If you are a high-income household making more than $400,000 (single) or $450,000 (married filing joint), your tax bracket will be up to 39.6% from 35%. However, this will not affect your 2012 income tax return. Those in the new high tax bracket will also be subject to a capital gains rate of 20% – up from 15% as well as the 3.8% surcharge from the Affordable Care Act.

In a speech following the congressional vote, President Barack Obama declared that the changes pushed through will not affect 98% of Americans.

In the fiscal cliff legislation, the Pease itemized deduction phase-out is reinstated and the personal exemption phase-out will be reinstated. The thresholds are $300,000 for married filing joint, $275,000 for head of household, and $250,000 for single. This means that if you make that kind of money, you will not be allowed to take all of your itemized deductions. Your personal exemptions – another subtraction from your income before taxes are calculated – will be reduced.

Employees’ net pay is also now 2% lower as the payroll tax holiday was allowed to expire. This means the full 6.2% of Social Security will now be withheld from your pay. The holiday lasted two years, and this increased percentage will help continue funding to the Social Security system. The wage ceiling on which Social Security is taxed has been increased to $113,700. Medicare tax is unlimited, but if you earn more than $200,000 an additional 0.9% will be withhold.

Congress patched the Alternative Minimum tax and adjusted it for inflation, which will keep taxes lower for the 60 million Americans that would have been affected.

While Congress did take a scalpel to some tax deductions  others were left untouched and extended through 2013:

  1. Discharge of qualified principal residence exclusion. Filers going through a foreclosure or short sale who may have had loan forgiveness should look into this as it will exclude most, if not all, of the forgiven amount from taxable income
  2. Educators may continue to deduct $250 in related job expenses as an adjustment to income
  3. Mortgage insurance premiums may be deducted as mortgage interest
  4. The deduction for state and local sales taxes may still be taken
  5. The $1,000 Child Tax Credit, the enhanced Earned Income Tax Credit, and the enhanced American Opportunity Tax Credit will all be extended through 2017;
  6. Tuition costs may be deducted as an adjustment to income
  7. IRA-to-charity exclusion from taxable income remains including a special provision that allows transfers made in January 2013 to be treated as made in 2012.

Beginning on Jan. 1, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be 56.5 cents per mile for business miles driven, 24 cents per mile driven for medical or moving purposes, and 14 cents per mile driven in service of charitable organizations.

By Bonnie Lee – Enrolled Agent


J Mark Olson CPA Inc is pleased to announce that we have formed an alliance with Lyndon Group (www.Lyndon-Group.com) to better serve our clients.  Together we form a boutique management consulting firm with finance & accounting professionals serving companies in your industry throughout Southern California and beyond.

Our practice leaders are Big 4 CPAs or MBA graduates of the nation’s leading business schools. Our professionals have provided services for small to medium sized businesses and to the Fortune 1000 companies.  Their hands-on expertise, backed by our support system, positions us as a leading provider of high-quality results.  The following is a partial list of our services:

  • Part-time & Interim CFO and Controller
  • Accounts Receivable | Credit & Collections | Travel & Entertainment
  • Financial Statement Audits & Reviews of Private Companies
  • Internal Audits & Internal Audit Support
  • Individual, Corporate and Partnership Tax Returns
  • Budgeting and Planning
  • IT Assessments | Leadership | System Selection and Implementations
  • Financing | Turnarounds
  • Year-end Audit Preparation | Reconciliations
  • Financial Statements | SEC Reporting | IFRS
  • Internal Control | Sarbanes Oxley
  • Board positions

For further information or to schedule a free no-obligation meeting, please call Mark Olson at (310) 330-6479 or email him at mark@markolsoncpa.com

Now is a good time for companies to prepare for their year-end audits.  However, many companies are unprepared.  Depending upon the company is and it’s complexity, it can take several weeks to months to be prepared for the audit.

You should consider the following action items and questions before you start:

  1. Start early.
  2. Select your CPA firm early.
  3. Do you have enough qualified resources?
  4. Are your financial statements prepared in accordance with GAAP?
  5. Have you prepared the required footnote disclosures?
  6. Were there any significant changes in your business from prior years?
  7. Will this be a first time audit or review?
  8. Will this be a multi-year audit?
  9. Do you have time to adequately supervise and review?
  10. Did you have a system conversion?  If so, did it go well or not?
  11. Bring in outside expertise.

Oftentimes, outside expertise is the best solution, since it enables your current staff to focus on their day-to-day activities and you simply cannot devote the required amount of time to the audit.

We specialize in helping companies prepare for their year ends.  Please call us at (310) 330-6479 or email us at mark@markolsoncpa.com to discuss your company’s needs.