It’s tax time.
The Beacon Journal presents reports today and Monday with information helpful in working on filing your income taxes and experts are available to answer questions.
Free call-in programs staffed by certified public accountants and staff accountants are scheduled and there will be an online chat for those who would like to ask questions via computer.
Three call-in sessions this week are co-sponsored by the Beacon Journal and the Ohio Society of Certified Public Accountants, who recruit our volunteer experts. The sessions will be:
• Monday, Feb. 11: 6-8 p.m.
• Wednesday, Feb. 13: 6-8 p.m.
• Saturday, Feb. 16: 9 a.m. to noon.
Call 330-996-3644. If you get a recording, it means lines are busy, so hang up and try again. We do not check messages and are not able to return calls.
Call-ins serve as a resource for questions that can be answered quickly and the accountants are not able to walk a caller through an entire return.
The live online chat will be noon to 1 p.m. Tuesday, Feb. 12. Join us at www.ohio.com to ask a question.
If you’re unable to join us but can send a question ahead, email it to email@example.com or if you’re on Twitter, to @ohiodotcom and we’ll try to submit those to the experts, too. We’ll also be monitoring our Twitter and our Akron Beacon Journal Facebook accounts during the chat to take questions that way. We will have the transcript of the chat and all tax stories archived online at www.ohio.com/taxes.
Fair Finance issues
A subject that came up during the call-in program concerns Fair Finance.
The company went into bankruptcy after FBI raids in November 2009 permanently closed its offices in Akron.
Last June, the two co-owners and a former executive were convicted on various charges of defrauding more than 5,300 Ohio investors out of more than $218 million in uninsured investment certificates from Fair Finance.
Timothy Durham was given a 50-year prison sentence while James Cochran was sentenced to 25 years. Former Fair Finance executive Rick Snow was given a 10-year prison term. They have appealed their sentences.
CPA Doug Klein of SS&G said: “While every investor’s case is different, and warrants a careful review of their own unique facts, with the indictment and convictions now behind us, there is little question that the special rules in Revenue Procedure 2011-58 and Revenue Procedure 2009-20 should be part of any investor’s decision-making for 2012 tax returns. The year of loss deduction, the rules the taxpayer elects to use for such loss, as well as the actual amount of loss will require special attention to these rulings and the regular theft loss rules.
“Anybody who elects to use the special rules will be required to make a reduction in the total deduction, as well as provide the IRS with an estimate of their recoveries — so there’s some math to do. If folks recover money in a future year, they may have to amend any loss claims or report income to the extent of the excess recovery over their estimated loss in these rules,” he said.
Top 10 tips
Klein and SS&G colleague CPA Ed Decker have served as my advisers for several years for our tax coverage. This year, Klein and Decker came up with what they’re calling “Ed and Doug’s Tax Tips,” or a priority list for readers:
1. Many key individual tax breaks were extended — don’t forget them.
• Deduction for certain elementary and secondary schoolteachers expenses.
• Discharge of indebtedness on renegotiated qualified principal residence loans.
• Mortgage insurance premiums as mortgage interest.
• Deduction for state and local general sales taxes.
• Deduction for qualified tuition and related expenses.
2. Revise your Form W-4 — (Employee’s Withholding Allowance Certificates), especially higher income earners with two breadwinners earning more than $250,000 combined in the same household.
New tax brackets and a new 0.9 percent Medicare tax on high wage earners might make your old W-4 out of date and cause underpayments of tax.
3. Alternative Minimum Tax (AMT).
You have to calculate the AMT. Most software programs do it automatically, and incorporate the higher exemption that was passed ($78,750 for marrieds filing jointly) — but taxpayers preparing returns by hand need to remember to prepare Form 6251 to see if you owe the AMT.
4. Tax credits were extended, too.
The IRS won’t automatically tell you that you forgot to include them. Some of the more common are:
• Employer wage credit for employees who are active members of the uniformed services.
• Work opportunity tax credit — Form 5884 — for employers who pay qualified first- or second-year wages to targeted groups of employees.
• New markets tax credit — Form 8874 — for investors in qualified community development entities (CDEs).
• Adoption expense — up to $12,650 maximum.
• Child and Dependent care.
5. Energy Efficient Tax breaks extended.
For those who have not used the $500 lifetime cap, energy efficient improvements for homes are still available.
6. Small businesses may continue to write off equipment purchases rather than depreciate them over time.
It goes up to $500,000, or take 50 percent (the so-called bonus depreciation) for qualifying property.
7. College tuition and related expenses — tax credit and deduction extended.
Lifetime Learning, American Opportunity Tax credits are claimed on Form 8863 for the credit and 8917 for the deduction. You still have to determine which is best — including the Ohio tax impact since the deduction also reduces Ohio tax. A tax credit is usually worth more than a deduction, but different phaseouts require calculating the numbers.
8. Small business health insurance credit.
Employers with fewer than 25 full-time equivalent employees for the year and who make less than $50,000 per year on average might qualify for the tax credit computed on Form 8941.
9. Gift and Estate changes. You can donate up to $13,000 per donee without filing a gift tax return. The estate tax threshold for 2013 is $5.12 million, indexed for inflation with the top rate now 40 percent rather than 35 percent.
10. Extension of favorable Qualifying Charitable Distribution (QCD) exclusion for donations of annual Required Minimum Distribution (RMD).
You may still send your required minimum distribution of your retirement accounts for those over age 70½ directly to charity and obtain an above-the-line tax benefit, rather than an itemized deduction, which is not deductible for Ohio and might be phased out. The money has to be sent directly from the account, so it has to be coordinated with the retirement plan administrator — and is capped at $100,000.
If you received an RMD in December 2012 and made a gift to charity any time after the distribution and prior to Feb. 1, you may elect to treat the 2012 distribution as a QCD equal to the lesser of the RMD or the donation up to the $100,000 limit. Special rules are in Publication 590 issued Jan. 31.