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.