A Doeren Mayhew Quarterly Newsletter
Winter 2012
the
Competitive Edge
Looking Back: Top 10 Federal
Tax Developments of 2011
Looking back over 2011, the IRS,
Congress, and the courts made many
tax decisions impacting taxpayers of all
types. Some tax developments were
taxpayer-friendly; others imposed new
requirements on taxpayers. Following is
a brief rundown of the top 10 federal
tax developments of 2011.
1. Bush-Era Tax Cuts Unresolved
Inside This Issue Reduced individual income tax rates,
marriage penalty relief, an enhanced
child tax credit, and much more are part
1 Top 10 Federal Tax
Developments of 2011 of a package of tax breaks known as the
“Bush-era tax cuts.” All of these
3 Payroll Tax Cut Extended
Two Months
incentives were renewed in 2010 and
are scheduled to expire after 2012.
President Obama wants to allow the
4 Early Planning Can Make
2012 Filing Season Easier Bush-era tax cuts to expire for higher have ratcheted-up their oversight of
income individuals, which the White foreign accounts. In December 2011,
5 Doeren Mayhew Helps
Women Dress for Success
House broadly defines as single persons the IRS issued final Form 8938,
with incomes over $200,000 and Statement of Specified Foreign Assets,
families with incomes over $250,000.
6 Doeren Mayhew 2nd Annual
Food Drive a Success In the summer of 2011, the White
which taxpayers will file to report
foreign accounts (if they meet certain
House and the GOP reportedly came requirements). The IRS also issued
close to an agreement but nothing guidance in 2011 for foreign financial
materialized. The fate of the Bush-era institutions about their reporting
tax cuts will likely be one of the major obligations under FATCA. In related
issues in the 2012 presidential election. news, the Treasury Department issued
2. Foreign Account Reporting final rules on Form TD-F 90-22.1,
Oversight Increases (Continued on page 2)
Since passage of the Foreign Account
Tax Compliance Act (FATCA) in 2010,
the Treasury Department and the IRS
Doeren Mayhew 1
The Competitive Edge — Winter 2012
(Top 10 Federal Tax Developments of federal employment tax purposes and 8. IRS Continues Fresh Start Initiative
2011 – Continued from page 1) take advantage of a reduced penalty During 2011, the IRS continued its
framework. The Voluntary Fresh Start Initiative, which the
Report of Foreign Bank and Financial
Classification Settlement Program agency explains is its response to the
Accounts (FBAR) in February 2011.
(VCSP) is open to employers currently economic slowdown. The Fresh Start
Lastly, the IRS launched a new
treating their workers as independent Initiative allows lien withdrawals for
campaign in 2011 to encourage
contractors and who want to taxpayers entering into direct debit
taxpayers to voluntarily disclose
prospectively treat the workers as installment agreements (and for
unreported offshore accounts. The
employees. The employer must not be taxpayers who convert from a regular
2011 Offshore Voluntary Disclosure
under audit and satisfy other installment agreement to a direct debit
Initiative (OVDI) rewarded taxpayers
requirements. The IRS has not agreement). The IRS also announced it
who came forward voluntarily with a
announced an end-date to the VCSP. would make streamlined installment
reduced penalty framework (although
agreements available to more small
not as generous as a similar program 6. IRS Makes Mid-Year 2011
businesses. Qualified small businesses
in 2009). Adjustment to Business Standard
with $25,000 or less in unpaid taxes
Mileage Rate
3. Payroll Tax Cut Extended Two can participate in the streamlined
For the third time in six years, the IRS
Months installment agreement program.
announced a mid-year adjustment to
President Obama signed the Temporary
the business standard mileage rate 9. Basis Overstatement Regs
Payroll Tax Cut Continuation Act of
because of rising gasoline prices. The The Supreme Court agreed in
2011 in December 2011. The new law
business standard mileage rate September 2011, to resolve a split
extends the employee-side payroll tax
increased from 51 cents-per-mile to among the federal courts of appeal over
cut through the end of February 2012.
55.5 cents-per-mile for the second half IRS regulations that impose a six-year
The two-month extension is intended
of 2011. The medical/moving standard limitations period on assessments due
to give Congress additional time to
mileage rate increased from 19 cents- to overstated basis. The IRS asked the
negotiate a longer-term extension of
per-mile to 23.5 cents-per-mile for the Supreme Court to decide, among other
the payroll tax cut to cover all of
second half of 2011. Congress did not questions, whether an understatement
calendar year 2012.
make a mid-year adjustment to the of gross income attributable to an
4. Cell Phones Removed From charitable standard mileage rate, which overstatement of basis in sold property
Listed Property Category remained at 14 cents-per-mile for the is an omission from income that can
The Small Business Jobs Act of 2010 second half of 2011. For 2012, the trigger the six-year assessment period.
