Posts

Retirement Savings Contributions Credit 2013

/in , /by

You may be eligible for a tax credit if you make eligible contributions (other than rollover contributions) to an employer-sponsored retirement plan or to an individual retirement arrangement.

Eligible Plans

The eligible plans for the retirement savings contribution credit include: traditional and Roth IRAs, 401(k), 403(b), governmental 457, SEP, SIMPLE, 501(c)(18)(D) and contributions to a qualified retirement plan as defined in section 4974(c) (including federal Thrift Savings Plan).

Additional Requirements and Limitations

Other important eligibility requirements and limitations include:

1. Income Limitations

You cannot exceed the following income limits in order to be able to take the Retirement Savings Contributions Credit (these are 2013 numbers):

• Single, married filing separately, or qualifying widow(er), with income up to $29,500

• Head of Household with income up to $44,250

• Married Filing Jointly, with income up to $59,000

2. Age Limitation

To be eligible for the Retirement Savings Contributions Credit you must have been born before January 2, 1996.

3. Full-Time Students Not Eligible

You cannot have been a full-time student during the calendar year if you wish to claim the Retirement Savings Contributions Credit (there are some specific definitions regarding the “student” status).

4. Cannot Be a Dependent on Another Person’s Tax Return

If you were claimed as a dependent on someone else’s 2013 tax return, you cannot take the Retirement Savings Contributions Credit.

5. Distributions are Deducted From Contributions

When figuring the Retirement Savings Contributions Credit, you generally must subtract the amount of distributions you have received from your retirement plans from the contributions you have made. This rule applies to distributions received in the two years before the year the credit is claimed, the year the credit is claimed, and the period after the end of the credit year but before the due date – including extensions – for filing the return for the credit year.

Credit amount

If you make eligible contributions to a qualified IRA, 401(k) and certain other retirement plans, you may be able to take a credit of up to $1,000 or up to $2,000 if filing jointly. The credit is a percentage of the qualifying contribution amount, with the highest rate for taxpayers with the least income.

Also note that the Retirement Savings Contributions Credit is a benefit in addition to other tax benefits which may result from the retirement contributions. For example, most workers at these income levels may deduct all or part of their contributions to a traditional IRA.

IRS Auto Depreciation Limits Released for 2013

/in , /by

The IRS recently released Rev. Proc. 2013-21 detailing the updated price inflation adjustment limitations on depreciation deductions and lease inclusion amounts for passenger automobiles first placed in service during calendar year 2013. These adjustments are required under Internal Revenue Code Section 280F. If you need advice relating to these matters, or any other tax or legal issues, please contact Sherayzen Law Office, PLLC.

Relevant Definitions

According to the IRS, “Passenger automobiles are defined in section 280F(d)(5)(A) as any 4-wheeled vehicle which is manufactured primarily for use on public streets, roads, and highways, and which is rated at 6,000 pounds unloaded gross vehicle weight (or, in the case of a truck or van, 6,000 pounds gross vehicle weight) or less. Section 280F(d)(5)(B) provides exceptions from this definition, and allows the Secretary to promulgate regulations to exclude trucks and vans from the definition of passenger automobiles” (Internal Revenue Bulletin: 2003-37).

Limits for Passenger Automobiles (Excluding Trucks and Vans)

The depreciation limitations for passenger automobiles (not including trucks or vans) first placed in service during calendar year 2013, and for which the additional bonus depreciation applies (allowing for 50% “expensing” of the cost of the automobile in the year of purchase), is $11,160 for the first tax year. The amounts for following years are: $5,100 the second tax year, $3,050 for the third year, and $1,875 for each succeeding year. Note that, for this category and for each category that follows below, any personal use of a passenger automobile, truck or van will reduce the maximum depreciation deduction that may be taken by a business.

As will be seen from the deduction amounts listed below, only the first year of depreciation is affected by the adjustments.

For passenger automobiles (excluding trucks and vans) placed in service during calendar year 2013 to which 50% bonus depreciation does not apply, the depreciation is $3,160 for the first tax year. For the following years, the amounts are: $5,100 the second tax year, $3,050 for the third year, and $1,875 for each succeeding year.

