IRS provides penalty relief to certain late filers

On March 20, the IRS issued guidance providing penalty relief to both individual and business taxpayers who file for an extension of their 2012 tax return and ultimately owe additional tax — but only if they meet certain criteria. First, the reason for filing for the extension must be that the taxpayer’s 2012 return involved forms whose publication was delayed because of the American Taxpayer Relief Act of 2012 (ATRA), signed into law Jan. 2. Here’s a sampling of the delayed forms:

• Form 8839: Qualified Adoption Expenses
• Form 8863: Education Credits
• Form 3800: General Business Credit
• Form 5884: Work Opportunity Credit
• Form 6765: Credit for Increasing Research Activities
• Form 8844: Empowerment Zone Employment Credit
• Form 8874: New Markets Credit

In addition, the taxpayer must make a good faith effort when filing for the extension to properly estimate the tax liability. Then that estimated amount must be paid by the return’s original due date, and any additional tax owed must be paid by the return’s extended due date.
 
If you’re considering filing for an extension due to delayed IRS forms, please contact us to help ensure you’ll qualify for penalty relief.

Yes, there’s still time to make a 2012 IRA contribution!

The deadline for 2012 IRA contributions is April 15, 2013. The limit for total contributions to all IRAs generally is $5,000 ($6,000 if you were age 50 or older on Dec. 31, 2012). Any unused limit can’t be carried forward to make larger contributions in future years.

So if you haven’t already maxed out your 2012 limit, consider taking advantage of one of these three contribution options by April 15:

1. Deductible traditional. If you and your spouse don’t participate in an employer-sponsored plan such as a 401(k) — or you do but your income doesn’t exceed certain limits — your traditional IRA contribution is fully deductible on your 2012 tax return. Account growth is tax-deferred; distributions are subject to income tax.

2. Roth. Contributions to a Roth IRA aren’t deductible, but qualified distributions — including growth — are tax-free. Income-based limits may reduce or eliminate your ability to contribute, however.

3. Nondeductible traditional. If your income is too high for you to fully deduct a traditional IRA contribution or make the maximum Roth IRA contribution, you may benefit from a nondeductible contribution to a traditional IRA. The account can still grow tax-deferred, and when you take distributions you’ll be taxed only on the growth. Alternatively, shortly after contributing, you may be able to convert the account to a Roth IRA with minimal tax liability.
 
Want to know which option best fits your situation? Contact us.

You don’t have to be a manufacturer to take the “manufacturers’ deduction”

The manufacturers’ deduction, also called the “Section 199” or “domestic production activities deduction,” is 9% of the lesser of qualified production activities income or taxable income. The deduction is also limited to 50% of W-2 wages paid by the taxpayer that are allocable to domestic production gross receipts.

Yes, the deduction is available to traditional manufacturers. But businesses engaged in activities such as construction, engineering, architecture, computer software production and agricultural processing also may be eligible.

The deduction isn’t allowed in determining net self-employment earnings and generally can’t reduce net income below zero. But it can be used against the AMT.

Contact us to learn whether this potentially powerful deduction could reduce your business’s tax liability.

Read my article in the March 2013 issue of Greenville & Columbia magazines

Greenville Business Magazine, see page 14.

http://ipubviewer.com/publication/?i=148963

Columbia Business Monthly, see page 10

http://ipubviewer.com/publication/?i=148984