removed cell phones from the business standard mileage rate is 55.5
10. Congress Bans Tax Strategy
definition of “listed property.” That cents-per-mile and the medical/moving
Patents
category generally requires additional standard mileage rate is 23 cents-per-
In September 2011, President Obama
recordkeeping by taxpayers. In mile. The statutorily-determined
signed the America Invents Act. The
September 2011, the IRS issued charitable standard mileage rate
new law is a comprehensive overhaul
guidance on the treatment of employer- remains at 14 cents-per-mile for 2012.
of the nation’s patent laws. The new
provided cell phones as an excludible
7. FUTA Surtax Expires law treats any strategy for reducing,
fringe benefit. When an employer
In 1976, Congress enacted the 0.2 avoiding, or deferring tax liability as
provides an employee with a cell
percent FUTA surtax to help repay prior art under patent law and
phone primarily for noncompensatory
federal revenues paid in unemployment therefore not patentable.
business reasons, the business and
benefits. The Worker, Homeownership,
personal use of the cell phone is
and Business Assistance Act of 2009
generally nontaxable to the employee
extended the surtax through 2010 and
and the IRS will not require
the first six months of 2011.The 0.2
recordkeeping of business use to
percent FUTA surtax expired after June
receive this tax-free treatment.
30, 2011. In December 2011, the IRS
5. IRS Launches Voluntary released Form 940, Employer’s Annual
Classification Settlement Program Federal Unemployment (FUTA) Tax
In September 2011, the IRS launched Return, and accompanying schedules,
a new program to enable employers to for 2011. Form 940 for 2011 reflects the
voluntarily reclassify their workers for mid-year expiration of the FUTA surtax.
2 Doeren Mayhew
The Competitive Edge — Winter 2012
Payroll Tax Cut Extended Two Months; Other Temporary
Incentives Expire
As 2012 gets underway, Congress has Extenders
extended the employee-side payroll tax After December 31, 2011,
cut but a laundry list of tax incentives many popular but
have expired and their renewal is in temporary tax breaks
doubt. The fate of these incentives, expire. The incentives,
along with the Bush-era tax cuts, will which are known as
dominate debate in Washington D.C. in “extenders,” impact
2012. At the same time, tax planning individuals and
in a time of uncertainty appears to businesses. Some of the
have become the new normal. more popular individual
extenders are the state and
Payroll Tax Cut
local sales tax deduction,
The Temporary Payroll Tax Cut
the higher education
Continuation Act of 2011, approved by
tuition deduction, and
Congress on December 23, and signed
the teachers’ classroom
by President Obama the same day,
expense deduction. For
extends the 2011 payroll tax holiday
businesses, the research
through the end of February 2012. The
tax credit is one of the
employee-share of OASDI taxes is 4.2 budget for the IRS. Congress voted to
most important extenders.
percent for the period January 1, 2012, cut $305 million from the IRS’s FY
One immediate change that many
through February 29, 2012 (10.4 percent 2012 budget. How this cut will impact
taxpayers will notice is a drop in
for self-employment income). The new IRS operations is unknown. In
transit benefits. In 2011, commuters
law also includes a recapture provision November 2011, the IRS offered
benefitted from more generous transit
for certain individuals. However, the buyouts and early outs to back-office
benefits. The 2011 monthly limit on
House Ways and Means Committee employees to reduce its greatest
the tax benefit for transit and vanpools
reported that the recapture provision will expense: employee payroll. The IRS
of $230 per month reverts to $125 per
only apply if the payroll tax reduction is could also delay some business
month in 2012. However, the monthly
not extended for the remainder of 2012. systems modernizations to save
limit for qualified parking provided by
Lawmakers are expected to extend the money. The IRS will likely keep
an employer to its employees for 2012
employee-side payroll tax cut through customer service as close as possible
will increase to $240, up $10 from the
the end of 2012, although not before to full funding, especially during the
limit in 2011.
difficult negotiations. busy 2012 filing season.
Several bills have been introduced
One speed bump to extending the
in Congress to extend the expiring Tax Planning
payroll tax cut through the end of 2012
incentives. However, the bills have One of the most significant challenges
is its cost. The two-month extension is
languished in committee. One reason to long-term tax planning is the on-
paid for by increasing certain fees
for the lack of movement is that again, off-again nature of many tax
charged to mortgage lenders. A full-
Congress can extend the incentives in incentives. Temporary incentives, such
year extension will require additional
2012 and make them retroactive to as the research tax credit and the state
offsets. Lawmakers are reportedly
January 1, 2012. The extenders are and local sales tax deduction, have
discussing additional revenue raisers,
also separate from the temporary become de facto permanent incentives
such as unspecified changes to the
Bush-era tax cuts, which are scheduled because they are regularly extended.
