In the most recent session of the Georgia State Legislature, Governor Deal and lawmakers passed several changes to tax laws that will affect nearly all residents and businesses.

Tax Changes for Individuals

Tax Exemptions Increase for Married Filers
Beginning 2013, married taxpayers filing jointly will receive an exemption of $7,400, a marked increase of the current $5,400 exemption. Those married filing separately will be entitled to an exemption of $3,700. The personal exemption for unmarried individuals remains unchanged at $2,700.

Motor Vehicle Property Tax Phased Out
Vehicles purchased and titled after March 1, 2013 will no longer fall under existing sales and annual property tax regulations. Instead, owners will pay a one-time fee equal to seven percent of fair-market value less trade-in value. The rate is phased in over three years beginning with 6.5% in 2013, 6.75% in 2014 and the full 7% in 2015 and every year thereafter. Individuals purchasing a vehicle between January 1, 2012 and March 1, 2013 may elect either the annual tax or new one-time fee system. Any owner of a vehicle titled before January 1, 2012 will continue to pay annual state taxes as normal.

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Earlier this month, President Obama signed into law the Jumpstart Our Business Startups Act (“JOBS Act”), which includes a number of provisions aimed at easing access to capital for entrepreneurs with the goal of ultimately creating new jobs.

Crowdfunding from Non-Accredited Investors

The JOBS Act eases restrictions on equity-based crowdfunding to now allow investments by all investors, not just accredited investors. Any non-credited investor can invest up to the lesser of 10 percent of annual income or $10,000. Crowdfunding investments will still need to file with the Securities and Exchange Commission (SEC), and are restricted to raising $1 million annually, or $2 million if they have filed audited financial statements.

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New temporary IRS regulations and transition guidance that will affect virtually all business taxpayers took effect January 1, 2012. While these new regulations, which relate to repairs and maintenance expenses, have been anticipated for some time, one recent development signals a seismic shift in the IRS position on how such expenses are to be handled for tax purposes.

On March 15, 2012, IRS issued a Directive for field examinations on the repair vs. capitalization issue that essentially suspended current examinations. For examinations of tax years beginning before January 1, 2012, examiners are instructed to discontinue current exam activity and not begin any new activity with regard to the “issues,” which are defined as:

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An important new provision in estate tax law may save you or your family from paying significant gift and estate taxes. To receive these benefits, you must file an estate tax return for the decedent, even if the estate is not otherwise required to file.

Each individual has a basic exclusion amount, and that amount can be transferred free of federal gift and estate taxes. The basic exclusion amount in 2011 was $5 million and, adjusted for inflation, the 2012 basic exclusion amount is $5.12 million. Under the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, individuals now have the opportunity to later use the remaining amount from a deceased spouse’s unused exclusion amount (DSUEA), in addition to their own exclusion when making gifts and upon death.

The ability to transfer the DSUEA to the surviving spouse is referred to as “portability.” Portability applies only to married decedents in 2011 and 2012. Under current law, portability will not be available for use by a surviving spouse after 2012. A recommendation to make the law permanent was included in President Obama’s proposed fiscal year 2013 budget.

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Earlier this week, House Majority Leader Eric Cantor unveiled a proposed JOBS (Jumpstart Our Business Startups) Act aimed a giving small businesses an extra 20-percent tax deduction. The proposal would allow businesses with less than 500 employees to take the deduction in addition to other write-offs, but further details remain forthcoming. The Obama Administration has already acknowledged support for some provisions of the proposal.

The plan appears very similar to a 2010 effort by House Republicans as part of their effort to win a majority of seats in the House:

In preparing to propose the deduction again, Cantor must decide what types of companies would benefit and whether the break should be temporary or permanent.

“They’re going to have to figure out who this applies to and how long it will last,” said Neal Weber, a tax partner in the Washington office of Cherry Bekaert & Holland LLP. “Those are the major issues.”

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Small Business lending is up to a four-year high as of November, up 18 percent over the same period in 2010. According to the Wall Street Journal, banks are more willing to lend as the economy continues to slowly stabilize and improve. Small business owners, previously discouraged by stagnant growth and a 60-percent average loan denial rate, are planning to borrow to expand in ever-increasing numbers.

Fewer small firms were falling behind in loan repayments, with delinquencies of 30 days or more down five basis points to 1.5%, and “severe delinquencies” of more than 90 days down 1 basis point to 0.39%, according to the index.

 

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The IRS released the 2012 standard mileage rates for business use of automobiles. Taxpayers driving a car, van, pickup or panel truck can use these rates to determine the deductible costs of that vehicle’s operation.

• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving expenses
• 14 cents per mile driven in service to charitable organizations

Rates for business miles driven remain unchanged from the July 1, 2011 adjustment while rates for medical and moving purposes are reduced by 0.5 cents per mile.

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A study by the Treasury Inspector General for Tax Administration has found that claims for the Small Business Health Care Tax Credit were far below expected levels for tax year 2010. The CBO originally estimated up to $2 billion in claims for 2010. As Accounting Today reports, the actual claims totaled just over $278 million, or slightly under 14 percent of expectations.

“The Small Business Health Care Tax Credit is an important credit for both small business employers and their employees,” said TIGTA Inspector General J. Russell George in a statement. “TIGTA’s recommendations, once adopted, should improve the IRS’s ability to verify claims for this credit.”

 

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Cherry, Bekaert & Holland will be hosting its annual Richmond Commercial Business Seminar and Ethics Training on Tuesday, December 6, 2011.

We’ll discuss what you need to know about updates to lease reporting, recent FASB projects and what they mean for your organization as well as the current impairment models including goodwill. We will also discuss what the Budget Control Act means to your organization and how changes on Capitol Hill impact 2011 and 2012 tax filings.

In addition, we will discuss estate planning and the $5 million estate tax exemption set to expire on December 31, 2012, as well as R&D and land conservation tax credits that can benefit your organization.

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The Georgia Private School Tax Credit allows Georgia taxpayers to redirect Georgia income tax dollars to an eligible Georgia private school as a donation. Donors will receive a dollar-for-dollar Georgia tax credit for the amount they donate to the qualifying school’s student scholarship organization.

• Maximum donation amount for Individuals: $1,000
• Maximum donation amount for joint filers: $2,500
• Maximum donation amount for married filing separate taxpayers: $1,250
• Maximum donation amount for C corporations: 75% of Georgia Tax Liability

Who is eligible?
Any Georgia taxpayer

What happens if my donation exceeds my Georgia tax liability?
The tax credit is a “non-refundable” credit. What that means is that you cannot receive a refund for any more than your Georgia tax liability. Any excess credit beyond your tax liability can be carried forward for up to 5 years.

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