For tax year 2012, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation.
By law, the dollar amounts for a variety of tax provisions, affecting virtually every taxpayer, must be revised each year to keep pace with inflation. New dollar amounts affecting 2012 returns, filed by most taxpayers in early 2013, include the following:

• The value of each personal and dependent exemption, available to most taxpayers, is $3,800, up $100 from 2011.
• The new standard deduction is $11,900 for married couples filing a joint return, up $300, $5,950 for singles and married individuals filing separately, up $150, and $8,700 for heads of household, up $200. Nearly two out of three taxpayers take the standard deduction, rather than itemizing deductions, such as mortgage interest, charitable contributions and state and local taxes.
• Tax-bracket thresholds increase for each filing status. For a married couple filing a joint return, for example, the taxable-income threshold separating the 15-percent bracket from the 25-percent bracket is $70,700, up from $69,000 in 2011.

Each United States person who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing the REPORT OF FOREIGN BANK AND FINANCIAL ACCOUNTS with the Department of the Treasury on or before June 30, of the succeeding year. You can get the required form TDF 90-22.1 along with the instructions from http://www.fincen.gov/forms/bsa_forms. 

This form is not a part of your tax returns so please remember to file it.  In the meantime, here is the link to an article published in the Times of India which is suggesting that IRS is to target wealthy Indo Americans who stash their monies in India!

http://timesofindia.indiatimes.com/nri/news/US-taxman-gets-after-Indian-Americans/articleshow/7915510.cms

The IRS has opened the 2011 tax filing season by announcing that individual taxpayers have until April 18 to file their tax returns.

Taxpayers will have until Monday, April 18 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have three extra days to file this year.

Taxpayers requesting an extension will have until Oct. 17 to file their 2010 tax returns.  The IRS reminded taxpayers impacted by recent tax law changes that using e-file is the best way to ensure accurate tax returns and get faster refunds.

Many tax-exempt organizations must file form 990 by May 17 deadline to preserve tax-exempt status with the IRS.

This crucial filing deadline is looming for many tax-exempt organizations that are required by law to file their Form 990 with the Internal Revenue Service or risk having their federal tax-exempt status revoked.

The Pension Protection Act of 2006 mandates that all non-profit organizations, other than churches and church related organizations, must file an information form with the IRS. This requirement has been in effect since the beginning of 2007, which made 2009 the third consecutive year under the new law. Any organization that fails to file for three consecutive years automatically loses its federal tax-exempt status.

http://www.irs.gov/newsroom/article/0,,id=222668,00.html

April 15 is the due date for filing your Individual, Partnership, LLC and Fiduciary tax returns. 

There are a number of reasons for not filing your tax return by April 15th.  Some people have financial transactions or joint ventures which may be difficult to summarize by the April 15th deadline.  Others simply don’t get around to filing. 

If it sounds familiar and you won’t be able to file your tax return by the deadline, it’s time to start thinking about filing an extension as it can give you extra time to file your returns.

Filing a proper extension can save you from the penalties for late filing assuming that you in fact file the actual returns by the extended due date.

Let’s get together if you would like to file an extension or if you would like to get together before the due date to prepare your returns!

Governor Schwarzenegger today signed AB 183 providing $200 million for home buyer tax credits.  The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.

Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.

This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state).  Buyers also must be at least 18 years old and be unrelated to the seller.  First-time buyers are defined as those who have not owned a home in the past three years.

Generally, use tax applies when a person or business in California purchases tangible merchandise to be used, consumed, given away, or stored in California from a retailer who does not collect California tax on the sale. In other words, if sales tax would apply when a particular item is purchased in California, use tax applies when a similar purchase is made from a retailer outside the state and tax is not charged.More information about this use tax can be obtained at:

http://www.boe.ca.gov/sutax/useTaxRegFAQ.htm#usetax2

IRS has announced standard mileage rates for the year 2010.  Beginning with the new year, it will be 50 cents per mile for business miles driven for the use of a car.  

It will be 16.5 cents per mile driven for medical or moving purposes and 14 cents per mile driven in service of charitable organizations

For more details, please go to:

http://www.irs.gov/newsroom/article/0,,id=216048,00.html

 Wish you happy holidays!

Here are couple of tax planning tips as we approach 2009 year end. 

If your real estate taxes are being impounded, you may be able to ask your lender to pay off both installment of taxes now!  This will generate the potential deduction for the 2nd installment during 2009.  Most likely, enough monies are sitting around in your impound account which may be earning little or no interest.  All you have to do is just conact the lender and instruct them to pay off both the installments.  If the reserves are not enough, sometimes the lender may change your monthly payments or they may not pay off all the taxes but it is worth looking into.

Similarly, you may be able to pay the January 2010 mortgage installment towards the end of December.  This will generally increase the amount of interest you have paid for the current year!  Please make sure it is treated as January payment and not as an extra payment.  Otherwise, your January payment may still be due! 

If you do it once, both of the above may have to be done annually thereafter.  Otherwise, the deductions may be less in the year in which you miss it!  Similarly, few other things may be doable to reduce your 2009 tax liability.  Now is the best time to estimate that liability and do the tax planning as needed. 

The Economic Stimulus package also offers incentives to spur business investment. The legislation would save businesses approximately $50 billion in near-term taxes through a temporary change to the tax code that will allow American businesses that buy new equipment this year to deduct an additional 50 percent of the cost of their investment in 2008. This will encourage businesses to expand and create new jobs now because buying equipment, software, and tangible property this year will dramatically lower their taxes.

The legislation also increases expensing for small businesses. This means that a business placing less than $800,000 of equipment into service this year would be able to immediately deduct up to $250,000 – up from $128,000 – of its investment in 2008.