S corporation rules and the closing of
to expire after December 31, 2012. Nonetheless, they are temporary.
a loophole for corporate jets. Other
Many lawmakers do not want to link Because of their temporary nature,
revenue raisers reportedly under
the extenders to the more-controversial taxpayers must have two tax plans:
consideration are repeal of certain oil
Bush-era tax cuts. one that takes into account an
and gas preferences and repeal of the
last-in, first-out method of accounting. IRS Budget extension of the incentives, and a
A variety of spending cuts are also on One bill that did pass Congress at second plan that does not.
the table. year-end 2011 was a fiscal year 2012
Doeren Mayhew 3
The Competitive Edge — Winter 2012
Early Planning Can Make 2012 Filing Season Easier
The new year brings a new tax filing
season. Mid-April may seem like a
long time away right now, but it is
important to start preparing now for
filing your 2011 federal income tax
return. The IRS expects to receive
and process more than 140 million
returns during the 2012 filing season.
Early planning can help avoid any
delays in the filing and processing of
your return.
Records
Initially, you will need to gather your
records for 2011. A helpful jumping-
off point is to review your 2010
return. Your personal situation may be
unchanged from when you filed your
2010 return or it may have changed
significantly. Either way, your 2010
return is a good vantage point for
assembling the materials you will
need to prepare your 2011 return.
If you need a copy of your
previous year(s) return information,
you have several options. You can Forms W-2 due date for 2011 returns is April 17,
order a copy of your prior-year Many taxpayers cannot begin 2012. If the mid-April tax deadline
return. Alternatively, you may order a preparing their 2011 income tax clock runs out, you can get an
tax return transcript or a tax account returns until they have their Forms automatic six-month extension of
transcript. A tax return transcript W-2, Wage and Tax Statement. time to file through October 17.
shows most line items from your Employers have until January 31, However, this extension of time to
return as it was originally filed, 2012, to send you a 2011 Form W-2 file does not give you more time to
including any accompanying forms earnings statement. If you do not pay any taxes due. To obtain an
and schedules. However, a tax return receive your W-2 by the deadline, extension, you need to file Form
transcript does not reflect any contact your employer. If you do not 4868, Application for Automatic
changes you or the IRS made after receive your W-2 by mid-February, Extension of Time to File U.S.
the return was filed. A tax account contact the IRS. You still must file Individual Income Tax Return.
transcript shows any later your return or request an extension to
Casualty Losses
adjustments you or the IRS made file even if you do not receive your
Many taxpayers experienced family,
after the tax return was filed. Form W-2. In certain cases, you may
business, and personal losses from
If you changed your name as a be able to file Form 4852, Substitute
hurricanes, tropical storms, wild fires,
result of marriage or divorce since for Form W-2, Wage and Tax
floods, and other natural disasters in
you filed your 2010 return, you must Statement.
2011. For federal tax purposes, a
advise the IRS. Your name as it
Filing Deadline casualty loss can result from the
appears on your return needs to
April 15, 2012, is a Sunday. Returns damage, destruction, or loss of your
match the name registered with the
would normally be due the next day, property from any sudden, unexpected,
Social Security Administration. A
April 16, 2012. However, April 16 is or unusual event such as a hurricane,
mismatch will likely delay the
a holiday in the District of Columbia tornado, fire, or other disaster.
processing of your return.
(Emancipation Day). As a result, the
(Continued on page 5)
Doeren Mayhew 4
The Competitive Edge — Winter 2012
(Early Planning Can Make 2012 employer retirement plan, this will relying solely on Social Security, or
Filing Season Easier – Continued affect how much, if any, of your is paying significant medical bills.
from page 4) contribution is tax deductible. If you are experiencing hardship,
Individuals age 50 and older may the most important thing you can do
Casualty losses are generally
qualify for a catch-up contribution of is to remain in compliance with your
deductible in the year the casualty
$1,000 on top of the $5,000 tax obligations. If you owe back
occurred. However, if you have a
maximum. Different rules apply to taxes, now is the time to pay them, if
casualty loss from a federally-
other types of retirement savings possible, or enter into an installment
declared disaster, you can choose to
plans. Our professionals can review agreement, if you qualify, with the
treat the loss as having occurred in
these rules in detail with you. IRS. The IRS wants to see you
the year immediately preceding the
making a good faith effort to pay
tax year in which the disaster IRS Fresh Start Initiative
your taxes.
happened. This means you can In 2011, the IRS announced a new
deduct a 2011 loss on your 2011 program, called the Fresh Start Tax Law Changes
return or amended return for that Initiative, to help distressed Along with assembling records and
preceding tax year (2010). If you taxpayers. The IRS adjusted its lien reviewing activities in 2011, it’s a
have any questions about a casualty policies, increased the dollar good idea to review some of the tax
loss, please contact our office. threshold when liens are generally law changes in 2011 that may affect
issued, made it easier for taxpayers to your return. Our tax professionals
Retirement Savings
obtain lien withdrawals, and can review your 2010 return and see
Just because the calendar moved
extended the streamlined offer-in- which areas may have been affected
from 2011 to 2012 doesn’t
compromise program. Previously, the by tax law changes for your 2011
necessarily mean you missed out on
IRS had given its employees greater return. In some cases, popular tax
contributing to a retirement savings
authority to suspend collection incentives that were available in 2010
plan. You can contribute up to $5,000
actions in certain hardship cases were extended into 2011.
