By Andrew Franklin, M.A. Tax Professional (CTEC Certified RPTP) at H&R Block

1. Impacts of the New Tax and Healthcare Laws and Other Tax Issues For Professionals Undergoing Reconstruction By Andrew Franklin, M.A. Tax Professional (CTEC Certified RPTP) at H&R Block Past Sacramento Professional Network Resume Chair Disclaimer: All tax advice presented is general advice. Consult a tax professional and give them consent to discuss your specific tax issues.

2. Tax laws are important during a career change

3. Brief Outline, Part I • I. Big changes in our tax law in 2013 with the passage of ATRA(American Taxpayer Relief Act of 2012) • II. Patient Protection and Affordable Healthcare Act moving us to universal healthcare • III. The basics of debt cancellation in taxland • IV. Education credits

4. Brief Outline, Part 2 • V. Unemployment benefits new law and reminder • VI. Retirement planning • VII. Conclusion: tax laws can significantly impact your career change options.

5. ATRA means big tax changes • The American Taxpayer Relief Act became law on January 2, 2013. H&R Block’s Tax Institute identifies 21 major changes to the tax law. I find three most significant for our larger fiscal policy: • 1. Most of the tax cuts made during the G.W. Bush administration are now permanent. • 2. Social Security withholding on employees is back up to 6.2% after a two-year holiday. • 3. The Alternative Minimum Tax has been permanently patched and indexed to inflation.

6. ATRA continued • Essentially, ATRA protected people under $250,000 in income (couple or single) from massive tax increases. • ATRA also eliminated some expiring tax laws and kept some of the more popular stimulus laws such as education deductions. • You can read the actual text of ATRA here:http://www.gpo.gov/fdsys/pkg/BILLS-112hr8enr/pdf/BILLS-112hr8enr.pdf

7. Health Care and Taxes: Play or Pay! • In 2014, if you are not exempt from having health care, you will face an IRS fine if you do not have health care. • Your subsidy or free healthcare and fine are determined by your tax filing status, number of dependents, and income in 2012. • Subsidies are projected to be provided to single people earning under $45,000 and a family of 4 earning under $92,000 if the employer does not provide adequate health insurance. Business taxes and fines will be assessed based on health care coverage for their employees. • CONCLUSION: Taxes and health care are now linked.

8. The Basics of Debt Cancellation in Taxland • According to the IRS, cancelled debts are taxable unless specifically excluded. This is called cancellation of debt income. • So, if you walk away from an ‘underwater’ mortgage, have a vehicle repossessed or credit card debt cancelled, you may lose your assets and then face a bigger tax bill! • If you have debts and are considering cancellation, gather your documents on those debts. You may be able to exclude some of that COD income with an insolvency worksheet. • ATRA included an income exclusion of $2 million for cancelled debt on a primary home loan. This provision expires at the end of 2013. So, if you are ‘underwater,’ and considering a short sale or foreclosure, get your options on the table now! The option to exclude that debt as income may not be available next year. • Debt cancellation is a complex matter, so seek the advice of a professional before making a major decision.

9. IV. Education adjustments and credits Education Can reduce your tax bill • ATRA included several significant changes in the educational arena. • A. Tuition interest adjustment is $2500 in 2012 tax year and $4000 in 2013. Paying down your student loans gives you a dollar-for-dollar reduction in income before computing AGI, the basis of most credit computations. Paying down interest on student loans is a good tax plan. • B. American Opportunity Credit has been extended through 2017 and is partially refundable. If you don’t have a Bachelor’s and aren’t in the fourth year of school or later, this amazing credit is refundable. You can get money if you qualify even if you don’t owe any taxes! • C. Lifetime learning credit is up to $2000 nonrefundable (only reduces your bill) and is based on 20% of your expenses.

10. Unemployment and taxes • Section 501 to 503 of ATRA extended the emergency unemployment benefits through January 1, 2014. It is unknown whether any further extensions will be made by Congress. • Unemployment is taxed as income by the federal government. It is unearned income for purposes of the Earned Income Credit and other credits. • The state of California does not tax unemployment. So, if you receive any, your California income is lower than your federal income for tax purposes.

11. VI. Retirement planning • There are many tax laws related to retirement. • Retirement tax law is complex and there are substantial penalties for non-compliance. • Consult an expert like Grant Lewis before making any retirement plan decisions! • Grant is now going to tell you some basic retirement planning facts. . .

12. Conclusion: Taxes Matter in Your Career Change • There are many other ways the tax laws can impact your career change. Moving expenses adjustment, employment-related travel, how your company covers your employee costs are just a few of the myriad ways taxes impact your career. • As a professional, you know the value of expertise. Ask a professional about the tax implications of big decisions so you can makethe best one for you.

13. Epilogue: A little about H&R Block • H&R Block is a major tax preparer, preparing one in every seven U.S. tax returns. • H&R Block has offices open year-round offices so you can always get advice from a tax expert. The new H&R Block Myaccount feature of the website makes it even easier to know your life through tax. • H&R Block stands behind its tax pros, provides amazing tax education resources and requires that its tax pros complete more than the minimum continuing education units. • H&R Block hires employees for work ranging from customer service, IT and marketing to tax preparation. • Go to www.hrblock.com or ask an H&R Block associate to learnmore!

14. Questions?