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2012-2013 Holiday Newsletter

Posted by Admin Posted on Dec 11 2012

As 2012 comes to an end, we would like to thank you for your business throughout the year and look forward to working with you during the year ahead. We would also like to sincerely thank you for your referrals as they really validate your confidence in us. We wish you Happy Holidays and all the best in the upcoming year.

 

Due to the impending fiscal cliff, it is possible that any of the information included in this newsletter could change. Please refer to our website, www.haascpa.com,  periodically for any updates to these tax issues.

 

2013 Payroll Tax Rates

Beginning January 1, 2013, the following rates and limits apply to payroll checks issued:

 

FICA*                   6.2% of wages up to $113,700

*May revert to 4.2%

 

MEDICARE        1.45% of all wages

ADDITIONAL

MEDICARE        0.9% of wages exceeding $200,000

 

SDI                         1% of wages up to $100,880

401K                      $17,500 maximum contribution

                                $23,000 for over the age of 50

 

SIMPLE               $12,000 maximum contribution

                                $14,500 for over the age of 50

 

1099 and W-2 Information

Just a reminder for our payroll clients: please send your December work to us in early January so that we can prepare your year-end payroll tax returns promptly.

S-Corp. Officer's Health Insurance

If you are an officer of an S-Corporation, please be sure to contact your payroll service or include in your QuickBooks payroll the amount paid in the current year for your health insurance so that it is reported on your   W-2 at year-end. This applies to employee spouses as well.

Foreign Financial Asset Disclosure Form 8938

Any U.S. taxpayer who, during the tax year, holds an interest in a "specified foreign financial asset" must attach to his or her income tax return for that tax year the "required information" for each such asset on Form 8938 if the aggregate value of all the individual's specified foreign financial assets exceed certain dollar thresholds. Foreign Real Estate is not required to be reported on Form 8938. Form 8938 does not replace the FBAR. Unlike the FBAR that requires a separate filing, this information report will be filed with the taxpayer's federal income tax return. The penalty for failure to disclose is $10,000.

 

FBAR Requirements

Any U.S. person must report annually to the IRS certain information about a foreign bank or financial account if the following conditions apply:

·         The U.S. person has a financial interest in or signature authority (or other authority that is comparable to signature authority) over any financial account in a foreign country; and

·         The aggregate value of all foreign financial accounts exceeds $10,000 (as measured in U.S. currency) at any time during the calendar year.

The FBAR is a separate filing requirement from Form 8938 and is due by June 30th, following the calendar year that the report holder meets the $10,000 threshold. No extensions for filing the FBAR are available, even if the income tax return for the same calendar year is on extension.

Section 529 Plans

Visit the Morningstar website below to review Section 529 Plans by state, plan rating, etc:

http://529.morningstar.com/state-map.action


 

Electronic Fund Transfer Penalties

The FTB will begin assessing EFT penalties on certain individuals who fail to make tax payments electronically. The penalty equals 1% of the amount that was not paid electronically, unless the failure was due to reasonable cause and not willful neglect. All payments made by an individual must be remitted electronically to the FTB after the individual either has:

·         Made a single estimated tax or extension payment greater than $20,000; or

·         Filed an original return with a tax liability greater than $80,000.

How to Pay: Taxpayers may make their required EFT payment by using the FTB's Web Pay at:

www.ftb.ca.gov/online/webpay

 

Reporting New Workers to the EDD

*Requirements for Independent Contractors: Any business that pays Independent Contractors is required to report the existence of a contract by completing EDD Form DE 542, Report of Independent Contractors, either when a contract is established or when $600 is paid or is expected to be paid to the worker. The worker must be reported each year within 20 days of either making payments to them totaling $600 or more or entering into a contract with them for at least that amount. Only individual taxpayers with a Social Security Number need to be reported. The EDD may assess a penalty of $24 for each failure to timely report the contractor.

*Requirements for New Employees: A similar requirement exists for new employees, who must be reported within 20 days of hire, regardless of the amount of compensation. These employees are reported using EDD Form DE 34, Report of New Employee(s).

The purpose of both of these requirements is to help locate and collect unpaid child support for parents who are delinquent on such payments.

Annual Filing: Employees need only be reported once, when they are hired. Independent Contractors must be reported each year.

How to File: The reporting of both forms can be done on paper or via the EDD's e-Services Web site:

www.edd.ca.gov/Payroll_Taxes/Forms_Publications.htm

 

Dentists and Managed Care

The dental profession has been fortunate to have avoided the erosion of profitability and practice values that have plagued the medical professions. Unfortunately, managed care plans continue to make inroads in dentistry. As the economy continues to limp along, the insurance companies are becoming more confident and brazen. Delta Dental of California now requires dentists signing up for Delta Premier to also accept the Delta PPO. The increased penetration of PPOs will likely lead to drops in practice profitability and practice sale values. What should dentists be doing to cope with the new reality of decreasing profitability and overall practice values? This will be a combination of increasing revenue and cutting costs. Here are some ideas:

·         Understand the ins and outs of the insurance plans you do accept and be sure to code for all the procedures performed.

·         Focus on your fees.

·         Focus on managing expenses and patient flow.

 

0.9% Additional Medicare Tax on Earned Income

Beginning in 2013, individuals will pay an additional 0.9% Medicare Hospital Insurance (HI) tax on wages and self-employment (SE) income on amounts earned above the following threshold amounts:

·         $250,000 for joint returns;

·         $125,000 for married filing separate; and

·         $200,000 for all others.

 

3.8% Additional Medicare Tax on Investment Income

Beginning in 2013, the law imposes an additional HI tax on individuals, estates, and trusts. To the extent that the amount of income exceeds the following thresholds, the taxpayer must pay 3.8% additional HI tax on the lesser of net investment income or the excess of modified adjusted gross income (MAGI) over the threshold amount:

·         $250,000 for joint returns;

·         $125,000 for married filing separate; and

·         $200,000 for all others.

Net investment income is investment income reduced by deductions properly allocable to such income. Investment income includes:

·         Gross income from dividends, interest, annuities, royalties, and rents, less allocable deductions unless these items are derived in the ordinary course of a trade or business to which the HI tax does not apply;

·         Other gross income derived from a trade or business to which the HI tax applies; and

·         Net taxable gain attributable to the disposition of property other than property held in a trade or business to which the HI tax does not apply.

A taxpayer may be subject to both the 0.9% additional HI tax on earned income and the 3.8% additional HI tax on investment income.