to a traditional IRA for 2011 and you
where taxpayers are unable to pay.
can make the contribution as late as
This includes instances where a
April 17, 2012. However, if you or
taxpayer has recently lost a job, is
your spouse is covered by an
Doeren Mayhew Helps Women Dress for Success
The Doeren Mayhew Women’s generous contributions. “CareerDress conducive to the retention and
Initiative Group successfully is an entirely volunteer run advancement of women. The
concluded a month long clothing organization that provides Women’s Initiative Group provides
drive for Lighthouse of Oakland appropriate clothing and accessories educational opportunities, networking
County’s CareerDress. to women entering the job market events, and mentoring programs to
Laurie Horvath, co-chair of the who do not have the resources to all professional women at the firm.
Doeren Mayhew Women’s Initiative obtain their own career wear,” said
About CareerDress
Group, said, “As a group of women Ziraldo. “Often times, appropriate
Since its creation in 2002,
working together to promote women dress is the largest obstacle
CareerDress has assisted over 1,600
in the workplace, a connection with preventing career-ready women from
at need Oakland County women who
CareerDress felt like the best fit for entering the workforce,” added
are hoping to enter the work force.
our charitable drive.” “We were Ziraldo. “Donations and support from
On average, CareerDress is helping
overwhelmed with interest and firms like Doeren Mayhew are vital
40 to 50 women a month feel
donations, and very pleased to donate to helping these women confidently
confident during their interview.
more than 200 items to CareerDress enter the job market.”
For more information about
this week,” added Horvath. The Doeren Mayhew Women’s
CareerDress, visit their Website at
John Ziraldo, President and CEO Initiative was reorganized in 2011
lighthouseoakland.org/careerdress.
of Lighthouse of Oakland County, with the purpose of promoting a
thanked Doeren Mayhew for their quality business environment
Doeren Mayhew 5
PRESORT FIRST-CLASS MAIL
U.S. POSTAGE PAID
ROYAL OAK, MI
PERMIT NO. 903
755 West Big Beaver Road
Suite 2300
Troy, Michigan 48084
www.doeren.com
248.244.3000
Doeren Mayhew is a certified public accounting and consulting firm,
providing unsurpassed business expertise critical to middle-market,
closely held companies and non-profit institutions since 1932.
< Accounting and Audit
< Tax
< International Tax and Consulting
< Corporate Finance and Strategic Services
< Litigation Support and Forensic Services
< Financial Advisory Services
< Payroll Services
Doeren Mayhew is the only Michigan-based certified public
accounting and consulting firm ever to attain the “Best of the
Best” rating from Inside Public Accounting as one of America’s
best firms – an honor we have received 16 years.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional advice or opinions on specific facts or matters, and, accordingly, assumes
no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted. © 2012 Doeren Mayhew. All rights reserved.
The Competitive Edge — Winter 2012
Doeren Mayhew 2nd Annual Food Drive a Success
Doeren Mayhew delivered a check wonderful example of how we can
on December 20, 2011, in the amount help make a positive difference in the
of $6,294 to Gleaners Community lives of our neighbors most in need,”
Food Bank of Southeastern added Simon. “We are proud of our
Michigan. The proceeds were the employees and their continued
result of Doeren Mayhew’s 2nd generosity and commitment to the
annual food drive. drive and our community.”
Doeren Mayhew announced the
About Gleaners Community
start of its annual Gleaners
Food Bank
Community Food Bank drive in
Gleaners Community Food Bank is a
2010, with Doeren Mayhew
non-profit organization located in
matching 100 percent of employee
Detroit. For more than 34 years,
contributions. Employee
Gleaners Community Food Bank has
contributions and firm matching
been “nourishing communities by counties. Of every dollar donated,
dollars totaled $6,200 in 2010.
feeding hungry people.” Last year, Gleaners uses 96 cents for food and
“Our annual food drive was
Gleaners distributed 40 million food programs. One dollar provides
another huge success this year,” said
pounds of emergency food to over three meals for a hungry neighbor.
Lawrence Simon, Marketing Director
600 partner soup kitchens, shelters, For more information about Gleaners
at Doeren Mayhew. “The continued
and pantries in Wayne, Oakland, Community Food Bank, please visit
success of this program is a
Macomb, Livingston, and Monroe www.gcfb.org.
6 Doeren Mayhew