With a contentious summer of debate in the rear-view mirror and a presidential election on the horizon, we could see a number of tax changes in 2012, including the retroactive extension of a handful of incentives that expired at the end of 2011: state and local sales tax deduction, higher education tuition deduction, charitable distributions from IRAs, a deduction for teachers’ classroom expenses, the research tax credit, and multiple energy credits.
While Congress reconvenes with a full plate of tax issues to debate, it is a good time to recall the tax changes that were enacted in 2011. Among them are:
Temporary extension of the payroll tax cut. The employee portion of the Social Security tax was lowered from 6.2 percent in 2010 to 4.2 percent in 2011, and it will remain at 4.2 percent through at least February 2012. Click here for more information.
Repeal of certain 1099 reporting requirements. The healthcare reform of 2010 included expanded reporting requirements that threatened to overwhelm small businesses, so in April 2011 President Obama agreed to repeal two provisions related to IRS Form 1099. Click here for more information.
Expanded tax credit for hiring unemployed veterans. A portion of the Work Opportunity Tax Credit was expanded to allow a greater credit for employers who hire unemployed veterans. Click here for more information.
New tax credit for investing in Ohio small businesses. The InvestOhio credit is a dollar-for-dollar reduction in state income tax and can be carried forward for up to seven years. Click here for more information.
Expiration of a federal unemployment surtax. The 0.2 percent surtax, which had been tacked onto the 6 percent federal unemployment tax (FUTA) since 1975, expired July 1. Unfortunately for employers in Ohio and Kentucky, any savings were negated by a reduction in FUTA credit that took effect January 1, 2012. Click here for more information.
Increased tracking of offshore accounts. In an attempt to generate more tax revenue from American taxpayers with foreign accounts, the federal government stepped up enforcement of Foreign Bank Account Reporting and created separate reporting requirements through the Foreign Account Tax Compliance Act. Click here for more information.
Compliance program for misclassified workers. The federal government has increased its efforts to catch and penalize employers that improperly classify workers as “independent contractors” rather than “employees.” The IRS announced a voluntary compliance program that would allow such employers to properly classify their employees and avoid significant penalties. Click here for more information.
As always, the Barnes Dennig tax team will monitor legislative changes and keep you abreast of any that impact you and your organization. If you have any additional questions, please contact your Barnes Dennig tax representative at (513) 241-8313.