Social Security Checks — Are you or another family member still receiving Social Security checks in the mail? The government has announced that it will not issue paper checks much longer. Retirees must switch to either direct deposit or a prepaid debit card by March 1, 2013. To use the direct deposit method, you must provide the routing number and account number for your bank account.
Worker Classifications — Under a new IRS initiative, employers can resolve payroll tax matters by reclassifying independent contractors as employees. The Voluntary Classification Settlement Program (VCSP) allows employers to avoid audits by agreeing to pay a minimal amount to cover past payroll tax obligations. The workers must be treated as employees in the future.
New Retirement Plan Limits — The IRS recently announced adjustments in retirement plan limits for 2012. Although some thresholds were bumped up from 2011, others remain the same. For instance, the limit for elective deferrals to a 401(k) plan increased from $16,500 to $17,000 (from $22,000 to $22,500 for taxpayers age 50 or older), but the limit for IRA contributions stays at $5,000 ($6,000 for taxpayers age 50 or older).
Being on Time — The IRS generally has three years to review federal tax returns, but this period is increased to six years for a substantial understatement of income. The IRS defines a “substantial understatement” as an omission of 25% or more of tax liability. After several lower-court conflicts over the statute of limitations for adjustments involving the “basis” of property, the U.S. Supreme Court will now decide the matter.