Important Federal Government Information will follow below as the information developes.
+++++
Information for Individuals Added 4/30/2011
Can you benefit from Recovery Act tax credits? Maybe. Click on the underlined links for more information that may help you.
> COBRA. Workers who lost their jobs between Sept. 1, 2008, and May 31, 2010, may qualify for reduced COBRA health insurance premiums for up to 15 months.
> Education benefits. The American opportunity credit and enhanced benefits for 529 college savings plans help families and students find ways to pay higher education expenses.
> Home energy efficiency and renewable energy incentives. See what you can do to reap tax rewards.
> Earned Income Tax Credit. The EITC was bigger in 2010.
> Additional child tax credit. More families qualified for the ACTC in 2010.
> Making Work Pay Tax Credit. This credit meant more take-home pay for many Americans in 2009 and 2010. Make sure enough tax is withheld from
your pay with the help of the IRS withholding calculator. See Making Work Pay for more.
> $250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment was paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board in 2009 or, in some cases, 2010. To verify whether you
received it, call 1-866-234-2942 and select Option 1 or visit Did I Receive a 2010 Economic Recovery Payment? on this website.
> Money Back for New Vehicles. Taxpayers who bought new cars and certain other new vehicles in 2009 can deduct the state and local sales taxes they paid as well as other taxes and fees they paid in states with no sales tax.
> Increased Transportation Subsidy. Employer-provided benefits for transit and parking rose.
> Health Coverage Tax Credit. This credit increased from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.
Can you benefit from Recovery Act tax credits? Maybe. Click on the underlined links for more information that may help you.
> COBRA. Workers who lost their jobs between Sept. 1, 2008, and May 31, 2010, may qualify for reduced COBRA health insurance premiums for up to 15 months.
> Education benefits. The American opportunity credit and enhanced benefits for 529 college savings plans help families and students find ways to pay higher education expenses.
> Home energy efficiency and renewable energy incentives. See what you can do to reap tax rewards.
> Earned Income Tax Credit. The EITC was bigger in 2010.
> Additional child tax credit. More families qualified for the ACTC in 2010.
> Making Work Pay Tax Credit. This credit meant more take-home pay for many Americans in 2009 and 2010. Make sure enough tax is withheld from
your pay with the help of the IRS withholding calculator. See Making Work Pay for more.
> $250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment was paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board in 2009 or, in some cases, 2010. To verify whether you
received it, call 1-866-234-2942 and select Option 1 or visit Did I Receive a 2010 Economic Recovery Payment? on this website.
> Money Back for New Vehicles. Taxpayers who bought new cars and certain other new vehicles in 2009 can deduct the state and local sales taxes they paid as well as other taxes and fees they paid in states with no sales tax.
> Increased Transportation Subsidy. Employer-provided benefits for transit and parking rose.
> Health Coverage Tax Credit. This credit increased from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.
++++++++
July 2010
What about the 3.8% tax on net investment income? Effective for 2013 Plan now for the changes
How does the 0.9% tax work?
If Joe and Mary each earn $175,000, their total employment income is $350,000. Currently they owe 1.45% -- $5,075 -- of regular Medicare tax, and their employers owe a matching amount. In 2013, the couple will owe an extra 0.9% -- $900 -- on their wages above $250,000, which is $100,000. Their employers pay nothing extra.
This levy is keyed to "modified adjusted gross income," with a threshold of $250,000 for couples and $200,000 for singles. (This is simply adjusted gross income for nearly everybody except expatriates, who must add back certain exclusions.) The tax is a flat 3.8% on investment income above the threshold.
How would this work?
Example 1: John and Jane, a married couple, have $400,000 of AGI -- $200,000 of wages plus $200,000 of investment income. Because they have $150,000 of investment income above the $250,000 threshold, they would owe an extra $5,700.
Example 2: Anne, a single filer, earns $40,000 but has an investment windfall of $190,000, for total income of $230,000. Because she has investment income of $30,000 above her $200,000 threshold, she would owe $1,140 of additional tax.
Example 3: Retirees Mary and Bill have no wages but they do have a taxable IRA payout of $90,000, plus investment income of $150,000, for a total of $240,000. They don't owe the new tax, because they have no investment income above the $250,000 threshold.
What is investment income?
Interest, except municipal-bond interest; dividends; rents; royalties; and capital gains on the sales of financial instruments like stocks and bonds. The taxable portion of insurance annuity payouts also counts, unless it is from a company pension. So do gains from financial trading, as well as passive income from rents and businesses you don't participate in. All are subject to the 3.8% tax on amounts above the $250,000 or $200,000 threshold, as described above.
Not taxed: Distributions from regular and Roth IRAs and other retirement accounts, including pensions and Social Security, and annuities that are part of a retirement plan. Life-insurance proceeds, muni-bond interest and veterans' benefits don't count, nor does income from a business you participate in, such as a Subchapter S or partnership.
Could the 3.8% tax apply to gains on the sale of a home?
Yes, if there is a taxable gain above the $500,000 ($250,000, single) exclusion for gains on the sale of your residence.
Example: Fred and Fran, who bought their home in a New York suburb for $50,000 in 1972, sell it in 2013 for $1 million. After subtracting the $50,000 cost and $500,000 exclusion, they have investment income of $450,000. If they also have a taxable IRA payout of $70,000 and a pension of $30,000, they would owe the tax of $11,400 on $300,000.
What happens if a taxpayer who owes the new tax on investments also has a large itemized deduction -- say, medical expenses or a theft loss?
