2012 TAX UPDATE
In 2012, the optional standard mileage rate for business use of a personal vehicle will continue to be 55.5 cents per mile.
FICA Wage Limit
The FICA wage limit for Social Security will increase to $110,100 for 2012.
Social Security Tax Cut―Breaking News
The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extended the 2 percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through February 29, 2012, on which it was scheduled to expire. On Friday, February 17, Congress voted to extend the payroll tax cut through the remainder of 2012. This reduced Social Security withholding will have no effect on employees’ future Social Security benefits.
The VOW to Hire Heroes Act of 2011
In February 2012, the IRS released the guidance and forms that employers can use to claim the newly expanded tax credit for hiring veterans. Read the full story here.
403(b) Thrift Plan Limits―2012
For 2012, participants in the BSA defined benefit pension plan will continue to contribute 2 percent of compensation to the plan with the local council contribution increased to 7 percent.
Maximum contributions for employees to 403(b) Thrifts plans increase to the following limits:
Over Age 50 Contributions
If you have a “nonemployee” who performs a service for you, and he or she is not incorporated, a Form 1099 must be issued if you make payment to them. Examples include all attorneys (regardless of whether they are incorporated or not), independent contractors, commissions paid to salesmen, rent paid to landlords, payments to cleaning services, etc. The law requires that before you issue a check, you must obtain their Social Security number or federal ID number and address (all subcontractors must complete a Form W–9). If they do not complete this form, you are required to withhold taxes from the payment amount. Additionally, if 1099s are not issued when they should be, the IRS could charge you with all withholding taxes due upon audit. Be sure your council is compliant.
W–9 forms are available for download from the IRS; click here. For instructions for filling out the forms, click here.
As always, consult with your state-licensed tax professional before making any tax-related decisions. If you have any questions or comments, please contact Ken Moran with the Fiscal Management Team at 972-580-2311.
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