Tax News & FAQ's

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The optional standard mileage rates to be used to compute deductible costs of operating a vehicle can be found by visiting the link below. These are updated rates for 2017.

https://www.irs.gov/uac/2017-standard-mileage-rates-for-business-and-medical-and-moving-announced

The NJ Division of Taxation has phased out the use of paper returns. Employer payroll tax returns and the New Jersey sales and use tax returns are required to be electronically filed. Payments must be made through the Tax EZ File Systems. Businesses will no longer receive ST-50/51 coupon booklets. Taxpayers simply complete the EZ TeleFile Worksheet and either call 1-877-829-2866 or file online at the Division of Taxation Website. You will be prompted for the information from the worksheet. There will be an opportunity to pay the sales and use tax liability by electronic check at the end of the phone call or during the online filing.
Along with bonus depreciation, the new law also provides for enhanced Code Sec. 179 expensing for 2012. Under current law, the Code Sec. 179 dollar and investment limits are $500,000 and $2 million, respectively, for tax years beginning in 2010 and 2011. The new law provides for $139,000 limit and a $560,000 investment limit for tax years beginning in 2012.
Congress used the 2010 Tax Relief Act to double and extend bonus depreciation from 50 percent to 100 percent for qualified property acquired after September 8, 2010 and before January 1, 2012, and placed in service before January 1, 2012. It also continues bonus depreciation, albeit at 50 percent on property placed in service during 2012.
The 2010 Small Business Jobs Act extends the carryback period for eligible small business credits from one to five years. Eligible small business credits are defined for purposes of the 2010 Small Business Jobs Act as the sum of the general business credits determined for the tax year with respect to an eligible small business. An eligible small business is a corporation whose stock is not publicly traded, a partnership or a sole proprietorship. Average annual gross receipts cannot exceed $50 million.
Under the HIRE Act, employers that have hired new workers in 2010 who qualify for payroll tax forgiveness may also be eligible for a tax credit for each qualified employee who is retained on the employer's payroll for 52 consecutive weeks. The 2011 business credit was increased with respect to each qualified retained worker by the lesser of $1,000 or 6.2 percent of wages paid by the taxpayer to the qualified retained worker during the 52 week period.
Federal and State law requires employers to report newly hired and rehired employees in New Jersey to the New Jersey New Hire Directory within 20 days of their start date. State laws also requires that an independent contractor transacting business in New Jersey be reported as a new hire. This information is used by New Jersey to assist in the prevention of unemployment insurance benefit overpayments and for child support enforcement. Employers can report this information via the Internet at nj-newhire.com.
For taxable years beginning on or after January 1, 2009, New Jersey Lottery winnings over $10,000 are taxable for New Jersey Gross Income tax purposes. All lottery payments received after this date are subject to this tax regardless of what year the prize was won.
For tax year 2010 and after, the amount of the New Jersey Earned Income Tax Credit has been reduced for 20% of the applicant's Federal earned income tax credit.
The property tax deduction is not limited by income for 2010, 2011 and 2012, and the maximum deduction is $10,000 for all filers as it was in 2008. The temporary income eligibility and benefit amount limitations for the property tax deduction were for tax year 2009 only.
The State of New Jersey is no longer mailing Form 1099-G, Certain Government Payments, to report the amount of a State tax refund a taxpayer received. State income tax refunds may be taxable income for Federal purposes for individuals who itemized their deductions on their Federal tax return in the previous year. To view or print your 1099-G information visit theDivision's Website
The New Jersey gross income rates for 2010, 2011 and 2012 have reverted to the rates that were in effect for 2008. (Rates were temporarily increased for 2009 on income over $400,000)
