RUTHERFORD & JOHNSON, P.C.

Certified Public Accountants & Business Advisors

 

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Tips for Accumulating Tax Data

Below are a few additional "hot topics" our clients are always asking about, such as mileage rates, social security benefits, tax rates, etc.

Changes for 2011, include changes in the mileage rates as well as changes to the FUTA rates and Social Security Limits

Three Percent Withholding Repeal and Job Creation Act
Health Care Reform Act
Standard Deduction & Personal Exemption Increase
Gift Tax Exclusion
Social Security Limits  
Financial Planning Process
Record Retention Schedule
Current Mileage Rates  
Minimum Wage Rate  
Retirement Plans
Health Savings Accounts
FUTA Rate Change

Standard Deduction and Phase-Out Levels

 Standard Deduction

The basic standard deductions are:

2012

2011

Married, filing joint return

$11,700

$11,600

Surviving spouse

$11,700

$11,600

Head of Household

$8,700

$8,500

Unmarried (not surviving spouse or head of household)

$5,950

$5,800

Married, filing separate return

$5,950

$5,800

"Kiddie" standard deduction alternative amount

$950

$950

The additional standard deduction amount for the aged and blind (if the individual is also unmarried and not a surviving spouse, $1,450 in 2011 and 2012). $1,150 $1,150

Personal Exemption Amounts

2012 2011
Personal exemption amounts $3,800 $3,700

 

Gift Tax Exclusion

The annual gift tax exemption remains at $13,000 in 2011 and 2012.

 

Social Security Limits

The social security tax rate has been reduced to 4.2% for the employee portion, but remains at 6.2% for the employer portion in 2011.

The Medicare tax rate remains at 1.45% for both employee and employer.

 
2012 2011
Social Security Wage Base

$110,100

$106,800

Medicare

No Limit

No Limit

 

The Maximum Amount of Earnings and Still Receive Full Benefits

   2012

          2011

Under Full Retirement Age

 $14,640

        $14,160

Over Full Retirement Age

 No Limit

        No Limit
Full retirement age (also called "normal retirement age") has been 65 for many years. However, beginning with people born in 1938 or later, that age will gradually increase until it reaches 67 for people born after 1959. 

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Record Retention Schedule

Retain Indefinitely

Audit reports

Capital stock and bond records, ledgers, transfer registers, stubs showing issues, record of interest coupons, options, etc.

Cash books

Charts of accounts

Checks (canceled for important payments, i.e. taxes, purchases of property, special contracts, etc.) (filed with transaction papers)

Contracts and leases in force

Copyrights, patents, trademark registrations

Corporation charter, minute books and bylaws

Correspondence (legal and important matters only)

Deeds, mortgages, easements and other property records

Depreciation schedules

Financial statements (end-of-year, other months optional)

General ledgers and journals

Insurance records, current accident reports, claims, policies, etc.

Property appraisals

Property records - including costs, depreciation reserves, end-of-year trial balances, blueprints and plans

Tax returns and work papers, including records to support carrybacks and carryovers

Retain 7-8 years

Accident reports and claims (settled cases)

Accounts payable ledgers and schedules

Accounts receivable ledgers and schedules

Bank statements

Canceled checks (except checks kept permanently)

Contracts and leases (expired)

Expense analysis and expense distribution schedules

Inventories of products, materials and supplies

Invoices to customers

Invoices from vendors

Maintenance and repair records (buildings and machinery)

Notes receivable ledgers and schedules

Option records (expired)

Payroll records and summaries, including payments to pensioners and timesheets

Plant cost ledgers

Purchase orders (purchasing department copy)

Sales records

Scrap and salvage records (inventories, sales, etc.)

Subsidiary records

Time books

Voucher register and schedules

Vouchers for payments to vendors, employees, etc. (includes allowances and reimbursement of employees, officers, etc. for travel and entertainment)

Retain 6 years

Commission reports

Employee disability benefits records

Employee withholding tax statements

Equipment leases (after expiration)

Fire damage reports

Monthly trial balances

Retain 2 years and less

Purchase orders (except purchasing department copy)

Receiving sheets

Requisitions

Stenographer's notebooks

Stockroom withdrawal forms

* The above listing is only a guide and is not all inclusive. If you have any questions or need additional information, please contact us at (540) 662-7070.

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Current Mileage Rates

The standard mileage rate for business mileage (in lieu of using actual expenses), as well as the standard rates for use of your car for medical and moving or charitable purposes are as follows: 

 

1/1/11-6/30/11

7/1/11-12/31/11

2012

Business 51 cents/mile 55.5 cents/mile 55.5 cents/mile
Medical & Moving 19 cents/mile 23.5 cents/mile 23.5 cents/mile
Charitable 14 cents/mile 14 cents/mile 14 cents/mile

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Current Minimum Wage Rate

The current federal minimum wage for covered nonexempt employees is $7.25 per hour effective July 24, 2009.
 

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Retirement Plans

Below are the annual contribution limits on elective deferrals for retirement plans.

Indexed Contribution & Benefit Limits for Qualified Plans
Type of Plan 2012 2011
Individual Retirement Accounts (IRAs)* $5,000 $5,000
Section 401(k) plans or SAR-SEPs* $17,000 $16,500
Section 403(b) plans* $17,000 $16,500
Section 408(p)(2)(E) SIMPLE Contributions* $11,500 $11,500
Section 457(b)(2) limit* $17,000 $16,500
Section 415 limit for:
      Defined contribution plans^ $50,000 $49,000
      Defined benefit plans $200,000 $195,000
Highly compensated employees Section 414(q) $115,000 $110,000
Top Heavy Key Employee Officer compensation limit $165,000 $160,000
Governmental "Grandfathered" plan compensation limit $375,000 $360,000
      *Age 50 Additional contributions
      401(k) type plans $5,500 $5,500
      SIMPLEs $2,500 $2,500
      IRAs $1,000 $1,000
      ^The Section 415 compensation limit for defined contribution plans is $250,000 for 2012 and $245,000 for 2011.

Roth IRAs --- 2012 & 2011

- Nondeductible Contributions
- Qualified tax-free distributions
- AGI limit for maximum contributions: 2012 2011
  Joint filers $173,000 $169,000
  Individual filers $110,000 $107,000

 

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Health Savings Accounts

Contribution Limits 2012 2011
Individual, self-only $3,100 $3,050
Family Coverage $6,250 $6,150
Catch-up for those age 55 and older $1,000 $1,000

For 2011 and 2012, the minimum deductible for a high-deductible health plan (HDHP) is $1,200 for self-only coverage and $2,400 for family coverage.  The maximum out-of-pocket limit is $5,950 in 2011 and $6,050 in 2012 for self-only coverage and $11,900 in 2011 and $12,100 in 2012 for family plans.

 

Health Care Reform Act

While recent legislation concerning the Health Care Overhaul is comprehensive, the complete effect has not been determined.  This link provides a summary of the major changes and the applicable time table.  More updates will be added as they are received.

 

FUTA Rate Change

Effective July 1, 2011, the FUTA tax rate will decrease from 0.8 % to 0.6% for all employers as a result of the 0.2% surtax not being extended.  However, there is also a .3% credit reduction calculation in effect for the entire calendar year 2011.  If you have any questions please contact us.