ACT SOON TO CUT YOUR 2012 TAXES

Time is running out to make tax-saving moves for 2012. Here's a sampling of ideas to consider.

HAVE YOU CONSIDERED A SIMPLE PLAN FOR YOUR BUSINESS?

Many sole proprietors and small business owners agree on the following two issues: they pay too much in taxes and they have difficulty attracting and retaining good employees. One way to address both of these issues is to set up a SIMPLE.

HOW TO SUCCEED IN A NEW BUSINESS

If the current job market has you thinking about starting a business of your own, take some steps to increase the odds that your business will succeed.

CHANGES SCHEDULED FOR FLEXIBLE SPENDING ACCOUNTS

Flexible spending accounts (FSAs) are popular with employees because they permit the use of pretax dollars for payment of medical expenses and dependent care costs.

If you use an FSA, be aware that changes are scheduled beginning next year. As part of the health care reform law passed in 2010, there will be a dollar limit on the amount that can be set aside for medical expenses. Effective for plan years starting in 2013, the maximum set-aside for medical expenses will be $2,500.

The limit on what can be set aside for dependent care costs will not change; it remains at $5,000.

Keep an eye on any upcoming legislation that could change these rules again.

IRS EASES REPORTING REQUIREMENT FOR SMALL BUSINESSES

The “Affordable Care Act of 2010” requires employers to report the cost of coverage under an employer-sponsored group health plan on the employee's W-2 for 2012.

The IRS is easing this requirement for small companies. Employers issuing fewer than 250 W-2s will not need to include the cost of health care on W-2s for 2012. For these employers, the 2012 reporting is optional. And such reporting will not apply for future years until the IRS publishes guidance giving at least six months of advance notice of any change in the filing requirement.

INVESTMENT TAX TIP

Consider tax-exempt investments as a means of cutting your income tax. There is an easy way to compare the yield on tax-exempt investments (such as municipal bonds) with the after-tax yield from taxable investments. Subtract your top tax bracket from 100 and divide the tax-exempt interest rate by that number. The result is the equivalent taxable return.

RETIREMENT TAX TIP

Consider a Roth IRA if you qualify for one. The beauty of a Roth is that your investment grows tax-free, and qualified withdrawals from a Roth will be completely tax-free. Contact our office at (518) 798-3330 for more information.