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Federal Tax Law Changes – Tax Year 2013

Federal Tax Law Changes – Tax Year 2013. Federal Tax Law Changes 2013. New provisions Indexing Extenders Form change Due Dates. Defense of Marriage Act Ruling. Same-sex couples – legally married by state or foreign law are married for federal tax returns

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Federal Tax Law Changes – Tax Year 2013

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  1. Federal Tax Law Changes – Tax Year 2013

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

  3. 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

  4. 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

  5. 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

  6. 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

  7. In or Out of Scope • Out of scope (still) • Self-employed medical insurance adjustment (1040 Line 29) • Roth IRA distributions that are partly taxable, including converted Roth IRAs (<59½ or failed to meet the relevant 5-year test) NTTC Training – 2013

  8. 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

  9. Capital Gains Tax Rate • New 20% rate for higher income taxpayers NTTC Training – 2013

  10. 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

  11. Medical Deduction Haircut • Taxpayers can deduct amount of unreimbursed medical and dental expenses that exceeds 10%of AGI (was 7.5%) • If taxpayer (or spouse) is 65 or older, threshold remains 7.5% (for both) NTTC Training – 2013

  12. New Taxes • Additional 0.9% Medicare tax on earned income over limit • Additional 3.8% tax on net investment income when modified AGI is over limit • Limits for both • $200,000 Single, HH or QW • $250,000 MFJ • $125,000 MFS • Both out of scope NTTC Training – 2013

  13. 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 self-employment tax rate 15.3% NTTC Training – 2013

  14. Standard Deduction NTTC Training – 2013

  15. Itemized Deductions • Subject to phase-out if AGI over • $250,000 Single or QW • $300,000 MFJ • $150,000 MFS • $275,000 HH NTTC Training – 2013

  16. Exemption Deduction • Exemptions increase to $3,900 • Subject to phase-out if AGI over • $250,000 Single or QW • $300,000 MFJ • $150,000 MFS • $275,000 HH NTTC Training – 2013

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

  18. 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

  19. Deductible Long-Term Care Premium Limits • Qualified long-term care premiums includible as medical expense on 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

  20. Other Indexing • HSA Limits • $3,250 self-only coverage • $6,450 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

  21. 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

  22. Extended Provisions 2013 • Tax-free distribution from IRAs to public charities for individuals age 70½ or older • COD exclusion for principal residence • Adjustment for educator classroom expenses up to $250 • Adjustment for qualified tuition and fees NTTC Training – 2013

  23. 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

  24. Form Changes • Sch D new lines if all transactions on statement are Code A or D – basis reported to IRS with no adjustments • But– continue to enter all capital gains/losses on Capital Gains Worksheet in TaxWise • TaxWise will carry to proper forms/lines NTTC Training – 2013

  25. 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

  26. 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

  27. 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

  28. Due Dates • 2013 tax 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

  29. Tax Law Changes 2013 Comments? Questions? NTTC Training – 2013

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