The Board has been convened to:

• Provide a public forum for communication between Vermont’s Commissioner of Taxes and representatives of the public interested in Vermont’s tax administration and policy,
• Provide ideas, input and perspective to the Commissioner, assisting her in developing tax policy and identifying improvements in the administration of taxes, and
• Provide constructive observations regarding current or proposed policies.

“The tax law is becoming more complex, reflecting our world,” said Vermont Tax Commissioner Mary Peterson. “Simultaneously, customer service expectations are rising. Open and transparent collaboration is the key strategy to help government agencies, businesses, and individuals work together in a positive manner. As Commissioner of Taxes, I am convening the Vermont Tax Advisory Board to foster this type of collaboration.”

“I am pleased that Commissioner Peterson is working to enhance relationships with the Department’s key stakeholders — the businesses, property owners, cities and towns, and non-profits that make Vermont great,” said Secretary of Administration Jeb Spaulding. “The Vermont Tax Advisory Board represents the type of innovation and transparency that is important to our state and Governor Shumlin.”

For more information, please contact McSoley McCoy and Co. at 802-658-1808.

Caitlin recently got engaged and is moving back home to New York to be closer to her family. She will be with us until the end of May and will be missed. Please join us in wishing her all the best with her future career and marriage.

The ideal candidate will have excellent communication skills and enjoy working with a variety of clients.  Strong computer skills, analytical ability and problem solving skills are required.  We are a culture of self-starters, who are encouraged to think and act creatively with a good deal of independence.  Our clients look to us to assist them not only with tax and accounting issues but also ask our insight on their business.  An accounting degree is required, CPA is a plus. and prior experience with ProSystem fx is beneficial.

The position requires maturity and discretion because there will be extensive client interaction with owners and management at all levels. Please contact Peter McCoy at plm1960@aol.com for more information.

When tropical storm Irene cut a path of destruction through Vermont last summer, many roads, bridges and houses disappeared in the powerful floodwaters, ripping apart entire communities. Following the devastation, The Vermont Long Term Disaster Recovery Group (VLTDRG) was formed to raise and allocate money from the Vermont Disaster Relief Fund. This effort is a national effort, although most of the money is raised in the state of Vermont.

The Vermont Long-Term Disaster Recovery Group, Inc., organizations and individuals who wish to help Vermont’s flood survivors conduct activities and events to raise money for recovery efforts. VLTDRG coordinates these efforts throughout Vermont, bringing together local and regional disaster recovery groups and funds.

Many of our neighbors, friends and business associates were profoundly affected by last year’s flood devastation.  Vermont accounting firm McSoley and McCoy is honored to be part of the effort to join, rebuild and strengthen our local communities.

To learn more about the Vermont Long Term Disaster Recovery Group, Inc. or to find out how you can help, click here.

Last month, staff accountant Lauren Rizzotti jumped into the icy, wintry waters of Lake Champlain along with more than 1,100 other intrepid Vermonters. It was her first Penguin Plunge.  Says Rizzotti, “It was a lot of fun.  My team and I raised $3,497 and we registered just two days before the event.”

The weather for this year’s plunge was not as cold as it’s been in previous years.  At 20 degrees, under sunny skies, this year’s weather could almost qualify as balmy by Vermont standards!  When asked if she’ll take the plunge again in 2013, Rizzotti replied, “Definitely!”  She added, “And next year we’ll start earlier so we can raise even more money.”

Rizzotti and her team placed 25th overall in terms of money raised.  Not bad for entering at the last minute.  We have high hopes  for what Rizzotti and her fellow plungers will do for next year’s event.

Vermont accounting firm McSoley and McCoy supports and encourages its employees and their communities to participate in fund raising activities like the Penguin Plunge because they provide a strong sense of teamwork, fun and involvement. For more information about Special Olympics Vermont, please visit www.vtso.org.

The extension is a somewhat revised version of the 2011 act, and includes a new “recapture” provision, which imposes an additional 2% income tax on higher-income employees who make in excess of $18,350 during the two-month period.

Otherwise, the tax break for the first two months of 2012 will be very much the same as it was in 2011: a reduction in the Social Security tax withholding rate from 6.2 percent to 4.2 percent. Though the provision is only temporary right now, there is a possibility that the payroll tax cut will be extended.

To learn more, visit the IRS website, or reach out to your local Vermont accounting firm, McSoley, McCoy & Co. We’re here to help Vermonters with a range of audit, accounting, and tax services, and are happy to answer any questions you might have as you confront this, and other tax law changes in the coming year.

With the 2011 tax year now drawing to a close, it’s time to think strategically about your tax liability.  Our tax system for the most part is firmly based on the calendar year, and your tax liability is computed from an annual snapshot of your income, deductions and credits. Understanding year-end tax strategies can therefore make a significant difference in what you owe for the 2011 tax year.

