting fresh laws pertaining to health care reform, housing bills, and changing tax rates for high income taxpayers coming in 2013, lawmakers were dead-set on extending those Bush-era tax cuts until at least the end of 2012. As we have experienced many times before in past presidential races, no candidate wants to rock the boat and create unrest by implementing drastic changes that could endanger his potential second tour.
There are still many aspects of taxation for 2012 to take into consideration. This article will cover a few of those components and help you articulate these aspects to your client in a relevant and palatable manner.
Delay On American Opportunity Credit?
The IRS has already essentially delayed the start of the 2012 tax season by not allowing any tax returns to be filed, period, until the day of January 30th. So those taxpayers who were salivating for that obese refund have already had to wait extra weeks. Now comes the news that the American Opportunity Credit Form 8863 is being delayed until at least the middle of February. So for those starving students who are engaged in their first four years of post secondary education and have the qualifying expenses, they are being made to wait an extra month for their returns to even start to be processed. Some of these students are due to gain up to $2,500 back from their school expenses. So for now all you can do is sit tight and tell the young(or old) bucks to hang in there. Maybe you can explain to them that the delay may cause them to put a halt to their impending frivolous and irrational expenses that were due to tabulate had they received their funds with on time. Now maybe you can advise them to think about stashing that cash and not burning it up on the latest iphone due to be out of style the day after it comes out.
What is the DD Amount on My W-2?
Many people, and tax preparers for that matter, are viewing their W-2 and noticing a few changes on that Form for 2012. With health care reform beginning to take shape, there are some new numbers appearing on many W-2s that may seem out place and worrying to some employee taxpayers. In Box 12 retirement contributions to 401k plans and other similar plans are listed, as well as any health care accounts. For 2012, there are amounts showing under the “DD” designation, which are not considered taxable income. This is more for IRS record-keeping and informational purposes, and it all has to with the Health Care Act, as the government makes an effort to confirm that taxpayers are paying for health coverage.
This listing is designed to make it more convenient for the IRS to find out if the employee is paying for their health care coverage or not, and for now the reporting of the information is optional for the employer when sending out their W-2 Forms.
Should I Accelerate Income for 2012?
The majority of self-titled tax experts will parrot the same old adage telling you to never pay any tax until it’s absolutely time. This is not always the most sagacious advice, especially now with the climbing 2013 tax rate hike lurking right around the corner. Top ordinary income tax brackets for 2012 top out at 35% of annuall taxable income. For some high earning taxpayers, the top rate for 2013 is going to revert back to the top rate of 39.6%, which is where it stood prior to the Bush Era tax cuts.
The future is bright for those tax preparers who are hungry to dive into the tax code and pull out some gems to pass on their thirsty clientelle. And with tax rates for some taxpayers due to climb for the year of 2013, your up to date knowledge of the intricacies of the forever morphing tax code are sure to be in high demand and surpremely relevant.