Some Happy New Year Tax Provisions

Inflation Adjustments
 The applicable amounts for many tax items increased on Jan. 1, due to inflation adjustments.

• Personal exemption amount (now $3,800) and standard deduction amounts
• Various credits and other items also were adjusted
• Contribution limits and other amounts for pension plans retirement accounts were increased for 2012
• The Social Security wage base for 2012 is $110,100.
• The standard mileage rate for business use of an automobile remains at 55½ cents; for medical and moving expenses it decreases to 23 cents per mile

 
Capital Gain and Loss Reporting
Taxpayers will have a new form, Form 8949, Sales and Other Dispositions of Capital Assets, to report gains and losses of certain capital assets. The information on Form 8949 will correspond to the new information being reported on 2011 Forms 1099-B, Proceeds from Broker and Barter Exchange Transactions.  The information from that form will then be transferred to a revised Schedule D.
 
The new form came about due to new asset base reporting requirements being imposed on securities brokerages.
 
Veterans Work Opportunity Credits
The work opportunity tax credit (now called the Returning Heroes and Wounded Warriors Work Opportunity Tax Credit) for businesses that hire certain military veterans is extended. Employers will be eligible for a rather large tax credit for each qualified veteran that they hire after the law’s enactment date (Nov. 21, 2011) and before Jan. 1, 2013.
 
Foreign Asset Reporting
Under the Foreign Account Tax Compliance Act, individuals are required to report interests in specified foreign financial assets when filing their federal income tax returns.  This rule is in effect for interest owned in 2011, but there is also a strange twist requiring the reporting of foreign assets held in 2010 with the 2011 return.
 
Bonus Depreciation                                
The 100% first-year bonus depreciation provision expired on Dec. 31, but 50% bonus depreciation is available for property placed in service in 2012.
 
Estate Tax
Estates of decedents who died in 2010 have until Jan. 17, 2012, to elect not to have the estate tax apply and to have heirs’ bases in assets they inherit determined under the modified carryover basis rules.
 
Voluntary Classification Settlement Program
A new voluntary classification settlement program (VCSP) introduced in September allows businesses to reclassify their workers as employees for federal employment tax purposes for future tax periods while receiving relief for part of the tax liability relating to the past treatment of the workers as non employees.  This is not exactly a good thing, just a gentle reminder that the IRS is really seeking to have employees properly classified.