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December 31, 2012


Payroll Tax Break Expires December 31, 2012

The employee portion of Social Security taxes, which was cut from 6.2% to 4.2% under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 will increase back to 6.2% on January 1, 2013.  The payroll tax cut that employees enjoyed in 2011 and 2012 has not been extended.  As a result of this change, your take-home pay will decline beginning on January 1, 2013.

Hurricane Sandy and National Disaster Tax Relief Act of 2012

On December 10, 2012, Senators Charles Schumer (D-NY) and Robert Menendez (D-NJ) announced the introduction of legislation that would provide for additional tax relief for victims of all FEMA major disasters.  This relief would include:

  •  A full deduction for expenses paid or incurred as a result of disaster cleanup
  • Elimination of the 50% of AGI contribution limit to charitable organizations for qualified disaster contributions
  • Waiving the $100 and 10% of AGI limitations for disaster losses
  • Allowing taxpayers who do not itemize their deductions to increase their standard deduction by the amount of disaster losses
  • Providing a credit to disaster damaged businesses that continued to pay their employees’ wages
  • Allowing disaster victims a five-year carryback for NOLs attributed to disaster losses

The bill has not yet been voted on by Congress.

Eliminating the 2012 Deficit

Individual income tax rates would have to increase by 96% to eliminate the $1.089 trillion deficit from 2012.  Total individual tax revenue collected in 2012 was $1.132 trillion.

Tax Code Changes May Be On the Horizon For Same-Sex Couples

On December 7, 2012, the Supreme Court agreed to review Windsor v. the United States, in which two married women were denied the estate marital deduction because Federal law bars them from being treated as married.   Edie Windsor was forced to pay over $360,000 in estate taxes from the estate of her spouse, Thea Clara Spyer.  Ms. Windsor contests that the estate would not have had to pay these taxes if the definition of marriage did not preclude same-sex couples.  This case will determine whether same-sex couples can claim the estate marital tax deduction or whether same-sex couples can file jointly with the IRS.

Same-sex couples may want to consider filing a protective claim to file a joint Federal tax return.  Under the current statute of limitations, Federal tax returns are able to be amended for three years from the due date or date of filing, whichever is later.  For example, if the statute of limitations on a couple’s 2009 tax returns is set to expire in on April 15, 2013, before the Supreme Court will make its decision, the couple should consider filing a protective claim with the IRS.

Metropolitan Commuter Transit Mobility Tax Constitutionality

The constitutionality of the Metropolitan Commuter Transit Mobility Tax (MCTMT) has been challenged by numerous lawsuits.  All but one have upheld the constitutionality of the tax.  The Nassau Supreme Court decided that the tax was unconstitutional.  The ruling is being appealed by New York State and the Metropolitan Transit Authority (MTA).  All taxpayers are required to continue paying the tax if it is applicable to their specific situation. 

If the tax is deemed unconstitutional, taxpayers will be able to file a claim for a refund of all MCTMT taxes paid in prior years.  As part of our 2012 tax preparation services, we will be filing a protective claim for refund for all of our clients that have paid the tax in prior years.  The protective claim will protect the taxpayer’s right to a refund if the statute of limitations has passed before the case has been decided.

Please contact us with any questions that you may have.

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