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Federal Tax Law, Form Changes, & Issues for 2013

Federal Tax Law, Form Changes, & Issues for 2013. Federal Tax Law Changes 2013. New Provisions Indexing Extenders Form Changes Issues Due Dates. Medical Deduction Limits.

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Federal Tax Law, Form Changes, & Issues for 2013

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  1. Federal Tax Law, Form Changes, & Issues for 2013

  2. Federal Tax Law Changes 2013 • New Provisions • Indexing • Extenders • Form Changes • Issues • Due Dates NTTC Training – 2013

  3. Medical Deduction Limits • Taxpayers under 65 can deduct only amount of unreimbursed medical and dental expenses that exceeds 10%of AGI (was 7.5%) • If 65 or older, threshold remains 7.5% until 2017 NTTC Training – 2013

  4. Capital Gains • Until 2011 only Sch D, then Added F 8949 • 3 year enforcement to have brokers reflect “cost basis” • “Covered” applies to any asset purchased after 2010 (stock)/2011 (mutual/DRIPs) • Retains A (basis provided) coding • Retains B (No basis provided) coding NTTC Training – 2013

  5. Capital Gains • Retains C – no 1099-B provided coding • 14 codes in column f (See 4012) • New 20% rate for higher income taxpayers ($200,000 +) NTTC Training – 2013

  6. Sale of Bonds • Sale (redemption) of bonds at maturity In-scope • Pub 4491, p 107 states OOS • TPs who have sold any assets other than stock, mutual funds, and a personal residence • Should have included bonds NTTC Training – 2013

  7. New Taxes • Medicare tax on high incomes • Net investment income tax (NIIT)for high income taxpayers • Both apply if AGI exceeds • $200,000 Single or HH • $250,000 MFJ or QW • $125,000 MFS • Both out of scope NTTC Training – 2013

  8. Social Security Tax Rate • Employee portion of social security tax returns to 6.2% (was 4.2% for 2011–2012) • Applies to self-employment tax too • Full social security rate now 12.4% • Total S-E tax rate 15.3% NTTC Training – 2013

  9. Standard Deduction and Exemption Increases • $6,100 – Single or MFS • $7,600 – Single >65 or blind • $8,950 – HH • $10,150 – HH >65 or blind • $12,200 – MFJ or QW • $13,400 – MFJ, QW >65 or blind • Exemptions increase to $3,900 NTTC Training – 2013

  10. Standard Mileage Rates 2013 • 56.5¢ per mile – business miles • 24¢ per mile – medical miles • 14¢ per mile – charitable miles NTTC Training – 2013

  11. EIC Maximum Creditsand Income • $6,044 – three or more qualifying children • $5,372 – two qualifying children • $3,250 – one qualifying child • $487 – no qualifying child • $46,227 ($51,567 MFJ) 3 qualifying children • $43,038 ($48,378 MFJ) 2 qualifying children • $37,870 ($43,210 MFJ) 1 qualifying child • $14,340 ($19,680 MFJ) no qualifying child Max Credit Max Income NTTC Training – 2013

  12. Defense of Marriage Act Ruling • Same-sex couples – legally married by state or foreign law are married for federal tax returns • State (or country) where married is key – not state of residence • Must file either MFJ or MFS for 2013 and onward as long as married (except if eligible for HH) • Taxpayers may, but are not required to, amend up to three years’ returns from S/HH/QW to MFJ/MFS/QW • Changes in employer benefit plans can affect amended return NTTC Training – 2013

  13. DOMA – Supreme Court Ruling • Domestic partnerships or civil unions not included • Rules for community property apply as per state law • State law governs state tax returns NTTC Training – 2013

  14. DOMA Ruling Impact – Amending Returns • Standard provisions for amending returns apply • Trained on year being amended and use TaxWise for year being amended • Amend only taxpayer’s return by adding spouse’s name, SSN, dependents, income, expenses, refund/balance due information and explanation of changes • No action required on spouse’s return NTTC Training – 2013

