The IRS tax tables for 2012, for use in filing 2012 taxes by April 2013, will be published in the fall of 2012.

However, the estimated tax withholding tables give an accurate assessment of how the 2012 tax tables from the IRS will look. Note that these 2012 tax bracket tables are no to be used for calculating your 2011 taxes that you file before April 2012, but rather for the tax year from January 2012 to December 2012. Those taxes will be filed in 2013, but estimated tax payments calculated throughout the 2012 year should use these IRS tables.

The 2012 standard deduction amount is the same.

2012 Estimated Tax Tables

If your 2012 filing status will be Single then your tax rate for estimated payments is:

• Income under $8,700 = 10%
• Income over $8,700 but under $35,350 = $870 + 15% of amount over $8,700
• Income over $35,350 but under $86,650 = $4,867.50 + 25% of amount over $35,350
• Income over $86,650 but under $178,650 = $17,442.50 + 28% of amount over $85,650
• Income over $178,650 but under $388,350 = $43,482.50 + 33% of amount over $178,650
• Income over $388,350 = $112,638.50 + 35% of amount over $388,350

If your 2012 filing status will be Married Filing Jointly then your tax rate for estimated payments is:

• Income under $17,400= 10%
• Income over $17,400 but under $70,700 = $1,740 + 15% of amount over $8,700
• Income over $70,700 but under $142,700 = $9,735 + 25% of amount over $35,350
• Income over $142,700 but under $217,450 = $27,735 + 28% of amount over $85,650
• Income over $217,450 but under $388,350 = $48,665 + 33% of amount over $178,650
• Income over $388,350 = $105,062 + 35% of amount over $388,350

Remember that whenever you are required to make estimated tax payments there is a general rule provision that you can use instead of calculating your estimated payments with the EST tax tables. The IRS decrees that if you pay 100 percent of the amount of taxes you paid the previous year, then you will not be subject to underwithholding penalties.

However, this does not mean that you will not owe taxes. Your tax rate will still be calculated based upon your actual income for the year. What it does mean is that you can make smaller quarterly estimated tax payments without being penalized for underpayment. You do need to be sure that you will be able to make your tax payment the following spring when you file your taxes, or you may be subject to interest and penalties at that point.

For higher incomes, those with an adjusted gross income (AGI) above 150,000, the general rule requires that your estimated tax payments equal 110 percent of your previous year’s taxes to avoid paying an under withholding penalty.

Other 2012 tax tips and advice is available here on Finance Gourmet.

Related posts:

1. Tax Due Date 2012
2. 2012 Standard Deduction Amount Set

2012 Tax Tables originally published at Personal Finance Blog - FinanceGourmet.com

The Internal Revenue Service, or IRS, doesn’t have a very good way for taxpayers to check in on the status of their accounts. This is because, in general, taxpayers are expected to basically keep track of their own tax accounting. If you have a salaried job, your withholdings are printed on your paystub. If you own own business, you are expected to keep track of your own quarterly payments. And, if there is another situation, you are supposed to have records anyway, to use for filing your taxes, if nothing else.

But, what if your account situation isn’t so simple?

Tax Return Transcript

The first reason you might want a tax return transcript is that you don’t have a proper record of what information you filed on your tax return. You are supposed to keep a copy of your return for your own records, but even if you do, it can get lost or destroyed in any number of ways. Fortunately, you can order a Tax Return Transcript directly from the IRS.

A Tax Return Transcript shows most of the line items from your original tax return including important information like your total wages,adjusted gross income and taxable income. The transcript also includes the various forms you filed with your income taxes. For example, a Schedule C for your business would have its various line items reported as well.

Using the adjusted gross income from your transcript allows you to determine what tax bracket you are in, or maybe what tax bracket you’ll be in if you get married, without having to guess what your gross income turns into on your tax returns.

For some lenders, a tax transcript is good enough if you don’t have a copy of your taxes. If it isn’t, download the proper year IRS Form 1040 and recreate it with your tax transcript’s information. Just fill in the blanks. Where it says to sign and date it, just write, “Copy for File,” or something similar. Then, make a copy and give it to the lender.

