SEC rules allow registered investment advisors to charge performance fees if the client’s assets meet a certain threshold. Under the new rules, clients must have at least $1 million in assets under management with the advisor or a net worth of at least $2 million in order to be charged a performance fee. Previously investors with $750,000 in managed assets or a net worth of $1 million could be charged a performance fee.

However, there is a grandfather provision that allows registered investment advisors to be able to continue to charge fees to investors who were considered eligible for fees before the rules changed. Inflation adjustments will be made every five years.

Questions? For more information please contact Keith N. Wiessner, CPA at (410) 823-8000.

Mr. Farina is a graduate of Calvert Hall and is currently completing his junior year at Mt. Aloysius College in Cresson, Pennsylvania.

Welcome Luca!

No action is required by workers to continue receiving the payroll tax cut. The lower rate also has no effect on workers’ future Social Security benefits.

Self-employed individuals will also benefit from a comparable rate reduction in the Social Security portion of the self-employment tax from 12.4 percent to 10.4 percent. For 2012, the social security tax applies to the first $110,100 of wages and net self-employment income received by an individual.

Questions? For more information please contact Keith N. Wiessner, CPA at (410) 823-8000.

This new smartphone application offers taxpayers a number of tools. Taxpayers can:

• Get Your Refund Status. Taxpayers can check the status of their federal tax refund through the phone app. An updated refund status is available approximately 3 days after the IRS acknowledges receipt of an efiled return and four weeks after mailing a paper return.

• Get Tax Updates. Enter your email address to automatically receive simple, straightforward tips and reminders to help with tax planning and preparation.

• Follow the IRS. Taxpayers can sign up to follow the IRS Twitter newsfeed, @IRSnews, which provides easy to use information, including updates on tax law changes and important IRS programs.

• Watch IRS Videos. People can view IRS YouTube videos on their smartphones. Videos provide short, informative features on a variety of tax-topics.

• Get the Latest news. Have the latest IRS news releases delivered to your phone as it becomes available.

• Get My Tax Record. Taxpayers can know order their tax return transcript from the IRS2Go app. The transcript will be delivered via the United States Postal Service to their address on record.

Apple users can download or update the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download.

Questions? For more information please contact Liz Gantnier, CPA at (410) 823-8000.

Ms. Welborn earned a Bachelor of Science degree in Financial Economics from University of Maryland Baltimore County with a certificate in Accounting and has passed the CPA exam.

Welcome Ana!

Inflation adjustments

The applicable amounts for many tax items increased on January 1 due to annual inflation. The personal exemption amount has increased to $3,800. Various credits and other items were also adjusted. Contribution limits and other amounts for pension plans and retirement accounts were also changed for 2012, and the Social Security wage base for 2012 is now $110,100.

Capital gain and loss reporting

Tax payers will have to report new information on Form 1040, Schedule D, Capital Gains and Losses, and file a new Form 8949, Sales and Other dispositions of Capital Assets, to report gains and losses of certain capital assets.

Individuals will be required to report both short-term and long-term gains and losses of capital assets when:

1. Basis was reported in box 3 of Form 1099-B
2. Basis was not reported on Form 1099-B
3. No Form 1099-B was received

Veterans Work Opportunity Credit

Employers will be eligible for a credit of up to $9,600 for each qualified veteran that they hire after the law’s enactment date (November 21, 2011) and before January 1, 2013.

See our previous blog, Veterans Work Opportunity Credit, for more information.

Foreign Asset Reporting

Under the Foreign Account Tax Compliance Act, individuals are required to report interests in specified foreign financial assets when filing their federal income tax returns. The final form was released in December. Taxpayers subject to the reporting requirement must file the form in 2012 for 2011 tax years. In addition, taxpayers who would have been required to file Form 8938 in 2011 for a tax year that began after March 18, 2010, must file it for the prior year with their return for the current year.

Bonus Depreciation

The 100% first-year bonus depreciation provision expired on December 31, 2011, but 50% bonus depreciation is available for property placed in service in 2012. (100% bonus depreciation does still apply in the case of certain longer-lived and transportation property placed in service before 2013.)

Estate Tax

Estates of decedents who died in 2010 have until January 17, 2012, to elect not to have the estate tax apply and to have heirs’ bases in assets they inherit determined under the modified carryover bases rules. The estate and gift tax lifetime exclusion increases to $5.12 Million for 2012.

EITC Due Diligence

The penalty for failing to meet the Earned Income Tax Credit (EITC) due diligence requirement increased from $100 to $500, effective for returns required to be filed after December 31, 2011.

Voluntary Classification Settlement Program

A new voluntary classification settlement program (VCSP) was introduced in September and allows eligible taxpayers voluntarily to reclassify their workers as employees for federal employment tax purposes for future tax period while receiving relief for part o the tax liability relating to the past treatment of workers as nonemployees. Taxpayers are eligible if they have consistently treated the workers as nonemployees, filed all required Forms 1099 for the previous three years, are not currently under audit by the IRS, U.S. Department of Labor or a state agency, and complied with the audit results if the taxpayers were previously audited by the IRS or DOL.

The VCSP limits the tax liability to 10% of the employment tax liability that would have been due on the compensation paid to the workers in the most recent tax year. Interest and penalties are not charged on the liability.

Questions? For more information please contact Liz Gantnier, CPA at (410) 823-8000.

Welcome, Yessica!

Employers and payroll companies will handle the withholding changes, so employees will not need to take any additional action. Employers should implement the new payroll tax rate as soon as possible in 2012, but no later than January 31, 2012. Employers should make an offsetting adjustment to any Social Security tax over-withheld during January as soon as possible, and no later than March 31, 2012.

The new law also includes a ‘recapture’ provision, where an additional tax is imposed on higher income employees who receive more than $18,350 in wages during this two-month period. Any wages received during the two month period in excess of $18,350 will have an additional two percent income tax imposed, payable in 2013 when the employee files his or her 2012 income tax return.

Please note the reduced Social Security withholding has no effect on employees’ future Social Security benefits.

Questions? For more information on the payroll tax cut extension please contact Keith N. Wiessner, CPA at (410) 823-8000.

Eligible workers still have until April 17, 2012 to make qualifying retirement contributions to an existing IRA or to set up a new retirement arrangement and receive the credit on their 2011 tax return. However, elective deferrals must have been made by the end of the year to a 401(k) plan or similar workplace programs, such as a 403(b) plan, a government 457 plan, or a thrift savings plan for federal employees.

The saver’s credit may be claimed by:

1. Married couples filing jointly with incomes up to $56,500 in 2011 or $57,500 in 2012
2. Heads of households with incomes up to $42,375 in 2011 or $43,125 in 2012
3. Married individuals filing separately and singles with incomes up to $28,250 in 2011 or $28,750 in 2012

Eligible taxpayers must be 18 years of age and may not be claimed as a dependent on someone else’s tax return. It is unavailable to full-time students.

Questions? For more information on the Saver’s Credit, please contact Keith N. Wiessner, CPA at (410) 823-8000.