It’s that time of the year again when it’s out with the old and in with the new. This month is the ideal time to clean out business files to get a fresh start for the new year and get paperwork organized. Here are some tips to help small business owners get ready to file their 2012 taxes and get ready for 2013:
The 2010 law governing gift and estate taxes is set to expire at the end of this year. For 2013, assuming Congress does not act, the lifetime limits on gift tax will fall from $5.12 million to $1 million. That means an individual can gift, over his lifetime, no more than $1 million tax-free starting in 2013. The top gift tax rate on amounts of more than that $1 million threshold is also scheduled to rise from 35 percent to 55 percent starting next year.
In 2010, the IRS audited 1.0% of taxpayers. For middle-income taxpayers, the percentage was even lower. Only 0.6% with adjusted gross income of $25,000 to $75,000 were audited, according to the IRS.
But traditional audits are just one way the IRS enforces the tax laws. Increasingly, the IRS is relying on what IRS Taxpayer Advocate Nina Olson calls “unreal” audits. These typically come in the form of a letter alerting you to errors or omissions on your return. While these audits are less intrusive than full-scale audits, they can still cost you real money.
Here are a few more:
- Federal income tax-bracket For a married couple filing a joint return, the taxable-income threshold separating the 15% bracket from the 25% bracket is $70,700 for this year, up from $69,000 for 2011.
- The standard deduction is up slightly. For singles, the basic deduction amount for this year is $5,950, up from $5,800 last year. For married couples, it’s $11,900, up from $11,600 in 2011. There are additional amounts for those who are 65 or over, blind or both.
- The dependent exemption is $3,800 for 2012, up by $100 from 2011.
- The maximum earned income tax credit for low- and moderate-income workers and working families rose to $5,891 for 2012, from $5,751 in 2011. The maximum income limit for the EITC rose to $50,270 from $49,078 in 2011.
- The foreign earned income exclusion rose to $95,100 from $92,900 for 2011.
- The IRS’s optional standard mileage rate for using your car for business remain unchanged at 55.5 cents for 2012. Drivers have a choice of using this rate or deducting the business portion of actual expenses.
In California, the new rules include limits on the ability of businesses to check the credit reports of workers and job seekers. Nationwide, tax deductions for equipment purchases will be sharply reduced.
Small-business owners will be greeted Jan. 1 with dozens of new laws and regulations.
In California, they will include new mandates concerning employees, including a partial ban on checking the credit reports of workers and job applicants.
And it’s no surprise that there are changes at the federal level too.
Here’s a guide to some of the new laws and regulations set to go into effect in 2012.
- Federal Taxes changes
- New federal accessibility rules
- New California laws
Despite the partisan bickering that kept Congress from accomplishing much in 2011, small businesses and entrepreneurs managed to eke out a few victories in Washington, D.C., this year.
1. Repeal of the 1099 paperwork requirement
2. Repeal of 3 percent withholding for government contractors
3. Small Business Innovation Research compromise
4. Startup America launched
5. Free-trade agreements passed
If you use your car for business, you may be eligible for valuable tax deductions.
Drivers have a choice of how to calculate the deduction. When in doubt, crunch the numbers both ways to see which produces the bigger deduction for you.