Tax Account Transcript

A Tax Account Transcript is a little bit different. Rather than showing you what the lines of your tax return were, this transcript shows you what happened to your account when. For example, you may know what date you mailed your quarterly tax payment, but you wonder when the IRS actually got it, this will show.

Also, if you didn’t pay your taxes on time and had to setup a payment plan or otherwise make tax payments, the account transcript will show you when each of those occurred. A tax account transcript is also useful to verify that payments have been made by a third-party. For example, if you file bankruptcy your bankruptcy estate might make a payment toward any back taxes you owed when you filed. This is one way to find out how much that payment was, and when it occurred.

To order a tax transcript, go online directly to the IRS. Choose click the link to order your tax transcript and then choose whether you want an account transcript (payments, interest, penalties, credits) or a return transcript (what was on your 1040). Enter your Social Security number, name, date of birth and address. The automated system will send your transcript automatically in 5 to 10 days.

Keep in mind that you can only use the online system if you don’t need the transcript sent to another address, as the system will send it automatically to the address the IRS has on file for you.

No related posts.

Tax Transcript from IRS originally published at Personal Finance Blog - FinanceGourmet.com

Taxes for 2011 are almost due. As always, the IRS tax filing deadline for 2012 is April 15th, only it isn’t.

April 15th is a Sunday and taxes are not due on weekends, especially Sundays. You don’t expect government bureaucrats to work on the weekend, do you? Not to mention, you can’t get a postmark on Sunday because the Post Office is closed.

So, your taxes should be due on April 16th, but they aren’t due then either.

Just like last year, the Monday your taxes would normally be due on is a holiday. It isn’t a Federal holiday, but it is a holiday in Washington D.C. and when it comes to the Internal Revenue Service, the holiday schedule includes those D.C. holidays.

After all of that, it comes down to for 2012 taxes are due on Tuesday April 17th. Technically, of course, that means that your taxes must be postmarked by midnight April 17th. As always, there will be certain post offices open late, some until midnight, where you can mail your taxes right up to the deadline and still get that all important postmark.

If you don’t file your taxes on time, you’ll owe penalties and interest. If you don’t pay your taxes, it’s the same story. Don’t forget, though that you can get a free, no questions asked, automatic filing extension just by filling out the form and mailing it in by the same due date as your regular income taxes. So mail your 2011 tax return or your extension request by April 17, 2012.

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Tax Due Date 2012 originally published at Personal Finance Blog - FinanceGourmet.com

Doing income taxes can be a trying time for many taxpayers. There are numerous forms to fill out, cumbersome calculations to perform, not to mention, the rules change every year. When you finally finish, you might end up owing a lot of taxes to the government. The IRS isn’t know for being forgiving, but that doesn’t stop people from wondering, what happens if I don’t pay my taxes?

Failure to File Taxes

First, it is important to distinguish between not filing your income taxes, failure to file, from not paying your income taxes. There are significant additional penalties for not filing your income taxes on time. If you can pay your taxes, but can’t get them done on time, then consider filing a Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax. Filing this form grants taxpayers an automatic extension of time to file. This form must be filed by the April 15th filing deadline just like a regular tax return would be. Once filed, the new deadline for filing your taxes moves to the beginning of October.

Beware, even if you file for an extension, you do NOT get any additional time to pay your income taxes. Just because you haven’t submitted the forms doesn’t mean the taxes aren’t due. You have to estimate how much you will owe and send the IRS a check. Keep in mind that penalties and interest for not paying your taxes are percentage based, so even if you are off in your estimate, submitting a payment will lower any potential charges. If you are expecting a refund, there is no need to send any additional payment with your extension request.

Failure to Pay Taxes

One of the first questions asked is often, “Can the IRS send me to jail if I don’t pay my taxes?”

Technically, the IRS cannot send you to jail. However, a judge can order you to serve jail time for failure to pay income taxes. However, this is not a common occurrence. The IRS actually has many other remedies at its disposal that it uses instead. After all, sending someone to jail doesn’t bring any money in to the government.

If you don’t pay your taxes on time, the IRS will begin charging you penalties and interest. The interest rat the IRS charges is set on a quarterly basis and is equal to the federal short-term rate plus 3 percent. In addition, there is a late payment fee of 1/2 of one percent of the amount owed for each month that it is owed, up to a maximum 25 percent penalty.

