Bill Nemeth and Merry Brodie join me to talk about recent trends and hot topics in personal finance on the Ilyce Glink Show on noon CST Nov. 11 on WSB Radio.
For today’s episode Bill and Merry give us some insight into the 2012 Tax Review and information about the looming 2013 Fiscal Cliff.
Bill and Merry are now partners in a new joint venture called Tax AuditA Tax Audit is a formal examination of your tax return by IRS auditors. Guardian along with some heavy duty retired IRS folks who are also attorneys and CPAs.
They do tax problem resolution from the standard “I haven’t filed in years” to the serious criminal cases. As Enrolled Agents, they are licensed by the IRS to work on behalf of their clients at both the federal and all 50 state levels.
You can contact Bill at firstname.lastname@example.org and Merry at email@example.com.
2012 – The GOOD Tax News
Education- Related Credits – AOC and Lifetime Learning Credit (expires in 2013)
Individual Income Tax Rates – NO Change
Long-Term Capital Gains & Dividend Tax Rates No Change – 15%
IRA Contribution Amounts – No Change
($5,000; $6,000 for taxpayers 50 and above)
MortgageA Mortgage is a document granting a lien on a home in exchange for financing granted by a lender. The mortgage is the means by which the lender secures the loan and has the ability to foreclose on the home. forgiveness on Primary Residence
(Last year for this provision)
Earned Income Credit for up to 3 children
Child Tax CreditA Tax Credit is an amount by which tax owed is reduced directly. In other words, a dollar-for-dollar amount is subtracted directly from the taxes you owe. remains at $1,000
2012 – The BAD Tax News
$4,000 Tuition and Fees Deduction eliminated
$250 Teachers Classroom Supplies Deduction eliminated
No Residential Energy Credits
Itemized Deductions – Schedule A
Sales TaxSales Tax is a tax levied by state or local governments. In most areas, a car lease is considered the same as a purchase. So you'll pay sales tax on your purchase. That's one reason to think carefully about where you purchase or lease your vehicle. You might only pay 7.5 percent sales tax instead of 8.75 percent depending on where you buy or lease your car. And when you're talking about a ,000 car, saving 1.25 percent means saving 0. Deduction goes away (Impacts taxpayers in the 9 states without a state income tax)
Private Mortgage Insurance no longer deductible for homeowners
Deduction for direct IRA Payout to charity
70 ½ or older taxpayer could direct up to $100,000 of their IRA distribution directly to charity and exclude the donated amount from taxable incomeTaxable Income is your gross earnings minus deductions and exclusions..
2012 – The UGLY Tax News
AMT Patch – Income Thresholds drop dramatically (to 2001 levels) – AMT invades the middle class. 31 Million Taxpayers exposed to higher AMT this year.
AMT – Tuition and dependentA Dependent is an individual for whom the taxpayer provides over half of the support for the calendar year. This could be a child, spouse, relative or non-relative living as a member of the taxpayer's household.-care credits were allowed to offset AMT liability
FBAR – Must report Foreign Bank Accounts over $10,000
FATCA – Must report foreign accounts over which the taxpayer has signature authority
Tax Return Identity Theft – Up 20% for 2012 filing season
VICTIMS OF IDENTITY THEFT – Student Aid
When the IRS determines that a tax filer has been, or likely was, a victim of identity theft, it will not allow that tax filer to obtain tax information through the use of the IRS DRT or to receive an IRS Tax Return Transcript until the matter has been resolved by the IRS. Resolution could take up to a year, depending on the complexity of the case. Therefore, in instances when the tax filer has been the victim of identity theft, the institution may accept for verification purposes a signed copy of the paperPaper is slang usage that refers to the mortgage, trust deed, installment, and land contract. IRS income tax return that was filed with the IRS along with additional documentation as follows.
2013 – The GOOD News gone BAD
Bush Tax Cuts Expire – Tax Rates return to 2001 levels of 15 to 39.6%
Payroll Tax Holiday goes away (FICA Tax restored to 6.2% for W-2 Workers, 12.4% for SE Workers)
Child tax credit reverts to $500 per child with increased income thresholds
Earned Income Credit drops to 2 children max
DividendsA shareholder's share of a company's profits, typically paid out in quarterly installments. To find out how much you'll receive, multiply the dividend (published in your local paper) by the number of shares you own. taxed at ordinary rates
No Generous AOC Education Credit
NO Mortgage forgiveness on Primary Residence
The adoption credit will revert back to $5,000, or $6,000 if a special needs child is adopted
Long Term Capital Gains taxed at 20% (up from 15%)
For higher income individuals, MedicareMedicare is a program of Hospital Insurance (Part A) and Supplementary Medical Insurance (Part B) protection provided under the Social Security Act. Taxes will be increased to 3.8% & expanded to cover both wage income and investment income.
AMT Thresholds may continue at 2001 levels