Social Security is a significant and welcome guaranteed income source, even for affluent retirees. Whether your benefit is reduced or taxed depends mainly on five items:Read More
Like other distributions from traditional IRAs and retirement plans, RMDs are generally subject to federal (and possibly state) income tax for the year in which you receive the distribution. However, a portion of the funds distributed to you may not be subject to tax if you have ever made after-tax contributions to your IRA or plan.Read More
So you aren’t fretting at tax time, maybe it will make sense over the next 9 days to put together an effective year tax management strategy to keep as much of your hard earned dollars as possible in your wallet. Every CPA or accountant seems to have a slightly different slant on the tax code, but here are your smart money moves tips that may be able to help you increase your bottom line.Read More
When it comes to filing tax returns, many people worry about completing every form correctly and according to the instructions. Unfortunately, taxpayers now have a bigger problem to contend with: the possibility that a scam artist may file a fraudulent return in their name. It happens all too frequently, according to the Internal Revenue Service, which estimates that it will process $21 billion in phony tax refunds next year.Read More
If you typically file your taxes early to receive your refund faster, you’ll have to wait a bit longer this tax season. Due to the partial government shutdown last year, the IRS won’t begin processing 2013 returns until January 31, 2014. (The April 15 deadline, however, remains the same.) That said, let’s review some important items to be aware of as you prepare to file your 2013 taxes, as well as look ahead to potential changes for 2014.
Filing your 2013 return
Americans—especially high-income taxpayers—are set to face a host of changes this tax season, both pleasant and not-so-pleasant. Highlights include:
- New top tax rate. Individual filers who earn more than $400,000 ($450,000 for married couples filing jointly) will fall into a new 39.6-percent bracket, which replaces the previous 35-percent rate.
- Higher Medicare taxes. An additional Medicare surtax of 0.9 percent applies to income over $200,000 ($250,000 for married couples filing jointly). There’s also a new 3.8-percent tax on net investment income for taxpayers with modified adjusted gross income above that same threshold. (The IRS explains what does and doesn’t count as net investment income at www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs.)
- Limitation on itemized deductions. Reintroduced in 2013 by the fiscal cliff deal, the limitation affects taxpayers with adjusted gross income (AGI) above $250,000 ($300,000 for married couples filing jointly). For these taxpayers, itemized deductions will be reduced by 3 percent of the AGI amount above the threshold. The same income threshold also applies to phaseouts for personal and dependent deductions.
- Simplified home office deduction. Instead of calculating actual expenses for a home office, you can take a standard deduction of $5 per square foot of home office space, up to 300 square feet—for a maximum of $1,500. The IRS estimates that the new option will save taxpayers 1.6 million hours of paperwork and recordkeeping annually.
- New filing options for married same-sex couples. Legally married same-sex couples must file their federal returns as married, regardless of whether their current state of residence recognizes same-sex marriage. Keep in mind that some couples may need to file their state tax returns singly if the state where they live doesn’t recognize the marriage.
In 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act were passed into law. One of their important provisions is a new Medicare tax designed to help pay the cost of health care reform. The new tax is effective in 2013, so it’s important to start planning now if you haven’t done so already.Read More