If you do not pay, the IRS will eventually begin what are called enforcement actions. There are a wide range of possible actions. The most common are an IRS levy and garnishments. With a levy, the IRS takes money or property that you own in order to settle your tax debt. A garnishment occurs when the IRS intercepts payments (typically a paycheck) before they are made to you.

The most common IRS levy is made against any tax refunds you might have. It goes without saying that the IRS will take any tax refund you are due in future years to pay off any unpaid prior year taxes. In addition, the IRS will also intercept any state income tax refund you might be due. A notice of levy will be sent to the taxpayer before each event.

Stopping IRS Levy or Garnishment

It is surprisingly simple to stop IRS enforcement actions such as a levy or garnishment. The IRS offers most taxpayers, who are delinquent for a single tax period, the ability to enter into a payment plan with the IRS. Although not required, the IRS typically stops all enforcement actions once a payment plan has been filed.

You can request a payment plan online and be informed immediately if your plan has been accepted. The monthly payment requirements can be relatively low. A $100 per month payment may be accepted for tax due amounts over $5,000 or more.

Although the interest charged for paying late does not stop, the penalty is reduced from one-half of one percent to one-quarter of one percent. Still, it is in your best financial interest to pay down your balance as quickly as possible to lower these fees. However, keep in mind that additional payments DO NOT pre-pay your installment agreement. That means if you agree to pay $100 a month and then you send in an extra $500, you still have to make next month’s $100 payment. You do not get credit for five months worth of payments.

There is a fee to setup a payment agreement and the consequences for failing to follow through on such an agreement can get nasty quickly since you have now not only failed to pay your taxes, but failed to honor your installment agreement as well.

Use the online installment agreement tool and choose the lowest amount possible, even if you can pay more. You can always send in extra money if you have it, but you won’t be stuck with a too high payment later if something goes wrong.

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What Happens If I Don’t Pay My Taxes originally published at Personal Finance Blog - FinanceGourmet.com

The following is a guest post from Michael at Credit Card Forum.

Yep, it’s that dreaded time of year again… tax time! And if you’re a small business owner, the process of doing taxes is especially arduous. Not only do you have to categorize all the business-related expenses from last year, but you also have to figure out the proper way to deduct them. So when it comes to interest, what does the IRS have to say about it?

Well first of all, let me start out by saying I am not a tax professional. Therefore the information that follows is not tax guidance, nor is it professional advice. Please consult an accountant or tax attorney for that.

Rather, I’m only coming to you as a real-life business owner. I have been 100% self-employed for the past couple years and before that, partially self-employed. So I know firsthand the headache and confusion of dealing with this issue.

What does the IRS say?

On the IRS website, you will find the “Tax Guide For Small Business” and Chapter 8 specifically addresses the deduction of interest. They start out by saying:

“You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your business.”

This is a pretty clear statement, except having the word “generally” in there definitely leaves it a bit vague. This is why you have to keep reading…

“Interest relates to your business if you use the proceeds of the loan for a business expense.”

Read that sentence twice. You need to make sure the proceeds of the loan (or credit card) are going directly towards the qualifying business expense(s). That will seem like common sense to most people, but I had a friend who erroneously believed he could deduct his student loan interest because the education would help him run his business. Sorry, but semi-related scenarios like that will not qualify.

As a rule of thumb, if the expense in question isn’t included in your business deductions, then it’s safe to say any interest you incurred from it won’t qualify, either.

The IRS also sets out 3 specific requirements which must be met in order to deduct business-related interest:

1. “You are legally liable for that debt.”

So if the debt was guaranteed by say, your mother’s credit instead of you/your business entity’s credit, then it doesn’t meet this requirement.

That being said, if a formal debtor-creditor relationship was established between you and your mother (to make you liable) then perhaps there might be a way to make it work, but you will need to consult a tax professional to find out whether or not that’s possible.

2. Both you and the lender intend that the debt be repaid.

If you have a loan from a bank or owe money on a business credit card, then of course the lender expects you to repay them. However if there are circumstances where your debt might be forgiven, then it probably wouldn’t pass this requirement.

