NEWS

IRS Releases 2011 Automobile Depreciation Limits

For passenger automobiles (other than trucks or vans) placed in service during calendar 2011 to which bonus depreciation applies, the depreciation is $11,060 for the first tax year. Trucks and vans to which bonus depreciation applies have a higher limit: $11,260 for the first tax year.

For passenger automobiles (other than trucks or vans) placed in service during calendar 2011 to which bonus depreciation does not apply, the depreciation limit is $3,060 for the first tax year. For trucks and vans to which bonus depreciation does not apply, the limit is $3,260 for the first tax year.

Bonus depreciation does not affect the limits after the first year. For passenger automobiles the limits are $4,900 for the second tax year, $2,950 for the third tax year, and $1,775 for each successive tax year. For trucks and vans the limits are $5,200 for the second tax year, $3,150 for the third tax year, and $1,875 for each successive tax year.

Planning for the Unearned Income Medicare Contribution Tax

As a means to raise revenue for health care reform, Congress passed the Health Care and Education Reconciliation Act. A feature of this Plan is the Medicare add-on tax. Beginning 2013 this tax is assessed on unearned (investment) income for individuals whose modified adjusted gross income (MAGI) exceeds certain thresholds (see table below). For most taxpayers MAGI is equal to adjusted gross income.

Filing Status	Modified Adjusted Gross Income (MAGI) Threshold
Single	Greater than $200,000
Married Filing Joint	Greater than $250,000
Married Filing Separate	Greater than $125,000

The tax is computed on the lesser of 3.8% of net investment income or 3.8% of the income exceeding the MAGI threshold. This tax will be added to your regular tax computation including any adjustments for alternative minimum tax.

Net investment income includes interest, dividend, annuity, royalty and rental income other than such income derived from a trade or a business (Tax-exempt bond interest is excluded from net investment income). Also included in investment income are capital gains from investments and passive activity income via Sub S corps, partnerships and LLC’s.

Considering this new law and the expiration of The Bush Tax cuts by the end of 2012, both you and your investment advisor will be able to focus on potential investment/tax strategies for 2012. Specifically, qualified dividends and long term capital gains that have been availed a special tax rate of 15% will expire in 2013. Please call us with any questions.

Rev. Proc. 2010-51 Recently Increased Mileage Rates

Recently mileage rates have increased for business and medical use of your vehicle. The table below reflects this change.

Mileage Rate Changes

Purpose Rates (1/1 - 6/30/11) Rates (7/1- 12/31/11)

Business ……………….. 51 cents……………………………… 55.5 cents

Medical ………………… 19 cents………………...….………… 23.5 cents

Charitable …..………….. 14 cents……………...….…………… 14 cents

Tax Planning Note/Roth-IRA

Have you considered a full or partial conversion of your retirement account to a Roth-IRA? Certain individuals may find that their retirement account(s) has been decimated by the latest market turmoil. In certain situations it may be the time to take advantage of low valuations. Call us to see if this can fit into your financial plan.

Sales and Use Taxes Everyone should be aware that during August many states institute sales tax holidays on certain purchases. For Maryland, August 14-20, 2011 clothing and footwear less than $100 are exempt from tax. For Virginia, August 5-7, 2011 clothing and footwear less than $100 are exempt from tax. Also, school supplies less than $20 are exempt from tax. The District of Columbia does not have a sales tax holiday. FBAR Requirements Penalty relief for Delinquent Filers of FBAR Forms has been extended until August 31, 2011. A similar program was available during 2009. This program is designed primarily to get individuals and other entities to report income not previously reported from foreign sources. Contact our office for specifics. Tax Preparer Rules Starting in 2012 tax preparers who are not CPA’s, attorneys or enrolled agents will be required to take a competency test and be required to take continuing education. The IRS will start contacting preparers subject to this new rule in October 2011. Tax Court A recent tax court case affirmed the IRS’s position, that an individuals’ tax home is typically where the individual works versus the physical location of their respective residence. (TC Summ Op. 2011-95) Gift Taxes IRS has begun an initiative to uncover omissions of gift tax filings for real estate transfers. The agency is reviewing land transfer records of 15 states for compliance. Failure to comply with these filing rules can adversely affect your estate planning objectives.

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Fiscal-Year Taxpayers Dates

Date	Event
01/01/12 - 04/17/12	Tax Season
03/15/12	Corporations - File Form 1120 and pay any tax due by 03/15/12. If you want an automatic 6-month extension, file Form 7004 and pay any balance due.
03/15/12	S Corporations - File Form 1120S and pay any tax due by 03/15/12. If you want an automatic 6-month extension, file Form 7004 and pay any balance due.
04/17/12	Individuals - File Form 1040 and pay any tax due by 04/17/12. If you want an automatic 6-month extension, file Form 4868 and pay any balance due.
04/17/12	Partnerships - File Form 1065 by 04/17/12. If you want an automatic 5-month extension, file Form 7004 and pay any balance due. Then file Form 1065 by 09/17/12.
04/17/12	Trusts- File Form 1041 by 04/17/12. If you want an automatic 5-month extension, file Form 7004 and pay any balance due. Then file Form 1041 by 09/17/12.
09/15/12	Corporations - 2011 calendar year return is due if you filed for an 6-month extension.
09/15/12	S Corporations - 2011 calendar year return is due if you filed for an 6-month extension.
09/17/12	Partnerships - 2011 calendar year return is due if you filed for an 5-month extension.
09/17/12	Trusts- 2011 calendar year return is due if you filed for an 5-month extension.
10/17/12	Individuals - 2011 tax return is due if you filed for an 6-month extension.

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