TAX-AIDE

TAX-AIDE

Federal Tax Law Changes – Tax Year 2013

TAX-AIDE

Federal Tax Law Changes 2013

●New provisions

● Indexing

●Extenders

● Form change

●Due Dates

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TAX-AIDE

Defense of Marriage Act Ruling

● Same-sex couples – legally married by state or foreign law are married for federal tax returns

● State (or country) where married is key – not state of residence

● Must file either MFJ or MFS for 2013 and onward as long as married (except if eligible for HH)

● Taxpayers may, but are not required to, amend up to three years’ returns from S/HH/QW to MFJ/MFS/QW Changes in employer benefit plans can affect amended

return

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TAX-AIDE

DOMA – Supreme Court Ruling

●Domestic partnerships or civil unions not included

●Rules for community property apply as per state law

● State law governs state tax returns

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TAX-AIDE

DOMA Ruling Impact – Amending Returns

● Standard provisions for amending returns apply Trained on year being amended and use

TaxWise for year being amended Amend only taxpayer’s return by adding

spouse’s name, SSN, dependents, income, expenses, refund/balance due information and explanation of changes

No action required on spouse’s return

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TAX-AIDE

In or Out of Scope

● In scope: Distributions from a SEP/SIMPLE IRA that are

fully taxable Roth IRA distributions that are wholly

nontaxable, including a converted Roth IRA Wash sale loss disallowed if identified as

such on the 1099-B, brokerage or mutual fund statement (Cap Gn Wkt adjustment code W)

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TAX-AIDE

In or Out of Scope

●Out of scope (still) Self-employed medical insurance

adjustment (1040 Line 29) Roth IRA distributions that are partly

taxable, including converted Roth IRAs (<59½ or failed to meet the relevant 5-year test)

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TAX-AIDE

Schedule C

● Expense limit raised to $10,000

● Standard C-EZ rules apply No loss No inventory No employees No depreciation or asset write-off No home office deductions, etc.

● Can have multiple Sch Cs per taxpayer

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TAX-AIDE

Capital Gains Tax Rate

●New 20% rate for higher income taxpayers

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TAX-AIDE

National Mortgage Settlement

●Taxpayers may receive a settlement payment in 2013

●Relates to a home lost in foreclosure 2008 - 2011

●Must be COD certified or refer to paid preparer

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TAX-AIDE

Medical Deduction Haircut

●Taxpayers can deduct amount of unreimbursed medical and dental expenses that exceeds 10% of AGI (was 7.5%)

● If taxpayer (or spouse) is 65 or older, threshold remains 7.5% (for both)

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TAX-AIDE

New Taxes

● Additional 0.9% Medicare tax on earned income over limit

● Additional 3.8% tax on net investment income when modified AGI is over limit

● Limits for both $200,000 Single, HH or QW $250,000 MFJ $125,000 MFS

● Both out of scope

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TAX-AIDE

Social Security Tax Rate

●Employee portion of social security tax returns to 6.2% (was 4.2% for 2011–2012) Applies to self-employment tax too

Full social security rate now 12.4%Total self-employment tax rate 15.3%

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TAX-AIDE

Standard Deduction

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Std Ded + if blind + if ≥65Single $ 6,100 $ 1,500 $ 1,500 MFJ 12,200 1,200 ea 1,200 ea MFS 6,100 1,200* 1,200* HH 8,950 1,500 1,500 QW 12,200 1,200 1,200 *also applies to dependent spouse if claimed

TAX-AIDE

Itemized Deductions

● Subject to phase-out if AGI over $250,000 Single or QW $300,000 MFJ $150,000 MFS $275,000 HH

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TAX-AIDE

Exemption Deduction

●Exemptions increase to $3,900

● Subject to phase-out if AGI over $250,000 Single or QW $300,000 MFJ $150,000 MFS $275,000 HH

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TAX-AIDE

Standard Mileage Rates 2013

●56.5¢ per mile – business miles

●24¢ per mile – medical miles

●14¢ per mile – charitable miles

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TAX-AIDE

EIC Maximum Credits and Income

● $6,044 – three or more qualifying children● $5,372 – two qualifying children● $3,250 – one qualifying child● $487 – no qualifying child● $46,227 ($51,567 MFJ) 3 qualifying children● $43,038 ($48,378 MFJ) 2 qualifying children● $37,870 ($43,210 MFJ) 1 qualifying child● $14,340 ($19,680 MFJ) no qualifying child

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TAX-AIDE

Deductible Long-Term Care Premium Limits

●Qualified long-term care premiums includible as medical expense on Sch A $360 – Age 40 or under $680 – Age 41 to 50 $1,360 – Age 51 to 60 $3,640 – Age 61 to 70 $4,550 – Age 71 and over

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TAX-AIDE

Other Indexing

●HSA Limits $3,250 self-only coverage $6,450 family coverage Both + $1,000 if age 55 or older

●Retirement savings credit income limits Max $29,500, $59,000 MFJ, $44,250 HH

●Max investment income for EIC $3,300NTTC Training – 2013 20

TAX-AIDE

Other Indexing

● IRA contributions Max $5,500 ($6,500 if age 50 or older) Modified AGI limits when covered by

employer plan

● Lifetime learning credit income limits

● Excludible savings bond interest – out of scope

● Foreign earned income exclusion

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TAX-AIDE

Extended Provisions 2013

●Tax-free distribution from IRAs to public charities for individuals age 70½ or older

●COD exclusion for principal residence

●Adjustment for educator classroom expenses up to $250

●Adjustment for qualified tuition and fees

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TAX-AIDE

Extended Provisions

●Premiums for mortgage insurance deductible as interest for qualified residence

●Deduction for state and local general sales taxes

●Nonbusiness energy property credit

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TAX-AIDE

Form Changes

● Sch D new lines if all transactions on statement are Code A or D – basis reported to IRS with no adjustments

●But – continue to enter all capital gains/losses on Capital Gains Worksheet in TaxWise TaxWise will carry to proper forms/lines

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TAX-AIDE

Form 8949 1099 Codes

2012 codes were for short or long-term:A. Transactions reported on Form(s) 1099-

B showing basis was reported to IRS

B. Transactions reported on Form(s) 1099-B showing basis was not reported to IRS

C. Transactions other than code A or B

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Pub 4012 – Pg 14

TAX-AIDE

Form 8949 1099 Codes

For 2013:●A, B and C now apply to short-term only●D, E and F are long-term equivalents●Continue to report on TaxWise Capital Gains Worksheet●Enter A, B or C as before – TaxWise will carry to correct Form 8949 based on dates entered

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TAX-AIDE

Form 8453s

● Pub 3189, pg 19: A second copy of Form 8453 and attachments must be retained until December 31st

● ERO must promptly mail one copy to Austin and one copy to local SPEC office (SPEC to provide postage-paid mailing labels)

● Attaching pdf to return is acceptable alternative if have secure scanning capability

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TAX-AIDE

Due Dates

●2013 tax returns are due Tuesday, April 15, 2014

●2014 estimated payments due April 15, 2014 June 15, 2014 September 15, 2014 January 15, 2015

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TAX-AIDE

Tax Law Changes 2013

Comments?

Questions?

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