Last year the IRS announced several “Fresh Start” initiatives in an effort to help taxpayers facing financial difficulties.  These programs consist of new policies and programs designed to help individuals and small businesses that have outstanding tax liabilities.

Click on the links below for more details of the changes the IRS has made to the lien system and other collection tools:

Increase of Tax Lien Thresholds

Easier Tax Lien Withdrawals

Withdrawal of Tax Liens with Installment Agreements

Installment Agreement Enhancements

Offer in Compromise (OIC)

Penalty Relief for some Taxpayers

Google Apps available to manage money, expenses, invoices, & inventory

Further guidance was recently provided clarifying the informational reporting requirements by employers on the costs of employer-provided health insurance. The Patient Protection and Affordable Care Act (PPACA) required employers to report the costs of employer-sponsored health insurance coverage on employee’s W-2 for tax years beginning after January 1, 2011. Additional relief was later provided extending the reporting requirement for another year, making reporting for 2011 optional.

Among other clarifications, Notice 2012-9 addresses which employers are subject to the reporting requirements. For 2012 and later, an employer is not subject to reporting health insurance costs if they filed fewer than 250 W-2s in the previous calendar year.

In our January 2012 newsletter, HAS alerted our readers to some of the changes affecting employers with the amendments to the Michigan Employment Security Act. The bills signed December 19, 2011 also made changes that will impact those receiving unemployment benefits. Below we have highlighted some of those changes:

• The MES Act requires an individual to be registered for and seeking work to be eligible for benefits. The new bill requires an individual to be ‘actively engaged’ in seeking work and report details of their work search in order to qualify for benefits. The reports submitted must include the name and physical or online location of each employer where work was sought, and the date and method by which the work was sought.
• As of January 15, 2012, after receiving benefits for 50% of the benefit year, work will not be considered unsuitable because it is out of a person’s training or experience if it pays at least minimum wage and 120% of the weekly benefit amount.
• Previously, an individual was disqualified from receiving benefits if he or she left work  voluntarily without good cause attributable to the employer. Under the bill, being absent from work for at least three consecutive work days without contacting employer is considered voluntarily leaving work. In addition, an individual who becomes unemployed as a result of negligently losing a requirement of the job will also be considered to have voluntarily left work.
• An individual claiming to have left work involuntarily for medical reasons must provide a medical professional’s statement that continuing in the current job would be harmful to the individual’s physical or mental health to receive  unemployment benefits. An individual must also show that they have unsuccessfully attempted to secure alternative work with the employer and unsuccessfully attempted to be placed on a temporary leave of absence with the employer.
• Prior to this bill, an individual was considered unemployed for any week of less than full time work if the remuneration received was less than their individual benefit rate. Currently, an individual is considered unemployed if the compensation is less than 1-3/5 times their weekly benefit rate. However, after October 1, 2015 the amount received cannot exceed 1.5 times the benefit rate to be considered unemployed.
• The act requires the weekly rate of an individual to be reduced with respect to each week in which he or she earns or receives remuneration. Previously, the rate had to be reduced by 50 cents for each whole dollar earned. The bill lowers the reduction to 40 cents for each dollar earned until October 1, 2015. At that time it will return to 50 cents.

Most homeowners have become familiar with the energy credits for energy efficient improvements made to their primary residence. Examples of some of these improvements included the purchase of qualified furnaces, air conditioners, insulation, windows, and doors. Unfortunately, many of these credits expired in 2011 and are no longer available. However, there are some energy incentives that are still available.

Click here to learn more about the products eligible for tax credits through 2016.

Most taxpayers deducting and/or reporting IRA contributions on their 2011 tax returns have until April 17, 2012 to fund their accounts.

There could be possible delays in federal tax refunds due to additional security filters that the IRS has installed to combat identity theft fraud.

Many times new tax laws that are enacted to create new or expanded deductions or credits are only temporary. Some recent provisions have already expired  or will expire in 2012, unless Congress extends the current laws.

Below are some examples of the most common provisions that will be expiring December 31, 2012. Click here for a more detailed list of these provisions and their expiration dates.

Individuals

• 10% tax rate for individuals; reduction of other rates
• Reduced capital gain rates
• Child tax credit increase to $1,000 
• American opportunity education credit
• Cancellation of debt income exclusion for principal residence

Business

• 50% additional first-year depreciation
• Section 179 increase in expensing limits to $125,000/$500,000

On February 22, 2012, the Middle Class Tax Relief and Job Creation Act of 2012 was enacted to extend the 2% Social Security payroll tax reduction to the end of 2012. The Temporary Payroll Tax Cut Continuation Act of 2011, passed in late December, temporarily extended the provision that was due to expire at the end of 2011.

There is no action required by employees to received the payroll tax cut and self-employed individuals will report the reduced rate on their 2012 tax return. The new law also repealed the 2% recapture tax was included in the December legislation.

One of the first items to consider when filing an individual tax return is your filing status. An individual’s tax liability is determined by the taxpayer’s filing status. Some taxpayers do not have a choice in this matter while others qualify for more than one status. Those taxpayers will want to choose the filing status that will result in the lowest tax. Click below for a summary of the conditions that must be met for each filing status.

Single
Married Filing Jointly
Married Filing Separately
Head of Household
Qualifying Widow(er)