Showing posts from December, 2012

Payroll Taxes Broken Down

The tax on wages consists of two portions:the employer's share and the employee's share.These can each be further broken down into portions for Medicare, federal income tax withholding, and social security.The Medicare tax rate is 1.45% for each, the employee and the employer.The federal income withholding portion is the federal income tax withheld for the employee.This portion is considered to be held "in trust" for the employee and this is where the "Trust Fund Recovery Penalty" may be applied.(For more information about the Trust Fund Recovery Penalty, see The Dove Firm's website.)

The social security portion is where the tax increase comes into play.For 2012, the employee tax rate for social security is 4.2%.This was instituted in 2011 as a compromise for the discontinuance of the Making Work Pay credit.(The decrease in funding to the Social Security program for the past two years was reimbursed by the general fund of the Treasury.) The employer'…

Thinking Outside the Theater Box

It may be interesting to see if Spain tries to close the loophole found by this theater.    The Quim Marce in Bescano, Spain, has stopped selling theater tickets, which are subject to a 21 percent sales tax, and now sells carrots, which are taxed only at 4 percent.

New Requirements for Some Return Preparers

As tax preparation season begins, make sure your return preparer is compliant with new IRS requirements.If you are using a CPA, attorney, enrolled agent, or any employee supervised by one of the above, your preparer has met the IRS requirements, so long as they are in good standing with their licensing agency and have renewed their Preparer Tax Identification Number (PTIN).If you are instead using a non-licensed preparer, they have until the end of 2013 to take and pass a Registered Tax Return Preparer competency test.See the IRS website for more information about the new requirements and the test.One key difference between the licensed preparers (CPAs, attorneys, and EAs) and the non-licensed preparers is noticeable only after your return is filed:licensed preparers have unlimited practice rights before the IRS, while non-licensed preparers can represent clients only in certain circumstances.

Estate Tax and the Fiscal Cliff

The current estate tax rate is 35% with a $5 million exemption.That is all set to change in 2013, with the rate jumping to 55 percent and the exemption dropping to $1 million.While there is still hope that Congress will do something before the end of the year to avoid such dramatic changes, some fiscal cliff talks have turned to the estate tax as the solution, leaving many Americans wondering if their estates could be affected by the changes.If you have questions about your current estate plan, or need to set up an original estate plan, speak with a knowledgeable estate planning attorney about your options.