  15. DOMA • Federal 1040 accepts same sex marriages • State of Virginia does not • Many questions to be resolved so look for updates • Handling of such situation, If VA allows separate submissions, THEN NTTC Training – 2013

  16. DOMA • Carefully select who is TP (only 1 reference and should be most complex) • Complete Taxwise 1040 • On MIS remove state designation • Check Box indicating “No State return” • File MFJ NTTC Training – 2013

  17. DOMA • E-File as Federal only. • After acceptance : • Convert original TP MFJ into a single return (Single, HoH) • Change Fed return from “e-file” to “paper” • Re-insert VA designation • Remove check in box “No state return" NTTC Training – 2013

  18. DOMA • Remove all spousal income, adjustments, deductions, etc. • Insert any new appropriate entries • Designate return as “State Only” • Unlink from any Federal return • QR and submit NTTC Training – 2013

  19. DOMA • Remove For Spouse: • Create a new Federal return as a new TP • Filing status, most likely Single • Set MIS status as for former TP • Ensure complete QR performed • Submit individually (Ensure return is Unlinked from federal) NTTC Training – 2013

  20. DOMA Problems • Due to delay in submission and acceptance of Federal: • TP’s may have to return to complete • If not practical, file paper return and have them mail NTTC Training – 2013

  21. In or Out of Scope • In scope: • Distributions from a SEP/SIMPLE IRA that are fully taxable • Roth IRA distributions that are wholly nontaxable, including a converted Roth IRA • Wash sale loss disallowed if identified as such on the 1099-B, brokerage or mutual fund statement (Cap Gn Wkt adjustment code W) NTTC Training – 2013

  22. Debit Card Conversion • State issued 450,000, recalled 250,000 • Activated w birth date and last 4 SSN • Problems • Compared to state DMV data bank • When a Jr. and Sr. at same address NTTC Training – 2013

  23. Debit Card Conversion • Expected TP to not pay fee via bank • Advise TP to use retailer OR • Use terms “Cash out” or “withdraw” in lieu of “transfer” with bank NTTC Training – 2013

  24. National Mortgage Settlement • Taxpayers may receive a settlement payment in 2013 • Relates to a home lost in foreclosure 2008 - 2011 • Must be COD certified or refer to paid preparer NTTC Training – 2013

  25. Indexing NTTC Training – 2013

  26. Deductible Long-Term Care Premium Limits • Qualified long-term care premiums includible as medical expense (Sch A) • $360 – Age 40 or under • $680 – Age 41 to 50 • $1,360 – Age 51 to 60 • $3,640 – Age 61 to 70 • $4,550 – Age 71 and over NTTC Training – 2013

  27. Other Indexing • HSA Limits • $3,250 self-only coverage • $6,500 family coverage • Both + $1,000 if age 55 or older • Retirement savings credit income limits • Max $29,500, $59,000 MFJ, $44,250 HH • Max investment income for EIC $3,300 NTTC Training – 2013

  28. Other Indexing • IRA contributions • Max $5,500 ($6,500 if age 50 or older) • Modified AGI limits when covered by employer plan • Lifetime learning credit income limits • Excludible savings bond interest – out of scope • Foreign earned income exclusion NTTC Training – 2013

  29. Extenders/Extentions No Changes NTTC Training – 2013

  30. Extended Provisions 2013 • Tax-free distribution from IRAs to public charities for individuals age 70½ or older • COD exclusion for principal residence • Educator classroom Adjustment ($250) • Tuition and fees Adjustment ($4K maximum ended 31 December 2013) NTTC Training – 2013

  31. Extended Provisions • Premiums for mortgage insurance deductible as interest for qualified residence • Deduction for state and local general sales taxes • Nonbusiness energy property credit NTTC Training – 2013

