- Credit for Hiring Veterans Extended and Enhanced
- IRS Kicks off 2012 Tax Season with Deadline Extended to April 17
- Payroll Tax Cut Temporarily Extended into 2012
- IRS Sets Auto Mileage Rate for 2012
- IRS Announces Pension Plan Limitations for 2012
- Personal Use of Company Vehicle
- Health Insurance and S Corporations
- Rate Changes for Social Security Withholding
Credit for Hiring Veterans Extended and Enhanced
A law enacted last November extended and enhanced a credit for hiring qualified veterans. Before the law was passed, the credit would have been available only if the qualified veteran were hired before January 1, 2012, and only certain veterans, were considered qualified veterans. The new law extends the credit for hiring qualified veterans, adds two new classes of veterans who are considered qualified veterans, increases the credit for hiring certain qualified veterans, "fast-tracks" the process for certifying that an individual is a qualified veteran, and provides tax-exempt employers with a credit against payroll tax for hiring qualified veterans. The credit amount varies depending on a number of factors. It can be as high as $9,600 for hiring a qualified disabled veteran. For an employer to qualify for the credit, the qualified veteran must begin work for the employer before January 1, 2013 and other requirements must be met.
IRS Kicks off 2012 Tax Season with Deadline Extended to April 17
The 2012 due date for personal income tax filings will be Tuesday, April 17. The traditional deadline for personal income taxes is April 15, but that will fall on a Sunday this year. Monday, April 16, is Emancipation Day, a D.C. holiday. IRS will begin accepting e-file returns on January 17.
Payroll Tax Cut Temporarily Extended into 2012
The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through February 29, 2012. This reduced Social Security withholding will have no effect on employees’ future Social Security benefits.
IRS Sets Auto Mileage Rate for 2012
IRS has announced that the optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) will remain at 55.5¢ per mile for business travel after 2011—that is, unchanged from the July 1, 2011 mid-year adjustment. This rate can also be used by employers to reimburse tax-free under an accountable plan employees who supply their own autos for business use, and to value personal use of certain low-cost employer-provided vehicles. The rate for using a car to get medical care or in connection with a move that qualifies for the moving expense will decrease by .5¢ from the July 1, 2011 mid-year adjustment to 23¢ per mile.
IRS Announces Pension Plan Limitations for 2012
The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $16,500 to $17,000.
The catch-up contribution limit for those age 50 and over remains unchanged at $5,500.
The deduction for taxpayers making contribution to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000. 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 if the couple's income is between $173,000 and $183,000, up from $169,000 and $179,000.
The AGI phase-out range for taxpayers making contribution to a ROTH IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011.
Social Security Wage Base Increase for 2012
The Social Security Administration has announced that the wage base for computing the Social Security tax (OASDI) in 2012 increases to $110,100 from $106,800.
The OASDI tax rate for wages paid in 2012 is set by statute at 6.2% for employees and employers, each. Thus, an individual with wages equal to or larger than $110,100 would contribute $6,826.20 to the OASDI program in 2012, and his or her employer would contribute the same amount. The OASDI tax rate for self-employment income in 2012 is 12.4%.
For Medicare's Hospital Insurance (HI) program; tax rates under the HI program are1.45% for employees, each, and 2.90% for self-employed persons.
Personal Use of Company Automobiles
If the Company is providing company owned vehicles to any owner, owner’s family or an employee, the personal use of that vehicle is a taxable fringe benefit. The IRS requires that a calculation be done on an annual basis to include the personal use of the company vehicle on the person’s W-2.
The personal use of an employer-provided auto is subject to FICA, FIT, SIT, FUTA and SUTA taxes, and must be included on W-2 boxes 1, 3, 5, 14 and 16. The employer may elect not to withhold federal and state income tax on personal use of the vehicle, but federal wages must be reported and FICA taxes must be withheld on the value of personal use.
Health Insurance and S Corporations
All S-Corporations, must properly report health insurance paid for more than 2% shareholders. The total corporate level payments for health insurance should be included in box 1 and box 16 of the shareholder W-2 with an explanation in box 14. The Health Insurance Premiums are not subject to FICA taxes and therefore are not shown in boxes 3 and 5 on the shareholder’s W-2.
Please report all health insurance premiums paid for more than 2% shareholders to your payroll provider. The shareholder may be eligible for an equal deduction of the premiums as an adjustment to gross income for self-employed health insurance premiums.Social Security Maximum Earnings:
For 2012 the social security max is $110,100