At the end of every year, we in the CPA world wait patiently for the IRS to release the new limits on various items that are indexed for inflation, and determine how they will affect our clients. The last few years have yielded few changes as inflation has remained at historically low levels. However, as we move into 2012 a majority of limits have been adjusted. Please note some of the more common items below.
Social Security Wage Base
In 2012, the wage base will increase $3,300 up to $110,100. This is the first increase in the wage base since 2009. An increase in the wage base results in a direct increase in the taxes you pay through the FICA system. The Social Security portion of your FICA taxes is capped at the wage base. As the wage base has increased, so will that portion of the taxes you pay. In 2010 and 2011, the wage base did not go up since there was not a cost-of-living increase to Social Security beneficiaries.
Retirement Plans
-The maximum 401(k) employee elective contribution rises $500 to $17,000 in 2012. The catch-up provision for those 50 and older is set at $5,000 making the maximum $22,500.
-There are no changes on the limits for the SIMPLE IRA, Traditional IRA, or Roth IRA.
-Simple--$11,500
-IRA--$5,000
-Roth IRA--$5,000
Stay tuned to our blog and be in contact with your CPA as we move closer to year-end; and tax legislation becomes a hotter topic in the world of politics. Depending on what comes out of Washington, you just might find that the 2012 rules that exist today might be different tomorrow.
brad@mcarthurco.com
704.544.8429
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