Limits for Trucks and Vans

The depreciation limitations for trucks and vans first placed in service during calendar year 2013, and to which the additional 50% bonus depreciation applies, is slightly higher than passenger automobiles, at $11,360 for the first tax year. For later years, the amounts are: $5,400 the second tax year, $3,250 for the third year, and $1,975 for each succeeding year.

The depreciation limitations for trucks and vans first placed in service during calendar year 2013, and to which the additional 50% bonus depreciation does not apply, is $3,360 for the first tax year. For later years, the amounts are: $5,400 the second tax year, $3,250 for the third year, and $1,975 for each succeeding year.

Bonus Depreciation

Rev. Proc. 2013-21 includes various factors as to why bonus depreciation may not apply, including the fact that a taxpayer, “(1) purchased the passenger automobile used; (2) did not use the passenger automobile during 2013 more than 50 percent for business purposes; (3) elected out of the § 168(k) additional first year depreciation deduction pursuant to § 168(k)(2)(D)(iii); or (4) elected to increase the § 53 AMT credit limitation in lieu of claiming § 168(k) additional first year depreciation.” If a passenger automobile, truck or van is not used at least 50% of the time for business purposes, the vehicle must be depreciated under standard straight-line ADS rules.
The Rev. Proc. also includes updated tables for the dollar amount of income inclusion for passenger automobiles (excluding trucks and vans), and separate tables for trucks and vans with a lease terms beginning calendar year 2013.

Tax-Free Transfers to Charity Renewed For Certain IRA Owners

/in , /by

On January 16, 2013, the IRS confirmed that certain owners of individual retirement arrangements (IRAs) have a limited time to make tax-free transfers to eligible charities and have them count for tax-year 2012.

Pursuant to the American Taxpayer Relief Act of 2012, Congress extended for 2012 and 2013 the tax provision authorizing qualified charitable distributions (QCDs). Under this provision, an otherwise taxable distribution from an IRS, owned by a person who has at least 70.5 years or older, can exclude from gross income up to $100,000 of QCDs paid directly to an eligible charitable organization. The eligible IRA owners have until Thursday, January 31, 2013, to make a direct transfer, or alternatively, if they received IRA distributions during December 2012, to contribute, in cash, part or all of the amounts received to an eligible charity.

The QCD option is available regardless of whether an eligible IRA owner itemizes deductions on Schedule A. Transferred amounts are not taxable and no deduction is available for the transfer.

It is iimportant to note that QCDs are counted in determining whether the IRA owner has met his or her IRA required minimum distributions for the year.

For tax year 2012 only, IRA owners can choose to report QCDs made in January 2013 as if they occurred in 2012. In addition, IRA owners who received IRA distributions during December 2012 can contribute, in cash, part or all of the amounts distributed to eligible charities during January 2013 and have them count as 2012 QCDs.

QCDs are reported on Form 1040 Line 15. The full amount of the QCD is shown on Line 15a. Do not enter any of these amounts on Line 15b but write “QCD” next to that line.

Filing Deadline Extended to March 30, 2012, for Some Tax-Exempt Organizations

/in , /by

On December 16, 2011, the IRS announced that certain tax-exempt organizations with January and February filing due dates will have until March 30, 2012, to file their annual returns.

The IRS is granting this extension of time to file because the part of the e-file system that processes electronically filed returns of tax-exempt organizations will be off-line during January and February. The agency stressed that the rest of the e-file system will continue to operate normally and urged all individuals and businesses to choose the accuracy, speed and convenience of electronic filing.

In general, the extension applies to tax-exempt organizations whose normal filing deadline is either January 17 or February 15, 2012. Ordinarily, these deadlines would apply to organizations with a fiscal year that ended on August 31 or September 30, 2011, respectively. The extension also applies to organizations that already obtained an initial three-month filing extension and now have an extended filing deadline that falls on January 17 or February 15, 2012. The majority of tax-exempt organizations will be unaffected by this extension because they operate on a calendar-year basis and have a May 15 filing deadline.

The extension applies to affected organizations filing Forms 990, 990-EZ, 990-PF, or 1120-POL. Form 990-N filers will not be affected. No form needs to be filed to get the March 30 extension.

In order to avoid receiving a late filing penalty notice, a reasonable cause statement should be attached to the tax return. If organizations receive late-filing penalty notices, they should contact the IRS so that these penalties can be abated. The IRS encouraged these organizations to consider either e-filing early — before the end of December — or waiting until March to file electronically.