  32. Form Changes • Schedule C • Schedule D • K-1 • F 2106 EZ • 1099-DIV NTTC Training – 2013

  33. Schedule C • Expense limit raised to $10,000 • Standard C-EZ rules apply • No loss • No inventory • No employees • No depreciation or asset write-off • No home office deductions, etc. • Can have multiple Sch Cs per taxpayer NTTC Training – 2013

  34. Form Changes • Sch D new lines if all transactions on statement are Code A or D – basis reported to IRS with no adjustments • Continue to enter all capital gains/losses on Capital Gains Worksheet in TaxWise • TaxWise will carry to proper forms/lines • Taxwise will not add codes D, E, & F NTTC Training – 2013

  35. No Codes D, E, F NTTC Training – 2013

  36. Form Changes • Foreign Tax Credit on Sch K-1 In-scope if defined as passive income and below excess limits (FTC slide 24) • Check page 2 of form for location NTTC Training – 2013

  37. Form 8949 1099 Codes 2012 codes were for short or long-term: • Transactions reported on Form(s) 1099-B showing basis was reported to IRS • Transactions reported on Form(s) 1099-B showing basis was not reported to IRS • Transactions other than code A or B Pub 4012 – Pg 14 NTTC Training – 2013

  38. Form 8949 1099 Codes For 2013: • A, B and C now apply to short-term only • D, E and F are long-term equivalents • Continue to report on TaxWise Capital Gains Worksheet • Enter A, B or C as before – TaxWise will carry to correct Form 8949 based on dates entered NTTC Training – 2013

  39. Form 8453s • Pub 3189, pg 19: A second copy of Form 8453 and attachments must be retained until December 31st • ERO must promptly mail one copy to Austin and one copy to local SPEC office (SPEC to provide postage-paid mailing labels) • Attaching pdf to return is acceptable alternative if have secure scanning capability TRS Webinar – November 2013

  40. Form 2106-EZ • 2106-EZ In-scope with Sch A • Use to report employee Bus expense, line 21 if: • Ordinary and necessary expenses • No employer reimbursement • Standard mileage only • See top of form NTTC Training – 2013

  41. Form 2106-EZ NTTC Training – 2013

  42. Form 1099-DIV Changes • Section 1250 Gain, Box 2b In scope • Collectibles 28% Gain, Box 2d In Scope • Section 1202 Gain – OOS • Amounts in these boxes will carry over automatically to Sch D from Div statement NTTC Training – 2013

  43. Form 1099-DIV Changes NTTC Training – 2013

  44. Issues • Activity Reporting • AARP Portal Usage • Debit Card • Care Giver 1099-MISC • Amended Returns NTTC Training – 2013

  45. Issues • Activity Reporting important for AARP Tax-Aide funding • Complete lines 11-14, Preference sheet • Ensure list anytime you assist a TP • Question • Return • At site , home, online, etc. NTTC Training – 2013

  46. Issues • AARP volunteer Sharenet primary source for communication, reimbursement, etc. • Two portals • http:// fake email • http://www.aarp.org/sk/taxaide • 2 weeks reimbursement if DD NTTC Training – 2013

  47. Caregiver Income Forms • TP has 1099-MISC or Cash to declare • Family member not in their business • Yes, No SE tax, report on line 21 • No, Must pay SE, report Sch C • Cash wages - $1800, no W-2 • Report line 7, via worksheet 1 NTTC Training – 2013

  48. Amended Returns • CO’s must have been certified in 2012 • We are not required to do amended • if didn’t create prior year return • If does not contain our error entry • If site capacity a factor • Can have them return at later date NTTC Training – 2013

  49. Due Dates • Returns are due Tuesday, April 15, 2014 • 2014 estimated payments due • April 15, 2014 • June 15, 2014 • September 15, 2014 • January 15, 2015 NTTC Training – 2013

  50. Health Care Reform Legislation • Patient Protection & Health Care Act & Education reconciliation Act • 2700 page laws • 15,000 pages regulations • Several implemented in 2012 • Some impacting us in 2013, 2014, NTTC Training – 2013

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