Planning for 2011 includes using both traditional year-end strategies as well as those that react to situations unique to this year. Particularly important is the impact of certain tax benefits scheduled to end this year; a look ahead at possible sea-changes in the tax laws starting in 2013; and attention to new opportunities and pitfalls created during the past year through court cases and IRS rulings.

Income/deduction shifting

The traditional year-end strategy of income shifting applies to year-end 2011 but with an extra twist. Under traditional strategy, it’s prudent to time your income and deductions so that your taxable income is about even for 2011 and 2012. This is done so that your tax bracket doesn’t spike in either 2011 or 2012. If you anticipate a higher tax bracket for 2012, you may want to accelerate income into 2011 and defer deductions into 2012. If you anticipate a leaner 2012, income can be delayed through deferred compensation arrangements, postponing year-end bonuses, maximizing deductible retirement contributions, and delaying year-end billings.

The twist for year-end 2011 is the uncertain future for tax rates after 2012. Many political observers forecast that higher-income taxpayers will be asked to pay more, either through higher tax rates or more limited deductions. That may suggest a strategy in which income is not deferred but is recognized now at lower tax rates while they’re still available.

IRA, Retirement Savings for 2011

There continue to be a number of tax-saving opportunities for retirement planning in 2011. Among these are Roth IRAs, changes that make regular IRAs more attractive, and other retirement savings incentives.

Traditional IRAs: Individuals who are not active participants in an employer pension plan may make deductible contributions to an IRA of up to $5,000. For 2011, an additional $1,000 “catch-up” contribution is allowed for taxpayers age 50 or older by the close of the taxable year, making the total limit $6,000 for these individuals. Individuals who are active participants in an employer pension plan also may make deductible contributions to an IRA, but their contributions are limited in amount depending on their Adjusted Gross Income (AGI). For 2011, the AGI phase-out range for deductibility of IRA contributions is between $56,000 and $66,000 of modified AGI for single persons (including heads of households), and between $90,000 and $110,000 of modified AGI for married filing jointly. Above these ranges, no deduction is allowed.

In addition, an individual will not be considered an “active participant” in an employer plan simply because the individual’s spouse is an active participant for part of a plan year. Thus, you may be able to take the full deduction for an IRA contribution regardless of whether your spouse is covered by a plan at work, subject to a phase-out if your joint modified AGI is $169,000 to $179,000 for 2011. Above this range, no deduction is allowed.

Spousal IRA: If an individual files a joint return and has less compensation than his or her spouse, the IRA contribution is limited to the lesser of $5,000 for 2011 plus age 50 catch-up contributions, or the total compensation of both spouses reduced by the other spouse’s IRA contributions (traditional and Roth).

Roth IRA: This type of IRA permits nondeductible contributions of up to $5,000 a year. Earnings grow tax-free, and distributions are tax-free provided no distributions are made until more than five years after the first contribution and the individual has reached age 59 ½. Distributions may be made earlier on account of the individual’s disability or death. The maximum contribution is phased out in 2011 for persons with an AGI above certain amounts: $169,000 to $179,000 for married filing jointly, and $107,000 to $122,000 for single taxpayers (including heads of households); and between $0 and $10,000 for married filing separately who lived with the spouse during the year.

401(k) Contribution: The §401(k) elective deferral limit is $16,500 for 2011. If your §401(k) plan has been amended to allow for catch-up contributions for 2011 and you will be 50 years old by December 31, 2011, you may contribute an additional $5,500 to your §401(k) account, for a total maximum contribution of $22,000 ($16,500 in regular contributions plus $5,500 in catch-up contributions).

SIMPLE Plan Contribution: The SIMPLE plan deferral limit is $11,500 for 2011. If your SIMPLE plan has been amended to allow for catch-up contributions for 2011 and you will be 50 years old by December 31, 2011, you may contribute an additional $2,500.
Roth conversions

If you converted an individual retirement account (IRA) to a Roth IRA in 2010, you were given an option. You could have chosen to recognize all income in 2010 or defer that income, half into 2011 and half into 2012. If you elected to defer that income into 2011 and 2012, don’t forget to include that income in your year-end planning for 2011.

If you initiated a Roth conversion earlier in 2011 and that Roth account has declined in value since then, you should consider a “Roth reconversion.” Reconverting your Roth IRA back to a regular IRA before year-end will allow you to avoid paying income tax on an account balance at its higher value.

Finally, if you have not yet made a Roth conversion, doing so at year-end 2011 might be an opportunity worth serious consideration. There are a few variables to consider, including your present income tax bracket, how close you are to retirement, and your access to other funds both to pay the conversion tax and to delay distributions from your Roth account later.

