Checklist to Cut 2013 Taxes
Take a peak at Andrew’s article for Oncology Practice Management. Lots of tips to cut your 2013 taxes and advice for 2014.
IRS Delays Tax Season
The IRS has announced it will delay the start of tax season due to the Federal government shut-down.? The agency needs adequate time to program and test tax processing systems prior to the start of next tax season.
The earliest individual tax returns will be accepted is now January 28, 2014.? The filing deadline remains the same as April 15, 2014.
For more info, you can read the IRS press release here.
Tips if you Owe Taxes
While most taxpayers get a refund when they file their taxes, some do not.??Here are?some?tips and options from The IRS if you owe federal taxes:
1. Tax bill payments. If you get a bill from the IRS this summer, you should pay it as soon as possible to save money. You can pay by check, money order, cashier?s check or cash. If you cannot pay it all, consider getting a loan to pay the bill in full. The interest rate for a loan may be less than the interest and penalties the IRS must charge by law.
2. Electronic Funds Transfer. It?s easy to pay your tax bill by electronic funds transfer. Just visit IRS.gov and use the Electronic Federal Tax Payment System. You may also use EFTPS to pay your taxes by phone at 800-555-4477.
3. Credit or debit card payments. You can also pay your tax bill with a credit or debit card. Even though the card company may charge an extra fee for a tax payment, the costs of using a credit or debit card may be less than the cost of an IRS payment plan. To pay by credit or debit card, contact one of the processing companies listed at IRS.gov.
4. More time to pay. You may qualify for a short-term agreement to pay your taxes. This may apply if you can fully pay your taxes in 120 days or less. You can request it through the Online Payment Agreement application at IRS.gov. You may also call the IRS at the number listed on the last notice you received. If you can?t find the notice, call 800-829-1040 for help. There is generally no set-up fee for a short-term agreement.
5. Installment Agreement. If you can?t pay in full at one time and can?t get a loan, you may want to apply for a monthly payment plan. If you owe $50,000 or less, you can apply using the IRS Online Payment Agreement application. It?s quick and easy. If approved, IRS will notify you immediately. You can arrange to make your payments by direct debit. This type of payment plan helps avoid missed payments and may help avoid a tax lien that would damage your credit.
Taxpayers may also apply using IRS Form 9465, Installment Agreement Request. If you owe more than $50,000, you must also complete Form 433F, Collection Information Statement. For approved payment plans the one-time user fee is $105 for standard and payroll deduction agreements. The direct debit agreement fee is $52. The fee is $43 if your income is below a certain level.
6. Offer in Compromise. The IRS Offer-in-Compromise program allows you to settle your tax debt for less than the full amount you owe. An OIC may be an option if you can’t fully pay your taxes through an installment agreement or other payment alternative. The IRS may accept an OIC if the amount offered represents the most IRS can expect to collect within a reasonable time. Use the OIC Pre-Qualifier tool to see if you may be eligible before you apply. The tool will also direct you to other options if an OIC is not right for you.
7. Fresh Start. If you?re struggling to pay your taxes, the IRS Fresh Start initiative may help you. Fresh Start makes it easier for individual and small business taxpayers to pay back taxes and avoid tax liens.
8. Check withholding. You may be able to avoid owing taxes in future years by increasing the taxes your employer withholds from your pay. To do this, file a revised Form W-4, Employee?s Withholding Allowance Certificate, with your employer. The IRS Withholding Calculator tool at IRS.gov can help you fill out a new W-4.
Now’s the time for Mid-Year Projections
Now’s the time to get a Mid-Year Tax Projection to see how you’ll do on April 15 next year.
If you have self-employment income, made a job change during the year, have multiple sources of income, or just want to see where you stand tax-wise, our Mid-Year Tax Projection Service will help!
We’ll calculate a mid-year projection and give you advice on what you can do for the rest of 2013 to reduce your tax burden on April 15 (a nominal fee is charged for this service).
You can download our Tax Projection Worksheet for 2013, complete it, and give us a call at 781.938.0045 to schedule a meeting.
Part 1: New Tax Rules, Hikes and Strategies for 2013
Tax hikes in 2013 mean it’s time to revisit available tax breaks.
Effective 1/1/13, taxes increased for many well-paid Americans. Here are three separate tax hikes that might affect you:
- Top federal income tax rate now 39.6%
- Top Medicare tax on earned income now 3.8%
- New 3.8% Medicare tax on unearned income
Beginning on January 1, 2013, The American Taxpayer Relief Act raised the top federal marginal income tax rates from the 35% max in place since the Bush 2003 tax cuts to 39.6% for taxable income exceeding the following thresholds:
Threshold for 39.6% Bracket:
|
Filing Status |
Tax Bracket Starts |
|
Married Filing Joint |
$450k |
|
Head of Household |
$425k |
|
Single |
$400k |
|
Married Filing Separate |
$225k |
So how much more federal income taxes could you expect to pay this year due to the 39.6% bracket? Single individuals with taxable income of $600k will pay the federal government an additional $9,200. Earn $400k more to bring your taxable income to $1 million, and the additional taxes you’ll owe jumps to $27,600. Let’s look at the increases based on the four filing statuses:
Additional Taxes Starting in 2013
|
Taxable income |
Single |
Head of Household |
Married Filing Joint |
Married Filing Separate |
|
$600,000 |
$9,200 |
$8,050 |
$6,900 |
$17,250 |
|
$800,000 |
$18,400 |
$17,250 |
$16,100 |
$26,450 |
|
$1,000,000 |
$27,600 |
$26,450 |
$25,300 |
$35,650 |
Increased Tax Rate on Long-Term Capital Gains and Corporate Dividends
The top tax bracket was not the only increase to federal income taxes. For long-term capital gains and qualified corporate dividends, the tax rate increases by one-third – from 15% to 20% – based on the same taxable income thresholds as apply the 39.6% bracket, effective 1/1/13.
Higher Medicare Taxes:
There are two new increases to the Medicare tax. One upped the Medicare tax that you’ll pay on your earned income from 1.45% to 2.25% for single individuals earning more than $200k or married couples whose combined earned income exceeds $250k. Keep in mind that your employer will match Medicare taxes withheld from your pay at a rate of 1.45%, so the federal government now gets 3.8% on your earned income that exceeds the applicable threshold.
Increased Medicare Tax
|
Filing Status |
3.8% Tax Starts |
|
Married Filing Joint |
$250k |
|
Single |
$200k |
New 3.8% Medicare Tax On Unearned Income:
The new 3.8% Medicare tax on unearned income kicks in at the $200k of Adjusted Gross Income (AGI) for single individuals and $250k of AGI for married couples. Unearned income includes interest, dividends, capital gains, annuities, royalties, and rents. This is the first time that unearned income has ever been subject to Medicare taxes.
Tax Rates for Capital Gains and Qualified Dividends ? 2012 vs 2013
|
Single |
Married Filing Jointly |
Capital Gains and Qualified Dividends -2012 rates |
Capital Gains and Qualified Dividends -2013 rates |
Increase in Tax Rates on Investments 2012 vs 2013 |
|
$0 – $36,250 |
$0 – $72,500 |
0% |
0% |
0% |
|
$36,250 – AGI of $200,000 |
$72,500 – AGI of $250,000 |
15% |
15% |
0% |
|
$200,000 – taxable income of $400,000 |
$250,000 – taxable income of $450,000 |
15% |
18.8% |
3.8% |
|
$400,000+ |
$450,000+ |
15% |
23.8% |
8.8% |