|Local accountant: Relief Act to greatly impact taxpayers |
|Posted: Tuesday, January 15, 2013 9:05 pm |
|By KEVIN BOWDEN |
This tax filing season is going to be greatly impacted by Congress’ passage of the American Taxpayer Relief Act.
The act established permanent 2012 income tax rates for most taxpayers and alternative minimum tax relief. It also extends many other breaks for individuals and businesses, according to local accountant Al Creswell, a member of the Union City accounting firm Alexander Thompson Arnold CPAs.
He explained the fiscal cliff deal by Congress does result in some tax increases.
Among the most significant, according to Creswell, are:
• Payroll taxes. The act doesn’t extend payroll tax relief, so taxpayers with earned income will see a Social Security tax rate increase of 2 percent in 2013.
• Income taxes. Begin-ning in 2013, taxpayers with taxable income that exceeds $400,000 (singles), $425,000 (heads of households) or $450,000 (married filing jointly) will face a marginal tax rate of 39.6 percent (up from 35 percent) and a long-term capital gains rate of 20 percent (up from 15 percent).
• Estate taxes. While the $5 million (indexed for inflation) estate tax exemption has been made permanent, the top estate tax rate increases from 3 percent to 40 percent beginning in 2013.
• Medicare taxes. This is really a reminder that the Health Care Reform Act imposes an Unearned Income Medicare Contri-butions Tax of 3.8 percent on the net investment income and an additional Medicare Tax of 0.9 percent on the earned income of certain high income taxpayers beginning this year.
Bob Sheridan at Union City’s Liberty Tax office has been doing tax preparation since 1972 and he said the new federal tax code is overwhelming. Sheridan said when he started there were only two volumes and now there are around 10 volumes.
He provided The Mess-enger with a three-page detailed overview of how the American Taxpayer Relief Act will affect taxpayers this year. Sheridan’s report details the impact of personal exemption phaseout limitations, itemized deduction limitations and changes to capital gain and dividend rates.
“For tax years beginning after 2012, the top rate for capital gains and dividends will permanently rise to 20 percent (up from 15 percent) for taxpayers with incomes exceeding $400,000 ($450,000 for married taxpayers,” Sheridan’s report states in part.
In fact, Sheridan’s tax highlight report indicates most of the changes will directly impact upper income families.
“For taxpayers in tax brackets below 25 percent, capital gains and dividends will permanently be subject to a 0 percent rate,” Sheridan’s report states.
His report also details what are described as “Recovery Act extenders” and “Historical individual extenders,” which extend some tax credits as well as other sections of the tax code.
Sheridan also explained various energy credits have been extended under the American Taxpayer Relief Act, such as credits for energy-efficient existing homes, alternative fuel credits, biofuel credits and credits for energy-efficient appliances.
One key change that has been implemented this year is a Jan. 30 deadline for the IRS to accept electronic tax returns.
“We’re up to date on all the changes,” Sheridan said.
Published in The Messenger 1.15.13