With the ringing in of the New Year, several new tax provisions took effect.
Inflation Adjustments
- The applicable amounts for many tax items increased on Jan. 1, due to annual inflation adjustments. Revised tax tables are in effect, as well as an increased personal exemption amount (now $3,800) and standard deduction amounts.
- The Social Security wage base for 2012 is $110,100.
- The standard mileage rate for business use of an automobile remains at 55½ cents per mile for 2012; for medical and moving expenses it decreases to 23 cents per mile (Notice 2012-1), down a half-cent from the second half of 2011
- The estate and gift tax lifetime exclusion increases to $5.12 million for 2012.
Capital Gain and Loss Reporting Taxpayers will have to report new information on Form 1040, Schedule D, Capital Gains and Losses, and file a new form, Form 8949, Sales and Other Dispositions of Capital Assets, to report gains and losses of certain capital assets.
Veterans Work Opportunity Credits Employers will be eligible for a credit of up to $9,600 for each qualified veteran that they hire after the law’s enactment date (Nov. 21, 2011) and before Jan. 1, 2013.
Under the returning heroes tax credit, an employer may be eligible for a credit of up to $2,400 for hiring a veteran who has been unemployed for at least four weeks and up to $5,600 for hiring a veteran who has been unemployed for more than six months. Under the wounded warriors tax credit, an employer may be eligible for a credit of up to $9,600 for hiring a veteran with a service-connected disability who has been unemployed for more than six months and up to $4,800 for hiring a veteran with a service-connected disability (who does not meet the returning hero credit requirements) or who qualifies as a food stamp recipient.
Bonus Depreciation The 100% first-year bonus depreciation provision expired on Dec. 31, but 50% bonus depreciation is available for property placed in service in 2012.
Voluntary Classification Settlement Program A new voluntary classification settlement program (VCSP) introduced in September (Announcement 2011-64) allows eligible taxpayers to voluntarily reclassify their workers as employees for federal employment tax purposes for future tax periods while receiving relief for part of the tax liability relating to the past treatment of the workers as nonemployees. Taxpayers are eligible if they have consistently treated the workers as nonemployees, filed all required Forms 1099 for the previous three years, are not currently under IRS audit, are not currently under audit by the U.S. Department of Labor or a state agency, and complied with the audit results if the taxpayers were previously audited by the IRS or the Department of Labor.
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