Tag Archives: tax

Tax Day!

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It’s official – in 15 hours, the 2012 tax season will be in the record books.  It’s been a wild ride, thanks to the late decisions by Congress on the tax aspects of the Fiscal Cliff, the software problems that plagued the industry, (which we thankfully escaped), and a normally 3 month filing season that was shortened by more than a month due to the late changes by lawmakers.

We wanted to take this chance to thank all of our clients for your continued business.  Whether you’re a new client this year, or you’ve been with us from the beginning back in 1976, we sincerely appreciate the opportunity to serve your tax needs, and more than that, to watch as your life unfolds over the years.  You’re the reason we all come to work every day, and love what we do.

No Foolin’ – Taxes Due Two Weeks From Today

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April Fool’s day happens to mark the Minnesota Twins Home Opener, as well as the two-week warning on the regular tax season.  Individual, Partnership, and LLC tax returns are due two weeks from today.

We’re in high gear here at Ramsay, working hard to meet that deadline.

Any tax returns not completed by the 15th can be put into post-season extension status, allowing an additional five months to file the business returns, and another six months to file the individual tax returns.  It’s just an extension to file though, and not to pay, so if your tax return needs to be extended, you’ll have to pay in any estimated balance due by the 15th of April.

As always, we’re here to answer your questions and guide you through tax season, usually without the mixed sports metaphors.

2013 Exemptions and Rates

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The IRS released the inflation-adjusted amounts for 2013 individual tax returns.

  • The standard deduction increases to $6,100 single and $12,200 married filing jointly.
  • The personal exemption increases $100 to $3,900.  Those with adjusted gross income (AGI) of more than $150,000 single and $300,000 married filing jointly will see their exemption reduced.
  • The maximum Earned Income Tax Credit increases slightly to $6,044.
  • The new 39.6% top tax rate applies to individuals with taxable income of more than $400,000, $450,000 for those married filing jointly.  All other rates remain the same as 2012.
  • Those with AGI of $250,000 single and $300,000 married filing jointly will see their itemized deductions reduced by up to 20%.

These changes present some significant planning issues for those who will have income in any of the ranges mentioned above.  We’re here to help take the guess work out of your tax situation, and to help reduce your tax exposure as much as possible.

Protecting Yourself – And Your Returns

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Lately, it seems like there is a news story every week about problems with tax returns.  One of the largest providers of tax software to home users, as well as professional accounting firms, had numerous issues correctly completing Minnesota tax returns.  The largest commercial tax preparer in the country had tens of thousands of returns prepared incorrectly, causing delays in their customers getting their refunds.  Both of these happened within the last two weeks, and point to an unsettling problem: tax preparers expecting their software to be smarter than they are.

More disturbing though are the stories of tax preparers cheating and defrauding their clients.  These stories are usually far less publicized – we learn about them through professional publications.  A tax attorney in New York recommended fraudulent deductions to clients – to the tune of $7 billion.  A former tax partner in a national accounting firm was arrested for stealing payments his clients made to his firm.  Numerous preparers have been arrested for claiming fraudulent deductions on client’s returns and pocketing the additional refunds for themselves.

Given all this, choosing a competent, trustworthy tax professional is crucial to keeping you in compliance with the law, and getting you the most accurate tax return.  Below are a few steps to take when choosing a preparer.

  • Get referrals from friends and family whose opinions you value.
  • Be leery of anyone who promises outcomes that seem too good to be true.
  • Check with the Board of Accountancy in your state to see if the preparer you are considering is currently licensed, and if they have had any disciplinary action taken against them.
  • Never be afraid to get a second opinion if you think something doesn’t seem right.
  • Use a search engine, like Google, to see if anyone has posted reviews or comments about the firm online.

As always, we’re here to help, as we have been for over 30 years.

Fiscal Cliff – Part 2

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Last week we covered the changes for the 2012 tax year created by the bill to avoid the tax portion of the fiscal cliff.  This week we’ll cover the changes that apply for 2013 and years after, as well as some of the less common provisions of the bill.

Tax Rates and Deductions

Beginning with the 2013 tax year, the following changes have been made to the individual tax rates, deductions and exemptions.

Tax Rates. Starting with 2013, income over $400,000 for single people and $450,000 for married couples will be taxed at 39.6% rather than the old 35% maximum rate.  All other tax rates are unchanged.

Capital Gain and Dividend Rates. The top tax rate for this income moves from 15% to 20%, with the 20% rate applying to single filers with more than $400,000 and $450,000 for married couples.  Those in the 10% and 15% brackets will continue to see this income taxed a 0%.

Those in a 25% or greater bracket, but with incomes less than the thresholds mentioned above will see a tax rate of 15%.

This is in addition to the 3.8% Medicare Surtax applied to investment income of those with $200,000 single or $250,000 married filing joint or more under the Affordable Care Act.

Deductions and Exemptions. For taxpayers with incomes above $250,000 single or $300,000 married filing joint, the following changes are effective for 2013 and years after:

  • Personal exemptions will be reduced by 2% for each $2,500 of income above the threshold amounts.
  • Itemized deductions will be reduced by 3% of the amount of income over the threshold amounts, with the maximum reduction not exceeding 80% of itemized deductions.

Estates and Gifts

The estate exemption is permanently increased to $5 million and indexed for inflation, and the portability of unused exemption amounts from one spouse to another is continued.  The top tax rate for estates and gifts increases from 35% to 40%.  These provisions are in place for deaths and gifts occurring after 2012.

Debt Discharge Income

The exclusion of up to $2 million of debt discharge income related to a principal residence is also extended through the end of 2014.