3. You and the lender have a true debtor-creditor relationship.

Without a doubt this is one of the biggest mistakes I hear small business owners make. They think that if they informally borrow $5,000 from Mary Sue and Uncle Bob, it counts as a loan… it won’t. Consult with a tax professional as to whether you have a “true debtor-creditor relationship” with the other party, but be aware that some of the things it must include will be a repayment schedule, maturity date, and default provisions (and of course interest charges). Not all promissory notes have those components.

How is the interest deducted?

There are many rules, so to summarize them in a few paragraphs wouldn’t be possible. Please reference Publication 535 from the IRS (chapter 4 is about interest). The most recent version can be found here. At the time of writing, if you open the PDF version of Publication 535 and turn to page 11, it will be the start of the section about interest and how to allocate it under different circumstances.

About The Author: Michael runs an online business, Credit Card Forum. There you will find an extensive section he has written about choosing the best business credit card.

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What Does The IRS Say About Deducting Business Related Interest? originally published at Personal Finance Blog - FinanceGourmet.com

Shortly after publishing my post about your odds of being audited by the IRS, a reader sent me a message with a link to a CBS News article suggesting that your chances of being audited were actually much higher than previously thought. That is what the bold type headline screams, at least.

In reality, if you read the entire article, you’ll find that the odds of triggering an IRS audit are pretty much right in line with what I said in my article. What this other news article points out is that there are ways for the IRS to contact you that aren’t really audits. If you include these not-audits in the count of actual audits, then you get, not surprisingly, a much higher number of audits. In particular, the article focuses on ominous letters that IRS sends out to taxpayers, which are very much not audits. In fact, the letters cited in the article are about as far from an audit as you can get.

One of the letters informs taxpayers of a math error in their tax returns. This is not an audit. This is a notice that you messed up your math and therefore need to pay your taxes based upon the correct math. This scenario in no way results in anyone questioning your deductions or asking you to prove anything on your tax return with financial records. An audit is a re-examination of your tax return, not a request for you to fix a math error. Assuming you use tax software and take the 2011 standard deduction, there is a small chance of filing a return with a math error in it.

Another of the letters mentions the electronic system the IRS has to match reported data with the amounts listed on a tax return. I did allude in my post to the fact that the IRS matches information reported directly to it by your employer and other financial relationships with the amounts you actually report on your income tax forms. I even mentioned that this is an are where only a fool tries any funny business. Again, the result of this scenario is a letter in which the IRS in no way re-examines your return except to change the results of your calculations based upon the numbers that are reported to the Internal Revenue Service directly. This is not an audit either.

The point of my article about the low chances of being audited was not to encourage people to cheat on their taxes, nor to suggest that anyone cheat because the risk of audit is so low. Rather, I hoped to make filing income taxes a little less tense. People get so worked up about getting audited that they don’t take tax deductions or credits that they qualify for, for risk of being audited. That isn’t smart personal finance strategy, but neither is cheating.

Go into doing your taxes realizing that they can be a bit complicated, although there are tax prep software packages that help, but there is no need to walk around in fear of a potential audit. It might happen, but chances are it won’t. Just don’t freak out about it for no reason.

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Higher Tax Audit Chances? originally published at Personal Finance Blog - FinanceGourmet.com

As tax season approaches, America’s thoughts turn to the required filing of income taxes. Theoretically, America’s tax system is a voluntary reporting system, however, that voluntary part is backed up by a pretty big stick, IRS audits.

Odds of Being Audited

According to IRS statistics, the chances of being audited by the IRS is about one in 100, or one percent. A deeper look, however, reveals the the IRS audits certain tax returns much more often than other returns. IRS audit statistics suggest that high-income taxpayers and those who own small businesses are more likely to be audited that middle and low income taxpayers who earn the majority of their income from wages and salary or brokerage-style investments.

The reasons certain groups get audited more than others are two-fold. First, and foremost, there is more money to be gained by auditing higher income taxpayers. For example, consider a middle income wage earner, who is married filing jointly, bringing down a salary of $70,000 with no other income. Taking the standard deduction for 2011, of $11,600 for married couples filing joint, that leaves $58,400 of taxable income.

Do the math and that taxpayer isn’t going to pay any more than around $7,500 and likely much less if there are any kids. Assuming that our fearless taxpayer files his income taxes and fudges a child care credit or student loan interest deduction, he might shave a few hundred bucks off his total. If he is caught and audited, then the IRS can recover that and penalties and interest (particularly if it is proven to be fraudulent). Either way, the sum total of collection by that IRS audit won’t be more than a $1,000. That’s hardly worth the time and effort.

