2012 & 2013 tax predictions that will save you taxes!

Income tax predictions of what will probably happen to taxes in 2012 and 2013 by Jeffrey Brooks, CPA, CFP, MBA for JBrooks Wealth Advisors, PC, a Professional CPA and CFP Firm jeff@jbrookswa.com 602-687-9900 x101

Here are my predictions based on what I know as of 8-16-2012:

1. The IRS will increase the number of audits of partnerships and S corporations. The current “formulas” the IRS is using to select audits has been a disappointment to the top management of IRS. The formulas are supposed to select the returns with the highest audit potential.
2. Expect higher unemployment tax rates and employer dollars paid out for State Unemployment due to the “empty state coffers” from the high unemployment claims that started in 2008.
3. Due to a recent court case, parents who want to gift corporate stock to their adult children will be able to get special capital gain treatment.
4. Inherited IRAs: Custodians of IRA funds will be more careful to have inherited IRA funds transferred directly to the beneficiary’s IRA account to avoid being taxed on the transfer. The Tax Court in the Beech case (Beech, T.C. Summ. Op. 2012-74) sided with the IRS argument that because the custodian wrote the check to the beneficiary instead of a direct transfer to the beneficiary’s IRA that the funds were taxable.
5. IRS will be more aggressive to apply payroll taxes (social security and medicare taxes) on net profit from rental of property owned by individuals rented to their business. In the past, the IRS didn’t argue that payroll taxes needed to be paid.
6. Some good news: medicare insurance premiums can be deducted by partners and S corporation shareholders as self-employed health insurance on page 1 of the personal tax return form 1040. What is the bad news? 1. The premium must be added to business owners W-2 ( S corporation shareholder) and guaranteed payment (partner in a partnership or member in a LLC Partnership). 2. The businesses must have taxable income that exceeds the medicare premium payments.
7. Although every year, there is always a question whether certain tax benefits will be discontinued (lapse), each year the benefits are reinstated. I predict that the school teacher’s $250 out of pocket reimbursement will be reinstated again. Shari and I have a wonderful daughter Rebecca (Becky) who is a teacher and I know that she spends much more than $250 per year out of pocket for teaching supplies.
8. I predict that the Alternative Minimum Tax will be eased to avoid a massive outcry due to middle income people being entangled in the spider web of the Alternative Minimum Tax.
9. I predict that the write-off for college tuition and related expenses will continue to be allowed. However, many people with higher incomes will still not get any tax benefits.
10. I predict that the up to $100,000 tax free DIRECT transfer from the IRAs of people over 70 ½ will continue although very few people take advantage of this tax loophole. I think this is a good benefit for people who give a lot of dollars to charity. By using their IRAs instead of just writing checks to charity, they are able to reduce their adjusted gross income, which will probably result in less social security income being taxed. Overall, due to the amount of adjusted gross income being used for reducing tax benefits, other tax benefits will be saved.
11. For my restaurants clients: the 15 years life write off of renovations to restaurants should be continued. The National Restaurant Association lobby will make sure this happens.
12. For all businesses that buy a lot of furniture, fixtures and equipment, the ability to expense up to $500,000 should be reinstated. Right now, there is a $139,000 limitation.
Please let me know if you have any questions. Thank you very much! Jeff jeff@jbrookswa.com

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About Jeffrey Brooks

Jeffrey Brooks, CPA, CFP, MBA since 1976 has specialized in helping clients save significant taxes, help businesses increase their cash flow, revenues and profits while increasing their control and satisfaction. Jeff and his accounting firm sincerely cares about the happiness of his clients.

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Address: 4647 N 32nd Street, Suite B245
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Email: jeff@jbrookswa.com