Bryan Clark is an extremely talented CPA located in Monument Colorado. He can stand on 20 years of experience helping SMB and large enterprises with their full-scale accounting needs. Mr. Clark is our guest blogger on sterndmb.com this week.
The most frequent question I get asked is “how do I keep more of what I make“. Most people don’t mind paying their fair share, but not more than that. That gets complicated because everyone’s idea of “fair share” is different. What I can provide them is my experience of helping a small 12 person company grow from zero to $20 million in sales in five years. Where we did a very good job of managing expenses, maximizing how the owners and employees could benefit, and still achieve solid financial results that a buyer would be interested in. Couple that with 20+ years of working with over 100 different business a year, either preparing their taxes, or their bookkeeping, and just coaching and consulting with them gives me a very wide perspective on how to help my clients define and achieve their goals.
Tax reform and The Fiscal Cliff Deal looks like this:
Tax Rates
Income tax rates made permanent. For 2013 and beyond, the top individual income tax bracket will increase from 35% to 39.6% for taxpayers with taxable income of $400,000 or more ($450,000 or more Married Filing Jointly). Taxpayers with income below the thresholds will not see an increase in tax rates.
Capital gain rates. Beginning in 2013, the maximum capital gains tax will increase from 15% to 20% for taxpayers with taxable income of $400,000 or more ($450,000 or more Married Filing Jointly).
Payroll tax holiday. The 2% reduction in Social Security tax for employees and self-employed individuals expired at the end of 2012 and will not be extended for 2013. An employee’s Social Security portion of FICA will increase from 4.2% to 6.2%, with a corresponding increase in self-employment tax.
Employer withholding. On December 31, 2012, the IRS issued guidance on withholding, assuming expiration of the 2001 and 2003 tax rates and subsequent tax rate increases at all income levels. The IRS instructed employers to begin using the new withholding rates as soon as possible, but no later than February 15, 2013. Since this guidance was issued before the new law, the IRS is expected to quickly release new withholding tables to reflect the changes in tax rates.
Other taxes. The taxes contained in the new legislation are in addition to the 0.9% increase in Medicare tax on earned income and the 3.8% increase in Medicare tax for unearned income for taxpayers with earned/unearned income in excess of $250,000 (MFJ), $125,000 (MFS), and $200,000 (any other filing status) that were implemented as part of the Affordable Care Act of 2010.
AGI Phaseouts
Phaseout on itemized deductions. Beginning in 2013, itemized deductions will begin
to phase out for taxpayers with AGI of $250,000 or more Single, $275,000 or more Head of Household, or $300,000 or more Married Filing Jointly.
Phaseout of personal exemptions. Beginning in 2013, personal exemptions will begin
to phase out for taxpayers with AGI of $250,000 or more Single, $275,000 or more Head of Household, or $300,000 or more Married Filing Jointly.
The really scary picture:
Surtax on Investment Income (Takes effect Jan. 2013): A new, 3.8 percent surtax on investment income earned in households making at least $250,000 ($200,000 single). This would result in the following top tax rates on investment income:
Capital Gains 2012 = 15% 2013 = 23.8%
Dividends 2012 = 15% 2013 = 43.4%
Other* 2012 = 35% 2013 = 43.4%
Contact Bryan Clark for the most professional Accounting Services in Colorado
*Other unearned income includes (for surtax purposes) gross income from interest, annuities, royalties, net rents, and passive income in partnerships and Subchapter-S corporations. It does not include municipal bond interest or life insurance proceeds, since those do not add to gross income. It does not include active trade or business income, fair market value sales of ownership in pass-through entities, or distributions from retirement plans. The 3.8% surtax does not apply to non-resident aliens. (Bill: Reconciliation Act; Page: 87-93)