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Bank Leumi Urges Disclosure to IRS by its U.S. Clients

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Leumi, one of the largest banks in Israel, recently wrote to its U.S. clients urging them to comply with the Internal Revenue Service’s voluntary disclosure program. Leumi and two other Israeli banks, Bank Hapoalim and Mizrahi Tefahot, are under investigation by the U.S. Justice Department in connection with offshore private banking services that may have enabled wealthy Americans to evade taxes. Faced with a federal deficit of roughly 1 trillion dollars, the U.S. government is hungry for more revenue, and has decided to crackdown on overseas tax evasion. If you have an account overseas it would be wise to take advantage of the voluntary disclosure program. Time may be running out.

 To read more about the IRS Voluntary Disclosure Program, click here: IRS Voluntary Disclosure

Court Affirms Mortgage Interest Deduction Limitation for Unmarried Couples

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Under the Internal Revenue Code, mortgage interest is deductible from income, provided that the outstanding mortgage balance is less than $1 million. Similarly, interest payable on a home equity line of credit that is used to finance home improvements is deductible as well, but only up to a loan balance of $100,000. An unmarried couple may at first glance assume that if they each buy half of a $2 million house, they can each fully deduct his or her half of the mortgage interest on his or her individual tax return. This would be true if the $1 million limitation is per taxpayer. A recent U.S. Tax Court case ruled otherwise. [Read more…] about Court Affirms Mortgage Interest Deduction Limitation for Unmarried Couples

Pamela Avraham Achieves Fraud Examiner Certification

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Congratulations to Partner Pamela Avraham on her well-deserved certification as a Certified Fraud Examiner (CFE). It comes as no surprise that Pamela passed all four sections of the CFE exam on the first sitting, as she has used her forensic skills in preventing and detecting fraud for over 25 years. Clients who have gained from her expertise are from a wide range of industries, including medical and health care practices and staffing agencies.

Pamela has also applied her forensic accounting abilities in the reconstruction of books and records for fiduciaries, and has frequently prepared court accountings for executors, trustees and guardians. Her unique expertise and experience is reflected in the outstanding success of the U&A forensic team.

New Year’s Gift from the IRS: 2013 Tax Increases

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While a new year is always cause for celebration, an impending, significant jump in tax rates could dampen this year’s excitement for many. Here’s a brief overview of what lies ahead in 2013:

Higher Tax Rates – The maximum income tax rates next year could be as high as 43.4% on ordinary income and 23.8% on long-term capital gains including the new Medicare Surtax (see following paragraphs). Furthermore, the current 2% payroll (social security) tax reduction is set to expire at the end of 2012 (it was reduced from 7.65% to 5.65%).

Medicare Surtax on Investment Income – 2013 will bring a brand new surtax of 3.8% on net investment income that will apply to certain individuals, trusts and estates. The surtax will apply to taxpayers with modified adjusted gross income of over $250,000 for married taxpayers filing jointly; $125,000 for married taxpayers filing separately; and $200,000 for taxpayers filing single or as head of household.

Medicare Surtax on Wages and Self-Employment Income – In addition to the surtax on investment income, a 0.9% Medicare surtax will apply to wages and self-employment income in excess of $250,000 for married taxpayers filing jointly; $125,000 for married taxpayers filing separately; and $200,000 for taxpayers filing single or as head of household.

 This combination of tax increases may make 2012 the rare year to accelerate rather than defer income. For example, taxpayers in higher tax brackets may want to take salary (or bonuses) in 2012 to avoid the bracket increase in 2013. It may also be advisable to harvest capital gains to avoid the new Medicare surtax on investment income. Of course, anyone who currently qualifies for the 0% capital gains rate, which is scheduled to expire at the end of 2012, should certainly take advantage of this special rate. With all the looming changes as well as uncertainty about what 2013 will bring it would be very advisable to consult with your tax professional before popping the champagne.     

Budgeting for 2013 FUTA Payments

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The “standard” current FUTA tax rate is 0.6%. However, the rate could be higher under certain circumstances. When a state lacks the funds to pay UI benefits, as was the case for New Jersey in 2011 and 2012, it may obtain loans from the federal government. If the loan is not repaid within a certain time period, wages paid in that state are subject to higher FUTA tax rates.

In 2011, as a result of the federal loan, the FUTA rate on New Jersey wages was 0.9% instead of 0.6% on wages up to $7,000. Since New Jersey has not repaid its loan from Uncle Sam in 2012; the rate increases from 0.9% to 1.2% retroactively as of January 1, 2012.

The important issue here is that payments so far in the first three quarters of 2012 were only required at the “standard” rate of 0.6%. The difference between 1.2% and the 0.6% that was actually paid plus the fourth quarter at 1.2% is due January 31, 2013 for all of 2012. If you remember getting hit with a large FUTA deposit requirement in January 2012, the 2013 hit will be double since last year you paid for a 0.3% increase over the “standard” rate and in 2012 you are paying a 0.6% increase over the “standard” rate.

This increase should be taken into consideration by businesses in which labor is a major component of cost of goods sold, such as staffing agencies and construction companies, when doing year end budgeting. Make sure you account for this tax payment in your January 2013 cash flow considerations.

 Unless NJ repays the loan in 2013, the penalty tax will increase again to 0.9% for 2013. You might want to budget for this in your April, July and October 2013 FUTA payments.

 

 

 

 

 

Urbach & Avraham Welcomes Partner Aryeh Levy

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Urbach & Avraham, CPAs would like to welcome new partner Aryeh Levy. Aryeh brings with him over 35 years of public accounting experience, as well as a sterling reputation. His specialties include audits, reviews, compilations and other attest engagements including personal financial statements. Those benefiting from his expertise have included, among others, service, distribution, and manufacturing companies, medical practices, health care firms, real estate ventures (including HUD projects), and retirement planners. Aryeh also has extensive experience in tax planning, and return preparation. He handles multi-state corporate tax issues as well as complex individual income taxes including taxation of individuals and businesses operating overseas. He regularly consults on various accounting and tax issues with accounting firms around the world.

Although Aryeh just recently joined the U&A team he is no stranger to us. Jeff and Pamela have known him, both personally and professionally, for over 30 years. We are most fortunate to have him on board.Article Sponsored Find something for everyone in our collection of colourful https://www.swisswatch.is bright and stylish socks. Buy individually or in bundles to add color to your sock drawer!