NC Budget Enacted Despite Gov. Perdue Veto

The NC House and Senate enacted the 2011-2012 budget on Wednesday, June 15, 2011 despite the veto from Gov. Beverly Perdue. The $19.7 billion budget contains several changes affecting NC tax law. The NC state sales tax will be cut by 1% on July 1, 2011. In addition, the temporary surtax on corporate and individual income taxes will expire. The full text of the House Bill 200 (now Session Law 2011-145) can be downloaded at the NC General Assembly website. (http://www.ncga.state.nc.us/)

--- Donna Boyette, CPA, Senior Staff Accountant
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The North Carolina General Assembly overrode Gov. Bev Perdue’s veto and enacted a budget bill that adopts federal adjusted gross income rather than federal taxable income as the starting point for computing North Carolina personal income tax, enacts a new net business income tax deduction, and retroactively modifies the capital stock base for purposes of determining a taxpayer’s corporate franchise tax liability. The new starting point and deduction are effective beginning with the 2012 tax year. Notably absent from the bill is the extension of the temporary income tax surcharge and the temporary increase in the sales and use tax rates that were enacted in 2009.

The new personal income tax net business income tax deduction is equal to the first $50,000 of net business income minus any passive income the taxpayer receives during the taxable year. By adopting federal adjusted gross income as the starting point, North Carolina no longer incorporates the federal standard deduction or personal exemption amounts and, therefore, no longer requires the corresponding North Carolina adjustments beginning with the 2010 tax year. The standard deduction amount will be set as follows depending on the taxpayer’s filing status:

• Married, filing jointly—$6,000
• Head of Household—$4,400
• Single—$3,000
• Married, filing separately—$3,000

The personal exemption amount will be $2,500 for taxpayers with incomes up to the following limits:

• $100,000 for taxpayers filing married, filing jointly
• $80,000 for taxpayers filing as heads of household
• $60,000 for single taxpayers
• $50,000 for taxpayers filing married, filing separately

The personal exemption for taxpayers with incomes above these thresholds will equal $2,000. Reserves for amortization of intangible assets as permitted for income tax purposes are deducted from the capital stock base for purposes of determining a taxpayer’s corporate franchise tax liability, effective retroactively to post-2006 tax years. Previously, the statute only authorized the deduction of reserves for depreciation of tangible assets in the capital stock base.

--- Written by CCH Incorporated

Tax Tip: Organizing Your Tax Information Throughout the Year

Now that tax season is over, you might think, “what can I do to make this process easier?”. There are many approaches to handling the myriad of paperwork we face every day, but you have to find the one that works for you. Some people like to keep everything related to their monthly bills, while others throw out all but the most important items. I believe there needs to be a happy medium.

No matter how you track your payments, whether it is through a special software program, such as Quicken, Quickbooks, Excel spreadsheets or just keeping up with your checkbook, you will need to retain your receipts for a certain period of time. Refer to our Record Retention Guidelines found at the bottom of the “What’s New” page on our website, then start the process of preparing for next year right now!

I like to put my bills in monthly files, then at the end of the year, throw out all insignificant non-tax related items. I keep such receipts as those related to car maintenance & repairs, large items purchased that might have a warranty or that I expect to last more than a year, improvements to my home, and other important documents. I have what would be considered permanent files where these items go. As year-end information comes in, I put them all in one special file.

Some people prefer to toss the unnecessary monthly bills each month. These bills might include supplies purchased for personal use, cable TV bills, etc. If you work at home, be careful when it comes to utility, telephone and other bills which might be used to calculate a home office deduction. For the bills you keep, always make a note as to the date paid, check number and the amount, if different from the bill. This notation will help you track the payment should the need arise.

If you’re in the habit of tossing, rather than keeping, then you will still need a place to corral the important documents. If you’re not a person who will file, then a large manila envelope might just be the ticket. You can have one for each category that is needed to easily find the receipt later, such as, medical expenses, auto expenses, property taxes, insurance, etc. Some people like to have a box or bin of some sort where they can easily accumulate a year’s worth of payments. This necessitates a lot of rummaging if you find that you need to refer to a bill later.

Whatever your style, you want to make sure that come tax time next year, you have the information readily available to complete the organizer. Even if you don’t complete the organizer, you can use it to check off the information you have to reveal what is left to gather. Then before you make your appointment for your tax preparation, you can see whether you have received all your Form 1099s and if you need to obtain more receipts for your expenditures. The more prepared you are for the meeting, your tax advisor is better able to give you the best service possible. That’s where I’m coming from.

--- Rosa Read, CPA – Senior Staff Accountant