Don’t get me wrong, the IRS can and does audit returns like this all the time, primarily to avoid the appearance of “never” auditing certain kinds of tax returns. All it takes is one person getting audited to scare-straight dozens of their friends and acquaintances. However, at the end of the day, this taxpayer isn’t really “worth” the cost of an audit.

Who Gets Audited By the IRS?

A high-income taxpayer on the other hand can generate a significant tax recovery. When someone’s total tax liability is $5,000, even a big cheater won’t owe too much extra if audited. However, when someone’s total tax liability is $25,000, $50,000 or more, a successful audit might recover $10,000 or more, especially if there are penalties and interest involved.

The other reason higher earning taxpayers get audited more often is that they have more ways to cheat. Someone who earns a salary and takes the standard deduction has very little room to be sneaky. After all, their salary is reported to the IRS as well as the taxpayer. Trying to cheat on that number is flat-out stupid, considering a computer will crosscheck each and every one of those.

On the other hand, higher salaried taxpayers tend to itemize their deductions. Many of those tax deductions, such as mortgage interest are also reported to the IRS and thus not likely to be underreported. However, there are plenty of deductions that can be exaggerated very easily. Catching these things is the bread and butter of audits.

For the same reason, small business owners are frequent audit targets. There are many deductions for small business owners and other than the requirement to keep receipts and records, many are completely undocumented directly to the IRS. The 2011 Section 179 tax deduction alone is worth up to $250,000 this year. That’s some real money worth collecting.

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IRS Audit Odds originally published at Personal Finance Blog - FinanceGourmet.com

Every year a plethora of financial articles come out telling people how to save money on their taxes at the end of the year. It’s a fine idea, and frankly, no stone should go unturned. However, the best tax planning takes happens year round. That being said, there are numerous last-minute ways to cut income taxes by making last minute moves in December. Today, we examine one of the most common end of year tax moves, paying your mortgage early.

Check here to learn how to deduct mortgage interest on your taxes.

Make Mortgage Payment Early to Deduct More

One of the biggest tax deductions that is available to ordinary taxpayers is the mortgage interest deduction. Simply put, the 2011 mortgage interest deduction is the ability to deduct whatever amount you pay in mortgage interest from your income taxes. There are several rules and exclusions, but they don’t apply to most taxpayers unless you have more than $1 million in mortgages or several houses. This is one of those tax deductions with no income limits.  You do need to itemize your deductions in order to claim the mortgage interest deduction. For many people, the amount of their mortgage interest deduction determines whether it is best to itemize or claim the 2011 standard deduction amount.

In a normal year, you make 12 mortgage payments. Add up the total amount of interest paid, and that is how much you get to deduct. Your mortgage company will actually do it for you because they are required to submit a 1099-INT to both you and the IRS. This means the IRS knows how much money you actually paid on your mortgage, so this isn’t a good place to get creative. You can find the 2011 1099-INT forms on the IRS website. (Update: The 2011 1099-INT forms are now also available.)

However, as with most tax deductions, you get to claim the amount amount you pay during the year regardless of when it is actually due. Thus, if you pay your January mortgage payment in December, you get to deduct it on this year’s taxes. That means you get to deduct the amount of interest paid on 13 payments instead of just 12.

For example, let’s assume for the ease of math that you pay $1,000 per month in interest on your mortgage. (Keep in mind that only the interest part of your payment is deductible. The amount that goes to principal and the escrow payment is NOT deductible.) If you made all the payments at the regular time during 2011, then your 2011 mortgage interest deduction would be $12,000.

That’s not too shabby. But, if you pay your January 2012 payment during December 2011, then you have made 13 payments during the 2011 tax year instead of 12. That means that on your 2011 taxes you can deduct $13,000 instead of just $12,000. That extra $1,000 deduction can be very valuable especially at higher tax brackets. In the 30 percent tax bracket, making your payment just a few days early saves $300 on your taxes.

The Catch to Paying Your Mortgage Early

There is, of course, a catch to using the tax trick of paying off your mortgage early.

