2013 Pork Management

Conference

June 20, 2013

Denver, Colorado

American Taxpayer

Relief ActJanuary 2, 2013

American Taxpayer Relief Act

Individual Impact

Generally ATRA provides for higher taxes

in 2013 for many Americans.

These changes concert with the 3.8% &

0.9% Medicare taxes enacted as part of

the Affordable Care Act (2010) which

apply starting in 2013.

American Taxpayer Relief Act

Individual Impact

• Avoided the so called “Fiscal Cliff” for some

• Permanent AMT Relief

• Individual Income Tax Rates

Individual Tax Rate Changes

• Bush Era Tax Cuts Expired at 12/31/2012 for:

• Individuals with Incomes > $400,000

• Families with Incomes > $450,000

• Long-Term Capital Gains – From 15% to 20%

• Dividend Rates – From 15% to 20%

• With 3.8% - Max Rate of 23.8% Applies

• Maximum Tax Rate – From 35% to 39.6%

• With 3.8% - Max Rate of 43.4% Applies

American Taxpayer Relief Act

Individual Impact (cont.)

• 2% Payroll Tax Holiday Ended 12.31.12

• American Opportunity Tax Credit - 2017

Other Notable Items (Healthcare)

• Supreme Court Affirmed Obamacare Decision 6.28.12

• Increased Threshold for Claiming Medical Expenses

• From 7.5% of AGI to 10% of AGI in 2013

• Additional Medicare Tax on High Income Workers

• From 1.45% to 2.35% for $200K Plus Wages

• Medicare Surtax – 3.8% on Net Investment Income (2013)

•Top Tax Bracket will Actually Be 39.6% + 3.8% = 43.4%

American Taxpayer Relief Act

Business Impact

• Section 179 Expensing

• Bonus Depreciation

• Tax Credit Extension

- R&D Credit / WOTC Thru 2013

Business Income Tax Relief

• Section 179 Expensing

• $500k in Immediate Expensing – 2012/13

• $2mm Threshold – 2012/13

• New or Used Qualifying Property

• Can’t Create a Loss with Section 179

• Drops to $25k/$200k Threshold in 2014

Business Income Tax Relief

Bonus Depreciation

• 50% Write-off of Qualifying Property (2013)

• New Property Only

• Bonus Depreciation Expires 12/31/2013

American Taxpayer Relief Act

Estate Planning Impact

• $5mm Indexed Exemption - Permanent

• Top Rate for 2013 and Beyond – 40%

• Permanent Unification of Estate, Gift &

GST Taxes

• Permanent Extension of Portability

Estate Taxes:

Post-American Taxpayer Relief Act

Calendar Year Applicable Exclusion Amount

Top Rate

2010 $5,000,000 35%

2011 $5,000,000 35%

2012 $5,120,000 35%

2013 and Beyond $5,250,000 40%

Tax on Net Investment Income

• Net Investment Income Tax (NIIT) took effect

on 1.1.2013.

• NIIT applies at a rate of 3.8% to certain Net Investment

Income of Individuals, Estates & Trusts that have

income in excess of statutory threshold amounts.

Tax on Net Investment Income

• 3.8% of the lesser of:

• Net Investment Income (NII) –

•or

•The excess (if any) of:

Modified Adjusted Gross Income over threshold

MAGI equals AGI Plus Foreign Earned Income Exclusion

Individual MAGI Threshold Amts

• Single $200,000

• MFJ (or Surviving Spouse) $250,000

• H of H $200,000

• MFS $125,000

• Amounts not indexed for inflation

Net Investment Income Includes:

• Interest

• Dividends

• Non-Qualified Annuities

• Royalties

• Rents

• Passive Activity Income

• Capital Gain

• Oil & Gas Income (Not Considered a

Working Interest)

Net Investment Income Excludes:

• Wages, Salaries & Bonuses

• Unemployment Compensation

• Operating Income from Nonpassive Business

• Social Security Benefits

• Alimony

• Tax Exempt Interest

• Self Employment Income

• Distributions from Qualified Plans & IRA’s

Top Ten Tax Developments of 20121. Tax law uncertainty

2. Supreme Court upholds PPACA

3. “Repair” regs

4. New Medicare taxes

5. Worker classification

6. IRS fresh start initiative

7. Limitations/basis overstatement

8. FATCA/FBAR compliance

9. Whistleblower regs

10.Practitioner oversight

Repair Regs Continue to Have Sweeping

Impact

• Temporary regulations issued December 2011

• Focus on issues of

• Materials and supplies

• De minimis expensing rule

• Definition of Unit of Property

• Single/multiple asset accounts

• General asset accounts

• Application delayed until 2014

IRS Whistleblower Program –

Successful or Concerning?

• Large awards paid - $104 million to UBS

employee, $2 million to Wall Street Executive

• IRS collections $1.5 billion, pays out $200

million

• Pays 15 to 30% of tax collected

IRS Audit, Return, and Collections

Statistics• Budget effects on audit enforcement efforts (quality

more so than quantity)

• 237 million returns processed

• 123 million refunds

• Net collections of $2.2 trillion

• Individuals examined – 1%, range from ½ to 27%

• Corporations – small 1.7%, large 10%, top end 45%

President Unveils 2014 Budget –

$3.77 Trillion

• Tax extenders – permanent vs. extension

• So called “Buffet Rule”

• High income earners – limit itemized deduction benefit to

28%

• Estate tax – 45% rate, $3.5 million exemption, ($1 million

for gifts)

Focus on Tax Reform

• Joint committee on taxation issued report - 11 tax

reform working groups

• Senate Finance committee - TaxReform.gov

• House Ways and Means discussion draft

• All budgets put tax reform forward as a principal

theme

• Must be coordinated with deficit reduction

2013 Pork Management Conference

Thank You

Rob Gunther, CPA

rgunther@frostpllc.com

Frost, PLLC

(800) 766-9241

Direct: (501) 975-0112