3. If you are self employed, what is the best retirement plan to invest in and what are the maximum amounts each year?
If you are a self-employed individual, there are several retirement plan options to choose from. The plans allowing for the highest contribution amount are a SEP/Keough or an Owners 401(k). For tax year 2012, both options allow for a maximum contribution of $50,000 if you are less than 50 years old. There are also other options available such as a SIMPLE IRA, Traditional IRA, or Roth IRA which provide lower maximum contribution amounts. Some of these plans allow for a contribution to be made after the end of the year for the preceding tax year. Please consult with your tax advisor to determine what, if any, contributions you may be eligible to make. You will also need to find a financial advisor to assist in setting up your plan and determining where to invest your funds.
4. What changes can we expect when filing in 2013?
As with all things related to tax law, it depends. Based on the information that is available at this time, there are many things that are set to expire at the end of 2012 including the Bush era tax cuts as well as provisions that expired at the end of 2011. These could have a negative impact on most taxpayers. As you are reading this you probably know more about what the future holds then I do, currently. Some of the items that are set to expire at the end of 2012 absent action by Congress include the elimination of the 10% tax bracket, the marriage penalty will be back in effect, an increase in the preferential rate for long-term capital gains, the child tax credit will fall from $1,000 per child to $500, and Section 179 expensing provisions for assets placed in service in 2012 reduced to a maximum of $25,000 per year, down from $139,000.
At the end of 2011, several provisions expired due to no action by Congress including the deduction for state and local sales tax as an itemized deduction, the itemized deduction for mortgage insurance, Section 179 expensing provisions for assets placed in service in 2011 reduced to a maximum of $139,000 per year, down from $500,000, and the above-the-line deduction for certain expenses of elementary and secondary school teachers was eliminated. If you have concerns about how these changes will affect you, please contact your tax advisor or feel free to call our office and make an appointment.
Allison Reynolds is a CPA employed by Terry Horne, CPA & Associates. She can be reached at 444-7293 or go to www.hornecpa.com for more information.