Tax Preparer Study Guide 2012: Cost-Of-Living Increases

December 18, 2011 by  Filed under: Taxes 

Looking in advance at IRS cost-of-living increases for 2012 presents interesting tax planning considerations. It doesn’t affect 2011 tax returns. However, some individuals are likely to ask tax preparation companies about changes effective in the new year.

People who pay tax liability in April 2012 may want advice for avoiding a recurrence of the situation. Rectifying the problem entails knowing the new tax preparer study guide 2012 figures. Individuals can reduce more of their taxable wages in 2012 by increasing their contributions to employer-sponsored retirement plans, such as a 401(k). The maximum amount of compensation deferral increases to $17,000 for 2012. The catch-up contribution limit to these plans for those age 50 and above remains unchanged at $5,500.

The maximum combined contributions by both employee and employer to a 401(k) rises to $50,000. This can have an important impact on the tax return preparer work for self-employed individuals. For example, shareholders of S corporations will want to adjust their 2012 salaries to fit this new retirement plan maximum.

Individuals with retirement plans at work may also want to make tax-deductible IRA contributions. The facts from tax preparer education about these situations reveal that the deduction is phased out over a range of income. The deduction is eliminated at income levels exceeding the upper limit of the ranges. These phase out ranges depend upon filing status.

The phase out range for people filing as single or head of household that tax preparer classes will pick up for 2012 is $58,000 to $68,000. For couples who are married filing jointly, the range is $92,000 to $112,000. However, the range is $173,000 to $183,000 when the IRA contribution is for someone without a retirement plan at work whose spouse has an employer plan. Unchanged is the IRA deduction phase out range of $0 to $10,000 for anyone who is married filing separately.

IRA contribution maximums for 2012 are still $5,000 per person with a $1,000 catch-up amount for people age 50 and older. These IRA contribution limits have not changed in tax preparation training lessons since 2007.

The exemption for taxpayers and dependents increases in 2012 to $3,800. In addition, the standard deductions are higher for each filing status.

$11,900 for married filing joint
$8,700 for head of household
$5,950 for single or married filing separately
Naturally, tax brackets were also changed by the IRS. They are a little wider for 2012. This will prevent people with incomes rising at the same pace as inflation to avert higher marginal tax rates. That can help individuals with taxable Social Security benefits. The Social Security Administration announced a 3.6 percent increase for 2012 payments.

IRS Circular 230 Disclosure

Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.

Fast Forward Academy is a leading publisher of education for tax preparation companies and tax professionals. Access to free questions for the tax preparer study guide 2012 is available on their website.

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