FUTA Tax – Credit Reduction for 2012

For the second year running, California is a credit reduction state.  This means “we” have taken loans from the federal government to meet state unemployment benefit liabilities and have not repaid those loans within the allowable time frame.   

The result of being an employer in a credit reduction state is higher tax due on the Form 940.  For the year ended December 31, 2012, the calculation results in $42 per employee as additional FUTA liability, bringing total FUTA tax per employee to $84 for the year.  The increased liability is considered incurred in the fourth quarter and is due by January 31 (with other annual payroll report filings).  For those filers that we process, explanation is provided with their reports.  Those who run reports off Quickbooks are often puzzled that the balance due with Form 940 is so much higher than last year.   Help them not to be puzzled.

As a practical matter, there is no predicting whether CA will be a credit reduction state again in 2013 (any bets  on whether “we” repay those loans in the coming months?). 

  •     In 2011, the credit reduction liability resulted in an additional $21 per employee. 
  •     For 2012, the hit is […]
By |January 11th, 2013|2012, 2013, ca, credit reduction, employer, FUTA, new tax|0 Comments

Bonus Depreciation & Section 179 Depreciation Deduction Rules for 2012

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Taxpayers may want to consider making fixed asset purchases before December 31, 2012 to take advantage of two accelerated depreciation options:
1.      Bonus Depreciation: For most qualified property placed into service in between January 1, 2012 and December 1, 2012, the maximum bonus depreciation allowance is 50% of the cost of the property.  Purchasing  new assets that have a useful life of 20 years or less generally qualify for bonus depreciation.  Bonus depreciation amounts are based upon a calendar year.
2.       Section 179:  For tax […]

2012 Year-End Tax Planning Takes a Different Direction

Each year we meet with our clients to review their projected taxes for the year and see what actions can be taken to minimize their tax liability.  The usual actions are to defer income to the following year, accelerate deductions into the current year, and take advantage of tax credits. This year, the year-end tax planning process is turning in a different direction.  
With the looming expiration of many tax deductions and increase in tax rates that begin in 2013, some clients are considering taking a reverse course by accelerating income and deferring deductions as a plan to minimize taxes. In addition to changes in the income tax code, unless Congress passes new legislation, the estate taxes are dramatically changing in 2013. Until December 31, 2012 each person can make gifts during their lifetime of up to $5,120,000 without incurring a gift tax. Starting in 2013, unless new legislation is passed, the lifetime exemption drops back to $1,000,000. This exemption is in addition to the annual exemption on gifts of $13,000 or less.  
As year-end is quickly approaching, now is the time to review […]

Tax Increases Coming in 2012 under Affordable Care Act

Tax Increases Coming in 2012 under Affordable Care Act
Fast forward to next year and we are looking at a number of important tax increases on the horizon. The tax increases falls under the the Affordable Care Act (the Patient Protection and Affordable Care Act, P.L. 111-148, and the Health Care and Education Reconciliation Act of 2010, P.L. 111-152), and include higher Medicare taxes for high earners, a 3.8% surtax on unearned income of higher-income individuals and caps on FSA contributions. Companies also get to look forward to compliance issues, along with new health insurance deduction limitations and fees.
Increased Medicare tax for high-earning workers and self-employed taxpayers. For the tax year beginning after 2012, an additional 0.9% hospital insurance tax applies to wages and self employment income in excess of $250,000 for joint returns, $125,000 for married filing separately and $200,000 in all other cases.
Surtax on unearned income of higher-income individuals. Starting in 2013, an unearned income Medicare contribution tax is imposed on individuals, estates, and trusts. The tax is 3.8% of the lesser of either (1) net investment income or (2) the excess of modified adjusted gross income over the threshold amount ($250,000 for a […]