The IRS announced that the 2012 business mileage rate remains 55.5 cents for business miles driven, the same as the adjusted midyear rate in 2011.
Starting Jan. 1, 2012, the rate for medical or moving purposes will be 23 cents and the rate for miles driven in service of charitable organizations will be 14 cents per mile.
The standard mileage rate for business is based on an annual study by independent contractor Runzheimer International of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
The IRS has released its notice that asks employers whether they have notified employees about the Earned Income Credit. The notice gives questions and answers related to notifying employees about the credit and how employees can claim it. This credit is for low income individuals who meet certain income level qualifications (depending on the number of dependents they have) who may qualify for additional funds from the federal government. These funds are distributed by the IRS upon review of the indivdual’s tax return.
The notice of the EIC is usually printed on the back the the employee’s W-2.
Qualified employees used to be able to add the credit to their regular paycheck. However, employees can no longer claim the advance earned income credit, and Form W-5 is no longer in use.
States that have specific notification requirements related to the federal earned income credit include: California, Delaware, Illinois, Louisiana, Maryland, New Jersey, Texas, and Virginia.
Social Security Rates and Taxes:
As you know, currently in place is a 2% reduction of the employee’s share of the social security tax rate… a reduction from 6.2% to 4.2%. This reduction expires Dec 31, 2011. The President and Congress are jockeying back and forth working on extending the credit through next year. There are even considerations of extending the 2% credit to the employer also. Politic pundits predict that it will be extended but with the mess that is Washington, who knows! The Advi$or will keep you posted.
Remember that the taxable wage base for Social Security taxes was increased from $106,800 to $110,100 for 2012, a 3% increase This will add an addition a $138 in social security taxes to those high wage earners (provided the rate remains at 4.2%).
Congress is also considering a bill that would extend emergency unemployment benefits another year and allow employers in FUTA credit reduction states (those states being hit by a reduction in the FUTA credit due to funds borrowed from the Federal Government to cover shortfalls in state unemployment benefit funds) to avoid paying the extra FUTA tax required under current law.
Needless to say, payroll professionals are hoping the idiots in Washington, who have probably never done a payroll in their life, make some decisions soon!