The 2013 tax season is upon us and I would like to take this opportunity to thank you for your continued trust and support. In addition, I would like to provide you with information regarding 2013 tax planning. As in previous years, continuing to assist and drive the tax practice of Pittman P.C. is Joe Aker. Please feel free to speak to either Joe or Susan in the event I am unavailable. We can all be reached at 317-636-5561.
2013 Tax Deadlines:
Corporate Deadline: March 17, 2014
Individual Tax Deadline: April 15, 2014
Partnership Deadline: April 15, 2014
Estate and Trust Deadline: April 15, 2014
Individual Extension Deadline: October 15, 2014
Corporate Extension Deadline: September 15, 2014
Partnership Extension Deadline: September 15, 2014
As the individual tax deadline is April 15, 2014, I ask that I receive all of your materials by April 1, 2014. The corporate tax deadline is March 17, 2014 and I will need all corporate materials by March 1, 2014. Should I not receive all of the necessary items to finish your tax return by March 1 and April 1 respectively, an extension will be filed.
Please note: if an extension of time is filed, the extension is for filing the return only and that 90% of all tax due must be paid with the extension or the tax authority will disallow the extension and deem the return late. If monies are owed with an individual extension request, the Indiana Department of Revenue requires an IT-9 separate extension form be filed.
On behalf of Joe, Susan and myself, I thank you again for the opportunity to serve you and appreciate your continued confidence in our abilities. Please feel free to contact any of us regarding these policies or with any general questions.
Federal Tax Update – 2013 Income Tax Newsletter
Outlined are some of the tax law changes that we feel may impact our clientele. Please feel free to call with any questions. For the 2013 tax season, several major changes occurred increasing income tax rates, creating additional taxes and restricting available deductions.
The income tax rates for 2013 include 10%, 15%, 25%, 28%, 33% and 35% as in previous years with the income brackets varying dependent on the filing status of Single, Head of Household, Married filing Joint/Widow or Married filing Separate. In 2013, a new tax rate and income bracket were created. The tax rate is 39.6%. The income bracket for the new rate is as follows:
Head of Household
Married Filing Joint/Widow
Married Filing Separate
Long Term Capital Gains
If you are in the 10%-15% income tax brackets, your capital gain rate is 0%. If you are in the 25%, 28%, 33% or 35% income tax brackets, your capital gains rate is 15%. If you are in the new 39.6% income tax bracket, your capital gains rate is 20%, an increase of 5% from the 2012 tax rates.
Social Security & Medicare Taxes
The social security wage base limit for 2013 is $113,700 with a rate of 6.2% for the employer and employee. There is no wage base limit for medicare. The rate is 1.45% for both the employer and employee.
2013 marks the first year of the Medicare surtax to assist with the funding of the new health care initiatives. An additional 0.9% medicare tax must be withheld from an employee or paid if self-employed on wages in excess of $200,000 if single or $250,000 if married filing jointly. The additional medicare tax is only imposed on the employee and not the employer.
Net Investment Income
The Affordable Care Act created a new tax on the net investment income of individuals, estates and trusts. The tax is effective as of January 1, 2013 and the rate is the smaller of 3.8% of your net investment income or the excess of your modified adjusted gross income over the threshold amount for your filing status.
2013 IRA Contribution Increases
2013 marks an increase in the amount that may be contributed to annual Roth or Traditional IRA’s. You have until April 15, 2014 to contribute $5,500 into these accounts. A catch up provision allows those age 50 or older to contribute $6,500.
Medical & Dental Expense Threshold
For those of you who itemize your deductions, you may only deduct qualified medical expense that exceed 10.0% of Adjusted Gross Income, up from 7.5% in previous years. The threshold remains 7.5% if you are 65 years or older until the filing of your 2017 tax return.
Personal Exemptions and Itemized deductions will be subject to phase outs in 2013.
Personal Exemptions will be reduced by 2% of each $2,500 (or any part there-of) over the phase out amount for each filing status. Itemized deductions can be reduced by 3% of the amount that exceeds Adjusted Gross Income for each filing status. The maximum phase out is 20% of your itemized deductions.
The filing status and phase amount for the personal exemptions and itemized deductions are:
Single above $250,000, Head of Household above $275,000, Married filing jointly/window above $300,000 and Married filing separately above $150,000.
Mileage Rate 2013
Business: 56.5 cents per mile
Charitable: 14.0 cents per mile
Medical/moving: 24.0 cents per mile
Health flexible spending arrangements (FSAs)
$2,500 is the maximum in salary reduction contribution made to a health FSA beginning January 1, 2013.
Simplified Home Office Deduction
For 2013, there is a simplified method of calculating your home office expense. The safe harbor is for qualified home business expenses up to $1,500 and replaces the allocation of expenses by a percent of the home used for business.
Foreign Financial Assets
If you had foreign financial assets for the 2013 calendar year, you may be required to file form 8938 with your tax return.