TAX-AIDE Federal Tax Law Changes – Tax Year 2013

TAX-AIDE Federal Tax Law Changes 2013 ● New provisions ● Indexing ● Extenders ● Form change ● Due Dates NTTC Training –

TAX-AIDE Defense of Marriage Act Ruling ● Same-sex couples – legally married by state or foreign law are married for federal tax returns ● State (or country) where married is key – not state of residence ● Must file either MFJ or MFS for 2013 and onward as long as married (except if eligible for HH) ● Taxpayers may, but are not required to, amend up to three years’ returns from S/HH/QW to MFJ/MFS/QW Changes in employer benefit plans can affect amended return NTTC Training –

TAX-AIDE DOMA – Supreme Court Ruling ● Domestic partnerships or civil unions not included ● Rules for community property apply as per state law ● State law governs state tax returns NTTC Training –

TAX-AIDE DOMA Ruling Impact – Amending Returns ● Standard provisions for amending returns apply Trained on year being amended and use TaxWise for year being amended Amend only taxpayer’s return by adding spouse’s name, SSN, dependents, income, expenses, refund/balance due information and explanation of changes No action required on spouse’s return NTTC Training –

TAX-AIDE In or Out of Scope ● In scope: Distributions from a SEP/SIMPLE IRA that are fully taxable Roth IRA distributions that are wholly nontaxable, including a converted Roth IRA Wash sale loss disallowed if identified as such on the 1099-B, brokerage or mutual fund statement (Cap Gn Wkt adjustment code W) NTTC Training –

TAX-AIDE In or Out of Scope ● Out of scope (still) Self-employed medical insurance adjustment (1040 Line 29) Roth IRA distributions that are partly taxable, including converted Roth IRAs (<59½ or failed to meet the relevant 5- year test) NTTC Training –

TAX-AIDE Schedule C ● Expense limit raised to $10,000 ● Standard C-EZ rules apply No loss No inventory No employees No depreciation or asset write-off No home office deductions, etc. ● Can have multiple Sch Cs per taxpayer NTTC Training –

TAX-AIDE Capital Gains Tax Rate ● New 20% rate for higher income taxpayers NTTC Training –

TAX-AIDE National Mortgage Settlement ● Taxpayers may receive a settlement payment in 2013 ● Relates to a home lost in foreclosure ● Must be COD certified or refer to paid preparer NTTC Training –

TAX-AIDE Medical Deduction Haircut ● Taxpayers can deduct amount of unreimbursed medical and dental expenses that exceeds 10% of AGI (was 7.5%) ● If taxpayer (or spouse) is 65 or older, threshold remains 7.5% (for both) NTTC Training –

TAX-AIDE New Taxes ● Additional 0.9% Medicare tax on earned income over limit ● Additional 3.8% tax on net investment income when modified AGI is over limit ● Limits for both $200,000 Single, HH or QW $250,000 MFJ $125,000 MFS ● Both out of scope NTTC Training –

TAX-AIDE Social Security Tax Rate ● Employee portion of social security tax returns to 6.2% (was 4.2% for 2011–2012) Applies to self-employment tax too  Full social security rate now 12.4%  Total self-employment tax rate 15.3% NTTC Training –

TAX-AIDE Standard Deduction NTTC Training – Std Ded+ if blind+ if ≥65 Single$ 6,100$ 1,500 MFJ12,2001,200 ea MFS6,1001,200* HH8,9501,500 QW12,2001,200 *also applies to dependent spouse if claimed

TAX-AIDE Itemized Deductions ● Subject to phase-out if AGI over $250,000 Single or QW $300,000 MFJ $150,000 MFS $275,000 HH NTTC Training –

TAX-AIDE Exemption Deduction ● Exemptions increase to $3,900 ● Subject to phase-out if AGI over $250,000 Single or QW $300,000 MFJ $150,000 MFS $275,000 HH NTTC Training –

TAX-AIDE Standard Mileage Rates 2013 ● 56.5¢ per mile – business miles ● 24¢ per mile – medical miles ● 14¢ per mile – charitable miles NTTC Training –

TAX-AIDE EIC Maximum Credits and Income ● $6,044 – three or more qualifying children ● $5,372 – two qualifying children ● $3,250 – one qualifying child ● $487 – no qualifying child ● $46,227 ($51,567 MFJ) 3 qualifying children ● $43,038 ($48,378 MFJ) 2 qualifying children ● $37,870 ($43,210 MFJ) 1 qualifying child ● $14,340 ($19,680 MFJ) no qualifying child NTTC Training –

TAX-AIDE Deductible Long-Term Care Premium Limits ● Qualified long-term care premiums includible as medical expense on Sch A $360 – Age 40 or under $680 – Age 41 to 50 $1,360 – Age 51 to 60 $3,640 – Age 61 to 70 $4,550 – Age 71 and over NTTC Training –

TAX-AIDE Other Indexing ● HSA Limits $3,250 self-only coverage $6,450 family coverage Both + $1,000 if age 55 or older ● Retirement savings credit income limits Max $29,500, $59,000 MFJ, $44,250 HH ● Max investment income for EIC $3,300 NTTC Training –

TAX-AIDE Other Indexing ● IRA contributions Max $5,500 ($6,500 if age 50 or older) Modified AGI limits when covered by employer plan ● Lifetime learning credit income limits ● Excludible savings bond interest – out of scope ● Foreign earned income exclusion NTTC Training –

TAX-AIDE Extended Provisions 2013 ● Tax-free distribution from IRAs to public charities for individuals age 70½ or older ● COD exclusion for principal residence ● Adjustment for educator classroom expenses up to $250 ● Adjustment for qualified tuition and fees NTTC Training –

TAX-AIDE Extended Provisions ● Premiums for mortgage insurance deductible as interest for qualified residence ● Deduction for state and local general sales taxes ● Nonbusiness energy property credit NTTC Training –

TAX-AIDE Form Changes ● Sch D new lines if all transactions on statement are Code A or D – basis reported to IRS with no adjustments ● But – continue to enter all capital gains/losses on Capital Gains Worksheet in TaxWise TaxWise will carry to proper forms/lines NTTC Training –

TAX-AIDE Form Codes 2012 codes were for short or long-term: A. Transactions reported on Form(s) B showing basis was reported to IRS B. Transactions reported on Form(s) B showing basis was not reported to IRS C. Transactions other than code A or B NTTC Training – Pub 4012 – Pg 14

TAX-AIDE Form Codes For 2013: ● A, B and C now apply to short-term only ● D, E and F are long-term equivalents ● Continue to report on TaxWise Capital Gains Worksheet ● Enter A, B or C as before – TaxWise will carry to correct Form 8949 based on dates entered NTTC Training –

TAX-AIDE Form 8453s ● Pub 3189, pg 19: A second copy of Form 8453 and attachments must be retained until December 31st ● ERO must promptly mail one copy to Austin and one copy to local SPEC office (SPEC to provide postage-paid mailing labels) ● Attaching pdf to return is acceptable alternative if have secure scanning capability TRS Webinar – November

TAX-AIDE Due Dates ● 2013 tax returns are due Tuesday, April 15, 2014 ● 2014 estimated payments due April 15, 2014 June 15, 2014 September 15, 2014 January 15, 2015 NTTC Training –

TAX-AIDE Tax Law Changes 2013 Comments? Questions? NTTC Training –