Changes coming in 2013 under the Affordable Care Act

We have all heard by now that the Supreme Court has upheld the Affordable Care Act. Many of the provisions have already been enacted while it will be several years before others take effect. We have highlighted some of the important provisions that will come into effect in 2013 below. If you have any questions or concerns about how these changes may impact you please call your LMGW advisor.  

• Additional .9% Medicare tax on higher earners-An additional .9% Medicare tax will be charged on taxpayers with salary and/or self employed earnings above $200,000 for single taxpayers, $250,000 for married filing joint taxpayers and $125,000 for married filing separate taxpayers. The .9% tax is calculated on a taxpayer’s salary and/or self employed earnings in excess of the applicable threshold. This tax is also in addition to the 3.8% Medicare tax on investment income discussed below. Taxpayers should be aware that they could be subject to both taxes and will need to take them into consideration in calculating estimated tax payments in the future. For more information see our previously posted article here.  
•  Additional 3.8% Medicare tax on net investment income-Taxpayers with modified adjusted gross income (MAGI) above $200,000 for single taxpayers, $250,000 for married filing joint taxpayers and $125,000 for married filing separate taxpayers will be subject to an additional 3.8% Medicare tax on their net investment income. Investment income generally includes interest, dividends, capital gains and losses on investment property and rental income. The tax will be imposed on the lesser of your net investment income or MAGI in excess of the threshold. If your MAGI is below the applicable threshold the additional tax will not apply, even if you do have investment income. For more information see our previously posted article here.
• Higher threshold for itemized medical expenses-Under current law, medical expenses can be deducted as an itemized deduction to the extent they exceed 7.5% of AGI. In 2013 the threshold will increase to 10% of AGI for regular tax purposes. The threshold will remain at 10% for AMT purposes. If you or your spouse is 65 or older at the end of 2013 the lower 7.5% threshold will apply until 2017.
• $2,500 cap on FSA contributions-The maximum an employee can contribute to an FSA plan will be capped at $2,500 annually beginning in 2013.
• 2.3% Excise tax for medical device manufacturers and importers-Medical device manufacturers and importers will have to pay a 2.3% excise tax on taxable sales of medical devices. Devices retailed to the general public are exempt, as are hearing aids, eyeglasses and contact lenses.
• Deduction for employer Part D is eliminated– The deduction for the subsidy for employers who maintain prescription drug plans for their Medicare Part D eligible retirees will be eliminated starting January 1, 2013.

Making the most out of a Non-Profit Organization’s Tax Return

The IRS Form 990, Return of Organization Exempt from Income Tax, is one of the most important documents that a non-profit organization prepares. The 990 provides reporting to the IRS on an organization’s programs, revenue sources, contributions, expenses and governance. One of the most important things about an organization’s 990 is that it is available for public review. Potential donors often download the organization’s 990 to gather more information before deciding to make a contribution and Press will often review the form when preparing articles about the non-profit. As you can see, it’s important that the 990 is accurate and complete.  Read more

Estate & Gift Tax for 2012 and Beyond

The estate and gift tax system is arguably one of the most complicated areas of the tax code. Adding to the confusion is the fact that after 2012 the tax on wealth transfers, whether through gifts or inheritances, remains uncertain. If you have or expect to have a sizable estate, say $1 million or more, now is the best time to create your estate plan. Keep in mind that an “estate” includes the value of your home, life insurance, retirement plans, and other investments. This means the estate tax is not just a concern for the “super” wealthy.

Under current law decedents dying in 2012 with estates worth $5,120,000 or less are not subject to estate tax. However, the $5.12 million threshold expires at the end of this year. And unless Congress acts, beginning January 1, 2013 the threshold drops to $1 million. Not only would many more estates be subject to estate tax but the highest estate tax rate is also scheduled to increase to 55%. A lack of estate planning now could result in a hefty estate tax bill later. Read more

Payroll Tax Cut Temporarily Extended

The 2% cut in social security withholding in effect during 2011 has been extended until February 29, 2012. The Temporary Payroll Tax Cut Continuation Act of 2011 was signed by President Obama on December 23, 2011. The temporary cut means that employees will only have 4.2% of their wages withheld for social security as opposed to the normal 6.2%. Employers are required to comply with the law by January 31, 2012. Any social security tax over withheld before the employer has complied will then be adjusted in the employee’s pay by March 31, 2012. Read more

LMGW promotes Michael Bryant to Partner

LMGW Certified Public Accountants, LLP has promoted Michael J. Bryant, CPA to Partner in charge of attest (Audits, Reviews and Compilations.) He will also continue assisting with litigation support services. Michael has a diverse client background which includes finance, technology and manufacturing clients for both private equity and closely held businesses as well as a range of nonprofit clients. In his tenure as manager, he was in charge of the firm’s larger and more complex audit and review engagements. He also gained experience on single audits and government audits.   Read more