By making your January 2012 payment in 2011, you have eliminated one of the payments you would normally make during 2012. That means that you can only deduct 11 mortgage payments worth of interest in 2012 because the January payment was not made during 2012, it was paid in 2011.

In our example above, by paying the January 2012 payment early, you got to deduct $13,000 in 2011. But, that means you will only be able to deduct $11,000 on your 2012 taxes. There is a way around this. If you make your January 2013 payment during December 2012, then you can deduct the full-year of interest of $12,000. However, there is no way to get that extra deduction again until you bite the bullet and take only 11 months worth of interest payments as your mortgage deduction in some year.

Mortgage Interest Deduction Audits

Here is the mistake that many taxpayers accidentally make.

In 2011, they read about this really great idea to make their January mortgage payment early in order to get a bigger interest deduction. So, they pay 13 months worth of payments during 2011 and they deduct 13 months worth of interest. So far, so good.

However, in 2012, they forget that they did that. The mortgage company sends them a 1099-INT that shows a full 12 months of interest payments for 2012 and they deduct the full 12 months of interest, even though they can only legally deduct 11. Then, are those who try and use the trick again in 2012 by paying their mortgage early and deducting 13 months of interest when they only qualify for 12 months of interest payments.

Remember those 1099-INT forms that the mortgage company sends to both you and the IRS?

That is how you get caught. The IRS computers run the numbers on the forms against the numbers you claim and sometime in 2013 or 2014, a letter shows up in the mail saying that a routine examination of your return has discovered a possible error. If you are really unlucky, your return will get flagged for a full-scale audit. Typically, however, you’ll just be subject to an “information audit” where the IRS will require you to provide documents to support your deductions.

It won’t take long for cancelled checks and mortgage statements to reveal that you claimed too many deductions in 2012 and owe back taxes and interest on the amount. Theoretically, if the IRS can prove you did it on purpose, you can also be on the hook for fraud and additional penalties, but this kind of mistake happens all the time and non-accountants routinely fall victim so they probably won’t go after you for that.

How To Maximize Tax Deductions by Paying Mortgage Early

Paying your mortgage early to increase your mortgage deduction amount in 2011 works best for people who either have income that varies from year to year, or people who know that they are going to get hit with a big tax bill and will adjust for it on their 2012 taxes.

If your income varies because you earn commissions, own your own business, or you get bonuses that are different sizes each year, then you want to pay your mortgage early in a year where your income will be high. Even if it is high the next year, you can pay early again and keep your full-year interest deduction. Eventually, when you have an off year or your bonus is smaller than usual, you can not pay early and only deduct 11 months of payments. This “reloads” this tax deduction increase trick for another year when your income is higher.

For people who get an unexpected windfall during the year that may result in a higher tax bill, that extra $300 deduction will give you some extra room when filing in 2012 for your 2011 taxes. Just be sure to adjust your withholding for 2012 so that you don’t come up short again.

Paying your mortgage early is a good end of year tax tip. However, be sure you fully understand what you are doing and how it affects your future taxes. If you pay early this year, you have to pay early for every other year until you are ready to take the smaller 11-month size deduction.

Subscribe to the Finance Gourmet Feed to get all of our coming 2011 end of year tax tips.

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Mortgage Tax Deduction End of Year originally published at Personal Finance Blog - FinanceGourmet.com

The standard tax deduction allowed for Americans is set each year in late October. The standard deduction is indexed for inflation, so it can increase or decrease in a given year depending upon how the cost of living index changes over time.

Standard Deduction 2012

The 2012 standard deduction is the amount that taxpayers will use to file their taxes before April 15, 2013. For taxes to be filed before April 15, 2012, taxpayers need to use the standard deduction 2011 amount set in the fall of 2010.

The amount of the standard deduction for 2012 for taxpayers who are married filing jointly is $11,900. This amount is up $300 from the 2011 standard deduction amount of $11,600. For taxpayers who are filing single, or who are married filing separately, the 2012 standard deduction is $5,950 which is an increase of $150. For those taxpayers who file as head of household, the standard deduction in 2012 is $8,700.

Various other tax credits and income tax deductions are also indexed for inflation. For the 2012 tax year, the maximum earned income tax credit, or EITC, increased to $5,891, which is up form the 2011 maximum of $5,751. Accordingly, the maximum income limit for the EITC increased from $49,078 in 2011 to $50,270 in 2012.

