Gunnip & Company LLP. - Certified Public Accountants and Consultants - Experience is the Difference®

The IRS is required by law to adjust certain tax numbers each year. Here are some of the adjusted numbers you’ll need for your 2012 tax planning.

STANDARD MILEAGE RATE for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.

SECTION 179 maximum deduction decreases to $139,000, with a phase-out threshold of $560,000.

TRANSPORTATION FRINGE BENEFIT limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.

SOCIAL SECURITY taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.

KIDDIE TAX threshold remains at $1,900 of unearned income and applies up to age 19 (up to age 24 for full-time students).

NANNY TAX threshold increases to $1,800.

HSA CONTRIBUTION limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.

401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).

SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).

IRA contribution limit remains at $5,000 ($6,000 for 50 and older).

ESTATE TAX top rate remains at 35%, and the exemption amount increases to $5,120,000.

ANNUAL GIFT TAX EXCLUSION remains at $13,000.

ADOPTION TAX CREDIT decreases to $12,650 for adoption of an eligible child.

ALTERNATIVE MINIMUM TAX (AMT) exemption decreases to $33,750 for singles and to $45,000 for married couples.  Over the past few years this has been increased at the last minute, so there may be hope of an increase, but you should use the exemption amounts state here when planning your 2012 tax liability.

To increase transparency for the more than 72 million 401k plan participants, the US Department of Labor issued new regulations regarding fees paid to advisors by the plan participants and sponsors.  The intent of the new regulations is for plan participants to be better equipped to make informed decisions about their investment choices.  Considering that many plan participants believe they pay nothing for the services provided in their 401(k) plan, the new quarterly disclosures will be quite an eye-opener for those future retirees.

Beginning in 2012, plan fees and expenses are required to be disclosed to participants in dollars and cents.  Often, the fees associated with a participant’s account are a function of some complex formula.  Fees are sometimes paid out of earnings and not easy to identify or quantify.  Now, quarterly statements will very plainly disclose the fees from a participant’s account. 

Department of Labor Employee Benefits Security Administration Assistant Secretary Phyllis C. Borzi  was quoted in a news release dated October 14, 2010 as saying “We are giving workers the tools they need to make the best possible decision about investing the nearly $3 trillion held in their 401(k)-type plans.  Now they will have information about different investment options to help them make wise decisions.” 

Initial disclosures must be made by May 31, 2012 and subsequent disclosures by the 45^th day following the end of the calendar quarter.  The regulations require the following to be disclosed on participant statements:

1.  Quarterly statements will reflect plan fees and expenses deducted from a participant’s account

2.  Provide information about investments available under their plan, including the cost of those investments

3.  Use standard methodologies when calculating  and disclosing expense and return information to achieve uniformity across the spectrum of investments that exist in plans

4.  Present the information in a format that makes it easier for participants to comparison shop among the plan’s investment options

5.  Give access to supplemental investment information in addition to the basic information required under the final rule

Plan administrators who fail to provide participants with the required information may be deemed to have violated their fiduciary duty under the Employee Retirement Income Security Act.  In that case, the administrator may be held liable for monetary damages to participants. However, as a result of the new regulations, plan participants will much better equipped to make informed decisions about their investment choices. 

Have you heard about solo 401(k) plans? The traditional type of 401(k) retirement plan is now available for self-employed individuals. And it lets you save more than other types of plans.

Now you can establish the same type of plan if you’re self-employed or run an “owner only” business. That’s a business with just you and possibly your spouse, but no employees. You can save more with a solo 401(k) than with the traditional SEP, SIMPLE, or Keogh plans. That’s because you are able to make two types of tax-deductible contributions. First you make the usual employer contribution as owner of the business. Then you can make an additional salary deferral as an employee. As a result, you could potentially shelter up to $49,000 of your 2011 self-employment earnings from tax. If you’re eligible for the over-50 catch-up, that rises to $54,500.

The solo 401(k) plans are flexible and relatively simple to administer. If you think this plan might be right for you, please contact our office. We can tell you more about it and help show you how much you could save.