Even if taxable income is zero because of deductions, he or she could still owe the 3.8% tax. Example: Myra is a single filer with investment income of $100,000 and wages of $200,000. But during the same year she loses $300,000 in a Ponzi scheme. She pays no income tax, but she still owes the new Medicare tax of $3,800 on her net investment income, says Sharon Kreider, a tax expert in Sunnyvale, Calif.
Does the 3.8% tax affect trusts and estates?
Yes, and it can hit them hard. The tax is levied on investment income as low as $12,000 that isn't paid out to beneficiaries. Some believe the tax may also hit children's unearned income subject to the "kiddie tax" if the parents owe it themselves.
What professions are able to avoid this tax?
Ms. Kreider and others see a sweet spot for real-estate professionals. The law deems their rents to be "active" income, so they wouldn't be subject to the investment tax. Often they don't owe self-employment taxes on that rental income, either.
What steps do experts recommend to minimize these taxes, other than taking capital gains before 2013 or buying municipal bonds?
• Examine both your regular and investment income: the higher your regular AGI, the more likely that your investment income will be subject to the new tax. So while Social Security and pensions don't count as investment income, they raise AGI. This makes Roth IRA conversions even more attractive for many. "Roth withdrawals don't raise AGI and aren't investment income," says Vern Hoven, a tax expert in Gig Harbor, Wash.
• Reconsider a defined-benefit pension if you're eligible -- say, you're in a small business or have consulting income, says Mark Nash of PricewaterhouseCoopers. Pension payouts don't count as investment income, and the older a taxpayer is, the more he can contribute.
• Taxpayers selling assets should consider installment sales, says Ms. Kreider, if spreading out the income would minimize the new tax.
• For some, life insurance may become more attractive. Because life-insurance proceeds at death aren't subject to this tax, a taxpayer could buy a policy, borrow from it and settle up at death, avoiding income tax on investment gains within the policy. But Mr. Nash cautions that the savings must outweigh the fees and other disadvantages such policies may have.
--------------------
March 2010
Congress has been extra busy passing two massive health care reform bills. These laws come with an overwhelming amount of tax changes. Not only are there some tax increases, and some new tax credits, but Congress has also granted the IRS the power to oversee many of the health insurance requirements, including tax penalties for failure to maintain continuous insurance coverage.
Health Care Reform Brings Massive Tax Changes
Health care is about to undergo a massive reform as a result of two new laws passed by Congress. Individuals will be required to maintain health insurance coverage, whether purchased through a group plan or individually.
Small Business Tax Credits: Beginning in calendar year 2010, the bill offers tax credits to help more small business provide their employees with health insurance. Business that begin offering employee health coverage will be eligible tax credits of up to 35 percent of their total employee premium payments. Starting in 2014, the small business tax credits will cover 50 percent of premiums.
Closing the Medicare Part D "Donut Hole": Effective this year, Medicare beneficiaries who fall into the costly Part D prescription drug donut hole will get a $250 rebate. Starting in 2011, the bill institutes a 50-percent discount on brand-name drugs needed by seniors already in the donut hole, and by 2020 completely eliminates the hated donut hole.
Free Preventative Care Under Medicare: Starting January 1, 2011.
There's an increase in the Medicare tax for high income earners. Currently the Medicare tax rate is a flat 2.9% on all wage income, with both the employer and the employee paying exactly one-half of this amount. Starting in 2013, the flat 2.9% Medicare tax will continue to apply to wages under $200,000 (or under $250,000 for married couples filing a joint return). There will be an additional 0.9% Medicare tax on wages over $200,000 ($250,000 for joint filers). This additional tax is to be withheld from wages, or if not withheld, it is to be paid directly by the employee. This additional Medicare tax also effects self-employed persons paying the self-employment tax.
Additional Medicare tax on investment income. HR 4872 modifies the health care act to impose the expanded 3.8% Medicare tax on investment income for people with income over $200,000 (or $250,000 for joint filers). Investment income for the purposes of the Medicare tax base would include interest, dividends, royalties, rent, passive activity income (such as income passed-through from partnerships and S-corporations), and gain from the sale of property.
Tax credit for smaller businesses to provide health insurance coverage. Businesses employing 25 employees or less may become eligible for tax credits of up to 35% based on employer-paid health insurance premiums. Larger employers who fail to provide health insurance coverage may become liable for tax penalties.
The floor on the medical expense deduction raises to 10%. Currently, out-of-pocket medical expenses are tax-deductible to the extent the expenses exceed 7.5% of a person's adjusted gross income. Starting in 2013, only medical expenses that exceed 10% of AGI will be tax-deductible.
Expanded information reporting for health insurance coverage. The Internal Revenue Service will be in charge of monitoring that individuals have health insurance coverage, assessing penalties for failing to maintain adequate coverage, and for paying tax credits to subsidize insurance coverage for lower-income people. There will also be information shared between the IRS and the Department of Health and Human Services, particularly to screen health care providers for tax compliance problems and to recover tax debts owed by health care providers directly from HHS payments.
Information reporting for income payments of $600 or more expanded to include corporations.
Test Engineering, Information Systems Selection, Budget Development and Audit, Equipment Service Selection, Income Tax Consulting and Preparation, Low Income
Housing, RDA Redevelopment Agency Programs, Self Employed Small Business Consulting, Tax Consulting, Tax Preparation, Form 1040, Schedule C, Sch A,
Tax Credit, NOL, Net Operation Loss, Housing, Form 540, CA.
Housing, RDA Redevelopment Agency Programs, Self Employed Small Business Consulting, Tax Consulting, Tax Preparation, Form 1040, Schedule C, Sch A,
Tax Credit, NOL, Net Operation Loss, Housing, Form 540, CA.