IRS Annual Gift Limit 2012

The IRS permits tax-free gifts to any persons up to a certain limit each year. The annual gift limit is per person, so a couple who is married filing jointly can actually give double the amount of the IRS gift limit each year. Additionally, when giving to a married couple that files jointly, each spouse can receive the full gift amount. For parents looking to give a tax-free annual gift to their married children, that means that a full four times the amount of the limit can be given tax-free.

The 2012 gift limit is $13,000. The annual gift exclusion is unchanged from 2011.

Therefore, a married couple can give $26,000 to a single person, or a full $52,000 to another married couple without triggering gift taxes or any estate tax issues.

Speaking of estate taxes, the 2012 estate tax exclusion is $5,120,00. That is an increase from the estate tax deduction in 2011 of $5 million.

IRS Tax Updates

Although the IRS releases updated tax numbers, deduction amounts and tax credit eligibility throughout the year, the release of widespread numbers like new 2012 tax brackets and other widely claimed tax deductions happens in October of the previous year to allow for official publication of IRS manuals and rules to be completed in time for the start of the tax filing season on January 1st of the following year.

You can subscribe to emails from the IRS or just check the Internal Revenue Service website in late October or early February each year.

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2012 Standard Deduction Amount Set originally published at Personal Finance Blog - FinanceGourmet.com

Generally, the IRS sets the mileage rate for taxes once per year in December. Gas prices go up and and down through the year, but the mileage deduction rate is not adjusted monthly or quarterly.

2011 Mileage Rate Update

However, the IRS increased the optional standard mileage rates for the last six months of 2011 citing, “increased gas prices … having a major impact on individual Americans.” The 2011 IRS mileage rate increased to 55.5 cents per mile from the original IRS 2011 mileage deduction rate of 51 cents, which still applies to the first six months of 2011.

In other words, when you figure out your income tax deductions for your 2011 taxes in 2012, you’ll have to use two different mileage rates to get the correct deduction for miles driven for business purposes. As always, the IRS requires contemporaneous driving records in order to deduct the mileage on your taxes. Using those records, taxpayers will multiply each deductible mile by 51 cents for trips between January 1st and June 30th and 55.5 cents per mile for trips between July 1st and December 31st.

Other IRS Mileage Rates for 2011

The standard IRS mileage rate is the one for business purposes. However, there are two other cases where you can deduct mileage.

Certain miles driven for medical purposes or for moving purposes may be deducted. The rate for this deduction was 19 cents per mile at the beginning of 2011. The mileage rate increases to 23.5 cents per mile for the second half of 2011.

Miles driven for charitable purposes can also be deducted in some cases. Mileage for charity is deducted at the rate of 14 cents per mile. The charitable mileage rate was not increased by the IRS.

Options Business Standard Mileage Rate

Income tax deductions for mileage may be computed in two ways. The most commonly used method uses the standard mileage rate set by the IRS. The deduction is computed by multiplying the standard rate times the number of miles driven.

However, taxpayers may also deduct the actual costs of operating a vehicle. Doing so, requires drivers to keep all receipts for fuel and maintenance and then to computer the vehicle’s depreciation. Most people forgo this extra effort and just use the mileage rate.

Businesses Reimbursement Rate for Mileage

Most American companies use the IRS mileage rate for reimbursing employees for miles driven on behalf of the company. There are two main reasons for this. First, companies deduct the money they reimburse to employees as a business expense. The IRS can’t complain the company is using too high or too low of a rate if it is using the same one as the IRS. Second, companies are shielded from employee complaints about the rate being too high or too low by saying that they are not responsible for the rate and that the IRS sets it.

However, there is no automatic requirement that companies raise their 2011 mileage reimbursement rates just because the IRS made a mid-year increase in the rate.

Check with your company to verify what your reimbursement mileage rate should be for the rest of 2011.

Related posts:

1. 2011 Mileage Rate IRS Standard Deduction Amount Set
2. New 2010 Tax Numbers Released By IRS For Filing 2010 Income Taxes in 2011

IRS Mileage Rate 2011 Increase originally published at Personal Finance Blog - FinanceGourmet.com