2013 Federal Tax Changes to Be Aware Of

Itemized Medical Expense Deduction Threshold Percentage Change
As part of the Affordable Care Act, the threshold percentage for when medical expenses are included as an itemized deduction on Schedule A was changed to:

• Taxpayers under 65: 10%
• Taxpayers 65 and older: 7.5%

Basic Changes
Business Mileage Rate for 2013: 56.5 cents per mile

Bonus Depreciation: 50% rate still applies

Capital Gains/Dividends Tax Rate:

• 0% for taxpayers in 10% or 15% tax brackets
• 15% for taxpayers in 25%, 28%, 33%, or 35% tax brackets
• New 20% rate for taxpayers in new 39.6% tax bracket

Standard Deduction

• Single: $6,100
• Married Filing Jointly: $12,200

For a complete listing of the basic yearly changes for 2013, see the Things to Know for Current Tax Year section of the Tax Resource Center on the CrossLink website.

New Provisions Affecting Higher Income Individuals
Individual Income Tax Rates

• Added new 39.6% rate when the AGI reaches:
• $400,000 - Single
• $450,000 - Married Filing Joint
• $425,000 - Head of Household
• $225,000 - Married Filing Separate
• The 10%, 15%, 25%, 28%, 33%, and 35% brackets were made permanent

Phase-Out of Itemized Deductions and Personal Exemptions
Beginning in 2013, the taxpayer's itemized deductions and personal exemptions will begin to be reduced when their adjusted gross income (AGI) reaches the following threshold amounts:

• $250,000 - Single
• $300,00 - Married Filing Jointly
• $275,000 - Head of Household
• $150,000 - Married Filing Separately

The reduction in Itemized Deductions will be calculated as the lesser of:

• 3% of the amount over the taxpayer's threshold amount; or
• 80% of the total itemized deductions

Personal exemptions will be reduced by 2% for each $2,500 (or fraction thereof) by which the taxpayer's AGI exceeds the applicable threshold amount.

For a complete listing of what Federal provisions have changed or what extender provisions are still in effect for 2013, see the Things to Know for Current Tax Year section of the Tax Resource Center on the CrossLink website.

Affordable Care Act Update - Employer Reporting and Penalty Provisions Delayed for One Year

The employer penalty and reporting provisions under the Affordable Care Act have been postponed for one year until 2015. The Administration explained that this delay was necessary in order to simplify the reporting requirements and to give employers more time to adapt their reporting systems and become familiar with the affordability and minimum value standards for the health insurance plans they offer their employees.

This means that for 2014, employers with 50 or more full-time employees will not be subject to a penalty if they do not offer health insurance to their employees, or if they do offer insurance and they fail to meet the affordability and minimum value standards.

Also for 2014, the employer reporting requirements relating to the health insurance an employer offers their employees will be voluntary. The employer reporting requirements will be required beginning in 2015.

It is important to note that this postponement of the employer penalty and reporting provisions does not affect the requirement that all individuals must obtain health insurance for themselves and their family beginning in 2014.

For more information, see the following:

• IRS Notice 2013-45 - Transition Relief for 2014 Under Sec 6055 and 6056 (Information Reporting) and Sec 4980H (Employer Shared Responsibility Provisions)
• July 2nd U.S. Department of Treasury Notes (Continuing to Implement ACA in a Careful, Thoughtful Manner)
• January 2nd White House Blog (We're Listening to Businesses About the Health Care Law)

IRS Update: Affordable Care Act: Employer Minimum Value Standard for Employer Health Insurance Plans

One of the requirements of the Affordable Care Act for a health insurance plan an employer offers their employees is that it meets the minimum value standard. If an employer plan fails to meet the minimum value standard, a large employer (50 or more full time employees) will be assessed a penalty.

The minimum value standard is met if the employer's plan pays 60% or more of the plan's share of the total allowed costs of the benefits provided under the plan.

Minimum value is calculated by dividing the anticipated covered medical spending of essential health benefits (EHB) coverage (for the population covered by a typical self-insured group health plan) by the total anticipated allowed charges for EHB coverage for a typical self-insured group health plan population. Read More

Click here to read the entire CrossLink Tax Update about the Employer Minimum Value Standard for Employer Health Insurance Plans.

Note: Modernized e-File (MeF) Scheduled Downtime - June 2013

This is a reminder that due to the current budget situation, the IRS plans to be closed on June 14, July 5, July 22 and August 30. The MeF system (Production and ATS) will not be available from 10:00 pm ET of the prior day until 9:00 am ET of the following day on these dates. For example, when the closure falls on a Friday, the system will be unavailable from 10:00 pm ET on Thursday until 9:00 am ET on Saturday.

MeF Production & ATS Downtime:
Shutdown is scheduled to begin on Thursday, June 13, 2013 at 10:00 pm ET and end at 9:00 am ET on Saturday, June 15, 2013.

IRS Update: Net Investment Income Tax for High Income Individuals

Beginning in 2013, a new 3.8% additional tax on net investment income will apply when a taxpayer's modified adjusted gross income exceeds the following thresholds:

• $250,000 for Married Filing Joint filers or Qualifying Widow(er)
• $125,000 for Married Filing Separate filers
• $200,000 for taxpayers that file Single or Head of Household

Modified adjusted gross income is defined as the taxpayer's adjusted gross income increased by the net amount of exempt foreign sourced income.

Investment income generally includes interest, dividends, capital gains, rental or royalty income, non-qualified annuities, income from businesses involved in trading financial instruments or commodities, and passive activity business income.

Click here to read the entire CrossLink Tax Update about the new Net Investment Income Tax.

Another tax season is behind us!

Another tax season is behind us!

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