Alternative Minimum Tax (AMT)

The Alternative Minimum Tax was not indexed for inflation, and it affects many moderate-income taxpayers, especially two-income married couples. As year-end approaches, your income and deductions for 2011 become more predictable, so now is a good time to compute whether you will be subject to the AMT for 2011 or 2012. If so, your decision to pay your 1/15/2012 state quarterly estimates or projected balance due would be affected.

Gains and losses

The recognition of capital gains and losses at year-end may be beneficial to minimize your net capital gains tax and maximize deductible capital losses. Many investors have excess realized capital losses from recent stock market declines that they may now “carry over” to offset capital gains that would otherwise be taxable.

Also of concern is whether the maximum tax rate for capital gains will rise from 15 percent to 20 percent or higher after year-end 2012 because of the scheduled expiration of the Bush-era tax cuts. Since long-term capital gains are only available on stocks and other capital assets held for more than one year, a capital asset must be bought on or before December 30, 2011 in order to be sold in 2012 and guarantee qualifying under the lower capital gains rates.

Medical expenses

Effective January 1, 2011, the Patient Protection and Affordable Care Act (PPACA) states that over-the-counter medications and drugs can no longer be reimbursed from a health flexible spending arrangement (health FSA) unless a prescription is obtained. The rule also applies to health reimbursement arrangements (HRAs), health savings accounts (HSAs), and Archer medical savings accounts (Archer MSAs), an important consideration for employees who are required to make a decision by year-end 2011 on how much to fund their accounts in 2012.

Casualty losses

Vermonters, as well as taxpayers in many other states, experienced natural disasters in 2011. A casualty loss can result from the damage to your property from any sudden, unexpected or unusual event, such as a hurricane, earthquake, wildfire, or flood. Casualty losses are generally deductible in the year the casualty occurred, less ten percent of your adjusted gross income and a $100 per casualty deductible.

However, if you have a casualty loss from a federally declared disaster, you can elect to treat the loss as having occurred in the year immediately preceding the tax year in which the disaster happened, and you can deduct the loss on your return or amended return for that preceding tax year. The election gives taxpayers the opportunity to maximize their tax savings in the year in which the savings will be greatest.

Energy tax incentives

If you’re considering replacing your roof, HVAC system, or windows and doors, doing so using energy-efficient materials before January 1, 2012 could generate tax savings. Through the end of 2011, a number of residential energy-efficiency improvements qualify for a tax credit. These include qualified windows and doors, insulation products, HVAC systems, and roofing. The “lifetime” credit amount for 2011 is $500 and no more than $200 of the credit amount can be attributed to exterior windows and skylights.

Gift/estate tax

The current estate tax through 2012 is set at a maximum 35 percent rate and a $5 million exemption amount. Vermont’s exemption is only $2,750,000; therefore one could be exempt from Federal tax but still have a Vermont tax liability. Many experts predict that after 2012 that Congress will lower the exclusion to $3.5 million and raise the top rate to 45 percent. In light of this possibility, lifetime gift-giving, ideally on an annual basis, should continue to form part of a master estate plan. The annual gift tax exclusion per donee is $13,000 for 2011 (and, again, for 2012), with $26,000 allowed to each donee by married couples. Making a gift at year-end 2011 to take advantage of this annual, per-donee exclusion should be considered by anyone with even modest wealth.

Please contact our office if you have further questions or would like to know how you can implement any of these strategies.

To ensure compliance with Treasury Department regulations, I wish to inform you that any tax advice that may be contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Love has been singing pop music for more than a half-century, and recently earned a spot in the Rock and Roll Hall of Fame. We’re very excited to see her in concert, and invite you to join us in witnessing her vibrant performance this holiday season.

If there’s one thing we at MMC love more than performing audits, it’s the performing arts. Supporting artists like Darlene is an important part of our culture and also part of how we identify ourselves as Vermont accountants.

Join us at the Flynn Main Stage in Burlington, VT. You won’t want to miss it!

Wednesday, December 14^th–7:30pm –Darlene Love – “Love for the Holidays”

Ticket prices range from $15-$45. Discounts are available for students. All tickets are available at www.flynntix.org and at the box office.

We at MM&C applaud the Perlman Music Program’s mission to bring world-class talent and training to small, regional communities like our own. It mirrors our own objective: to provide the training, discipline and experience of an international accounting firm to our local community, with a focus on personal service, accessibility and flexibility.

Spruce Peak Performing Arts Center is a wonderful addition to the area’s cultural life.  As a local Vermont accounting firm, McSoley McCoy & Co. is delighted to support it and Itzhak Perlman. Join us in supporting our community and enjoy an amazing performance at any of three exciting events:

Friday, November 11th
3:30pm – 5pm – Open Orchestra Rehearsal conducted by Maestro Itzhak Perlman

7:30pm Chamber Music Concert

Saturday, November 12th
7:30pm – Orchestral and Choral Concert conducted by Maestros Itzhak Perlman and Patrick Romano

All tickets are available on www.sprucepeakarts.org, and at the box office.