Guest Article Post by Leif Jensen of Leif Jensen and Associates:
In planning for the filing of your 2013 taxes there are a number of issues that Congress has blessed the US taxpayers with. A number of these new laws may or may not impact you personally.
A growing number of taxpayers consider themselves to be the middle class only to find out that they are in the top 10% of all US taxpayers, an adjusted gross income (AGI) of $115,000 or so will get you into this club.
The following are a number of provisions that will either help or hinder your tax planning for 2013.
State and local general sales tax deduction, this is for those who itemize but have no state taxes paid. In Illinois this is usually reserved for the elderly who are living off of Social Security and qualified assets. This election has been extended for 2013.
Principle residence mortgage debt relief, this is for those lost their homes and have cancellation of debt income. This election has been extended for discharges of debt occurring before January 1, 2014.
Medical deductions allowed on Schedule A have been increased for those less than 65 years of age. Making this election even more difficult to utilize, the higher threshold can only be crossed when there has been a catastrophic illness, or a devastating unemployment issue.
The marriage penalty is back in place at the higher income levels. This higher levels begin with the 15% tax threshold, so those married and making more than $72,500 will be taxed higher than single individuals at the same income levels.
The Net investment income tax (NIIT) is a 3.8% additional tax on investment income based upon the lesser of: the taxpayer’s net investment income for the year or the amount of modified adjusted gross income in excess of the taxpayer’s threshold. I know clear as mud, this is s complicated calculation and not easily explained in a short space.
The Affordable Care Act (ACA) added SS3101(b)(2) to the code. This new code section requires the payment of a 0.9% tax, called the additional Medicare tax, which is an entirely separate tax from the 3.8% NIIT. This if for taxpayers whose income exceeds certain levels, single $200,000 or MFJ $250,000.
With all of these new changes and the others not mentioned it is increasing in your best interests to consult a qualified tax prepare to make sure you are adequately prepared to minimize and tax liability of underpayment penalties.
Remember Illinois has three levels of Accountants:
- Licensed CPA who has the training, background and education levels to prepare and defend your taxes before the IRS
- Registered CPA those who took the exam years back and just want the designation with no educational requirement.
- Then everyone else. There are no requirements whatsoever to call yourself an accountant in Illinois. No training, education or experience is required.
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