Getting ready for a new year
Just prior to enjoying our November 28th celebrations, final regulations were passed on the new 3.8% healthcare tax which you can view online by Googling ”TD 9644.” It now appears that all tax regulations are set for us to proceed with our 2014 filing season for 2013 tax returns. As providers of tax services, we would like to inform you of significant changes in the tax law as well as expiring provisions.
If you are looking to lower your 2013 tax liability, there is still time to act. There are some year-end tax strategies that may work for you. As I always remind you at this time of year, the easiest way to reduce your tax – as well as clean your house – is to donate all the clothes that you have not worn in the last year or those household items that you no longer need. Get signed receipts from the charitable organization.
Based on the myriad of tax law changes affecting us, I have attended numerous education seminars. In October, I attended the MA Chapter of the National Association of Tax Professionals’ annual event where Kathryn Keene presented on the following topics and the nuances based on the new laws:
1) The first part of the day focused on foreign asset reporting requirements, foreign tax credits and foreign earned income exclusion. As our world shrinks into one global community, the IRS is increasing compliance on assets and income for which you have control.
2) The Affordable Care Act and its application was the second focus of the seminar. The Act created an additional Medicare tax of .9% on compensation that exceeds $250,000 married filing joint, $125,000 married filing separate and $200,000 for all other filers.
Under the Act, the employer withholds the tax on an employee’s wages if they are greater than $200,000. Since the employer is not aware of the spousal wages, taxpayers may be subject to the additional Medicare tax when their return is due. Application of the Act also burdens taxpayers with modified adjusted gross income (which is income prior to deductions and exemptions of the aforementioned floors) with a 3.8% unearned income Medicare tax applied to investment income. This tax will be applied when your return is prepared or prior to April 15th. Also, as part of the Act, the floor to deduct medical expenses has increased from 7.5% to 10% unless you are 65 or older.
Tomorrow I plan to attend a seminar on enhanced 1099 reporting and the following week, I have scheduled a seminar on the DOMA Act as same sex spouses will be filing federal taxes as married couples for the first time. As well, keep in mind the phase-out of itemized deductions for 2013, higher tax brackets and the expiration of the teacher expense deduction and the energy credit. You may want to order that new storm door after you read this, but make sure it is energy efficient. Please schedule an appointment to discuss tax planning issues that could lower your tax.
Happy Holidays from all of us at Fillo Financial
Associations
