Tax Time Tips

§ Well, we all survived the tumble off the fiscal cliff. Unless you are an individual earning more than $400,000 or a married couple earning more than $450,000, the primary impact was the elimination of the 2% payroll tax holiday. The federal estate tax continues to exempt $5 million per decedent and if a married decedent does not use the full $5 million, the unused portion can be tacked onto the surviving spouse's $5 million exemption. The gift tax reporting exclusion increases to $14,000 per beneficiary per year. Gift tax and generation skipping transfer tax also exempt up to $5 million per donor. These exemptions are now permanent and will not sunset.
§ Turning to income tax, the IRS announced at tax school that they will be targeting education credits and charitable contributions for audit this year. If you claim more than $25,000 in charitable contributions, the chances are very high that you will be selected for an in-person audit. You must have a contemporaneous written receipt for each donation over $250 to a particular charity. In-kind contributions valued at more than $5,000 require an independent appraisal. Education credits will be audited with enhanced 1098-T matching.
§ IRS is also stepping up compliance audits on partnerships and S-corporations.
§ As was the case last year, penalties are draconian if you fail to report income on any assets you hold outside of the United States.
§ IRS continues to see an increase in fraudulent tax return filing. Your best defense against someone filing a return with your SS# is to file your own return first. However, IRS will not be accepting any tax returns before January 30, but promises to have all tax forms approved by March 19. The deadline for farmers and fishermen to file their returns without penalty for failure to estimate has been extended to April 15. Tip to college student parents: “Balance due” tax returns will not be available for download to FAFSA until June 1 this year, so if this affects you, make estimated tax payments or increase your withholding if you generally pay with your return.
§ IRS requires mileage logs for vehicles with business use; standard mileage rates for 2012:
* * * * * * * * * * * * * Federal * * * * * * * * * * * * * *Iowa
Business: . . . . . . . . . . 55.5¢/mi. . . . . . . . . . . . . . 55.5¢/mi.
Medical & moving: . . . . . 23¢/mi. . . . . . . . . . . . . . 23¢/mi.
Charitable . . . . . . . .. . 14¢/mi. . . . . . . . . . . . . . . 39¢/mi.
§ You are required to send a Form 1099 to any individual, partnership or LLC that you paid $600.00 or more for services, rent or interest. Payments to cooperatives, banks and other corporate entities are excluded. Wages in excess of $150 in any quarter require the filing of Forms W-2 and W-3.

Dual Represntation

_____Representation of both buyers and sellers in a real estate transaction gives rise to apparent, potential, and actual conflicts of interest. An attorney may provide legal services in such a situation only if there has been a full disclosure of the conflict of interest in writing and an explicit waiver of any actual or potential conflict of interest by the parties involved. Potential risks of waiving any objection to the conflict of interest include the following: ___1....Should a legal dispute arise between the buyers and the seller, I would be prohibited from rendering further legal services for either party in this matter. ___2....Information that would otherwise be protected by attorney-client confidentiality may be disclosed to the opposing party as a result of dual representation. ********************************************************** ______I do not recommend such dual representation, but it is not unheard of in rural Iowa, where relatively small stakes and economy often take precedence over an abundance of caution. In such situtations you should treat me as if I am working for the other side, because I am, regardless of who is paying the bill. ************************************************************* ______You are advised to seek independent legal advice regarding whether you should waive any actual or potential conflict of interest. You should not sign any document that you do not fully understand.