About Me

Orlando, Florida, United States
McCarron Accounting & Consulting was established in 1990 to provide efficient, expert solutions to businesses and individuals. Our primary services include accounting, taxation, and business consulting. We also offer a host of specialty services to cater to the unique needs of our clients. We serve a wide range of individuals, corporations, partnerships, and non-profit organizations and have experience with the accounting issues and tax laws that impact our clients.

Monday, November 28, 2011

Tax credit for hiring "Returning Heroes and Wounded Warriors"

As part of the President's "Jobs" bill endeavor, last week congress passed and the President signed into law the "Returning Heroes Tax Credit" and the "Wounded Warriors Tax Credit". These new tax credits will assist employers that hire "qualified" veterans with a tax break between $2,400 and $9,600 for each qualified veteran hired. The amount of the credit depends, in part, on how long the veteran has been unemployed, and the credit increases to the maximum if the veteran has a qualified service related disability. A tax credit is much better for the employer than a tax deduction. A tax credit reduces your taxes dollar for dollar, whereas a tax deduction only reduces your taxable income.

The goal of the jobs bill is to incent employers to hire the thousands of veterans that have or will be returning from the war. It would be great if the bill reduces the number of veterans on the unemployment line. I'd love to see all veterans gainfully employed after serving our country. Hopefully the next bill will assist other citizens that have been searching for employment as well.

Now for the details of the new tax law.

Employers that hire veterans who have been looking for employment for more than six months may be eligible for a Returning Heroes Tax Credit of up to $5,600 per employee; employers that hire veterans who have been looking for employment for less than six months may be eligible for a credit of up to $2,400 per employee.

Employers that hire veterans with service-connected disabilities who have been looking for employment for more than six months may be eligible for a Wounded Warriors Tax Credit of up to
$9,600 per employee.

Of course both tax credits have strings attached.

1-In addition to the above criteria, the individual must begin after the date the law was passed, November 21, 2011.
2-State workforce agencies must certify that an individual is qualified for the credit.
3-Employers must complete Form 8850 Pre-Screening Notice and Certification no later than 28 days after the date of hire.
4-Other requirements must also be met to qualify for the credit.

This new tax law is meant to be tax neutral, as a number of other laws were changed to increase revenue.

1-Veterans Administration(VA) mortgage applications contain an application fee. These fees were scheduled to be reduced, but the new tax law delays the mortgage application fee.
2-After the year 2013, it will be more difficult to qualify for a health insurance premium assistance tax credit. Health insurance exchange options are scheduled to be available under the Patient Protection and Affordable Care Act.upcoming premium assistance tax credit for qualified individual who obtain health insurance through a heals insurance exchange after 2013

Tuesday, November 1, 2011

New IRS Inflation Adjustments could help or hurt your cash flow

The IRS recently announced inflation adjustments in the tax code for 2012. IRS statistics report inflation increased just over 3.8%. Obviously, this doesn't take into consideration the rising cost of food and gasoline, as these items have increased much more than that!

For some, the IRS inflation adjustments will result in lower tax burden for 2012. For others, their paycheck will be a little lower than in the past with an increase to the Social Security Wage base.

First the bad news.

Employees and self-employed individuals pay social security taxes on the wages, or profit for self-employed individuals. The maximum wage base subject to this tax increases for 2012 to $110,100 from $106,800. This is the first increase in the wage base since 2009.

Now some good news.
RETIREMENT PLANS
401Ks The maximum amount an individual can contribute tax-free to a 401(k) plan increased to $17,000. If you are 50 years old or more, you can contribute an extra $5,500 to you retirement plan.

Traditional IRAs.. The deduction for taxpayers making contributions to a traditional IRA is phased out for single individuals and heads of households who are covered by a workplace retirement plan and whose modified adjusted gross incomes fall within certain ranges. For 2012, the income phaseout range starts at $58,000 and ends at $68,000, up from $56,000 and $66,000, respectively, for 2011. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phaseout range for 2012 starts at $92,000 and ends at $112,000, up from $90,000 and $110,000, respectively, for 2011. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out for 2012 if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000, respectively, for 2011.

Roth IRAs. are subject to similar rules. The AGI limit for maximum Roth IRA contributions for a married couple filing a joint return for 2012 is $173,000, an increase of $4,000 from 2011. The AGI limitation for all other taxpayers (other than married taxpayers filing separate returns) increases from $107,000 for 2011 to $110,000 for 2012.

Individual income tax brackets
Although tax rates have not gone down, inflation also impacts the individual income tax rate brackets (which are 10, 15, 25, 28, 33, and 35 percent, respectively, for 2011 and 2012). Indexing of the income tax rate brackets effectively lowers tax bills by including more of an individual’s income in lower brackets.

Standard deduction. Taxpayers who elect not to itemize deductions use the standard deduction amount. The standard deduction increases by $500 for married couples filing a joint return from $11,400 for 2011 to $11,900 for 2012. The standard deduction for single individuals increases from $5,700 for 2011 to $5,950 for 2012.

Personal exemption. Taxpayers may claim a personal exemption deduction (and an exemption deduction for each person they claim as a dependent). The amount of the personal exemption and the dependency exemption increases from $3,700 for 2011 to $3,800 for 2012. The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (2010 Tax Relief Act) repealed the personal exemption phaseout for higher income taxpayers for 2011 and 2012.

Estate tax. The 2010 Tax Relief Act provided that the basic exclusion amount for determining the amount of the unified credit against estate tax for estates of decedents dying after December 31, 2009 is $5 million. The $5 million amount is adjusted for inflation for tax years beginning after December 31, 2011. For 2012, the inflation-adjusted amount is $5,120,000.

Gift tax exclusion. For 2012, you can give up to $13,000 to any person without incurring gift tax. Married couples can gift up to $26,000 tax-free to any person. There is no limit on the number of individuals you can make the $13,000 ($26,000) gift. The $13,000 and $26,000 amounts are unchanged from 2011.