The Federal Estate Taxes are due to change effective January 1, 2013. Please check our website for future updates. The 2010 Tax Relief Act reinstates the estate tax at a maximum rate of 35 percent. The estate tax exemption amount was increased to $5,120,000 for descendents dying before December 31, 2012. The annual exclusion for gifts increases from $13,000 in 2012 to $14,000 in 2013. The State of New Jersey continues to tax estates valued over $675,000 when assets do not pass to a surviving spouse
The contribution limits for retirement plans are as follows:
Plan Type Limit 2012 2013
IRAs & Roth IRAs For individuals age 49 and below
For individuals age 50 and above
$5,000
$6,000
$5,500
$6,500
SIMPLE For individuals age 49 and below
For individuals age 50 and above
$11,500
$14,000
$12,000
$14,500
SEP the lesser of 25% of total compensation or $50,000 $51,000
401(k) & 403(b) For individuals age 49 and below
For individuals age 50 and above
$17,000
$22,500
$17,500
$23,000
Effective for 2010 and beyond, taxpayer friendly rules for Roth IRA conversions apply. Individuals may convert funds from a traditional IRA, 401(k) plan or certain other qualified plans to Roth IRAs, regardless of income. The traditional IRA or 401(k) plan can make the distribution directly to a new or existing Roth IRA (a trustee-to-trustee transfer) or to the taxpayer to deposit into a Roth IRA within 60 days. There can be a potential tax liability, so talk to your tax professional at Mills & DeFilippis prior to making a conversion.
For tax years 2010 and forward, self-employed individuals may deduct Medicare premiums from their self-employment income. Besides sole proprietors, partners and more-than 2 percent shareholders of S corporations are considered self-employed individuals for purposes of the deduction.
Effective January 1, 2013, the health care reform package imposes a new 3.8 percent Medicare tax contribution on the net investment income of higher-income individuals. Net investment income includes interest, dividends, annuities, royalties and rents and other income attributable to a passive activity. Capital gains income will be subject to this tax. The tax applies to the lesser of net investment income or modified AGI above $200,000 for individuals or $250,000 for joint filers. Please contact your tax professional at Mills and DeFilippis to discuss the tax consequences of the new 3.8 percent Medicare tax on your investment income.
There is no limit to the wages subject to Medicare tax. All covered wages continue to be subject to the 1.45 percent Medicare tax. Beginning in 2013, wages paid in excess of $200,000 will be subject to an extra 0.9 percent Medicare tax. This will only be withheld from the employees' wages; employers will not pay the extra tax.
The 2010 Tax Relief Act reduced the employee-share of Social Security tax from 6.2 percent to 4.2 percent for wages paid in calendar year 2011. This was later extended for wages paid through December 31, 2012. The Social Security tax rate is scheduled to be 6.2 percent for both employees and employers in 2013. The maximum amount of wages subject to Social Security taxes increases from $110,100 in 2012 to $113,700 in 2013.
The Tax Relief Act of 2010 extends reduced capital gains and dividend tax rates beginning after December 31, 2010 and ending before January 1, 2013. Qualified capital gains and dividends will continue to be taxed at a maximum rate of 15 percent (zero percent for taxpayers in the 10 and 15 percent brackets). After 2012, the maximum capital gains will increase to 20 percent and align the dividends rate with the higher ordinary income tax brackets unless Congress acts in the meantime.
On December 17, 2010, President Obama signed into law a two-year extension of the reduced individual income tax rates put in place by the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and subsequent legislation. Under the 2010 Tax Relief Act, the individual rates remain at 10, 15, 25, 28, 33, and 35 percent for all taxpayers through the end of 2012.
The IRS has cautioned taxpayers to be on the lookout for scams. The IRS does not contact the taxpayer by phone or e-mail for information. Also, the IRS does not send unsolicited e-mail about tax account matters to taxpayers. If you receive a suspicious e-mail or telephone call that claims to have come from the IRS, please notify the IRS of the scam at phishing@irs.gov.

Disclaimer

The information contained in this web site is for general information purposes only and is not intended to provide professional tax advice. Please consult your tax advisor, or someone from our office before making any decisions or to determine how the tax law changes apply to your specific tax situation. Mills and DeFilippis, CPAs, LLP disclaims any responsibility for any actions taken by users.