The document discusses several key tax changes and impacts of the Affordable Care Act taking effect in 2013. This includes a new 3.8% Medicare surtax on investment and some earned income above $200,000/$250,000 adjusted gross income thresholds. The medical expense deduction is also increased to 10% of income. Employers must now report the cost of employees' health insurance on W-2 forms. The top capital gains tax rate rises to 20% from 15%. The temporary 2% reduction in Social Security taxes expires, increasing taxes. Overall, most individuals and those with higher incomes will face higher taxes in 2013.

1. Tax Planning Changes in 2013
Tax
planning
is
a
word
we
should
not
have
to
fear.
2013
will
usher
a
plethora
of
new
taxes,
driven
by
the
federal
government’s
inability
to
reign
in
spending
and
state
governments
running
de?icits.
Tax
planning
becomes
very
critical
in
2013.
The
biggest
tax
hit
in
2013
all
relates
to
the
new
Affordable
Care
Act,
known
by
most
as
Obamacare.
Following
is
what
I
have
gathered
on
the
issue
and
the
areas
you
need
to
be
aware
of
in
tax
planning.
Tax Planning — Healthcare reform Medicare
surtax on most unearned income
Part
of
healthcare
funding
is
a
new
3.8%
tax
on
investment
income,
which
includes;
taxable
interest,
dividends,
capital
gains,
passive
income,
and
rental
income.
Some
call
this
a
sales
tax
on
sale
of
your
personal
residence.
This
is
not
a
sales
tax,
but
rather
an
income
based
tax
that
ONLY
applies
to
the
TAXABLE
portion
of
a
sale
of
personal
residence
(can
you
say
tax
planning?).
That
means
on
a
personal
residence,
you
need
a
gain
of
$500,000
for
married
taxpayers
($250,000
for
single)
before
this
additional
tax
kicks
in.
For
rental
properties,
this
tax
does
apply
to
the
gain.
This
tax
only
kicks
in
for
individuals
at
$200,000
in
adjusted
gross
income
and
married
at
$250,000
in
adjusted
gross
income.
Tax
planning
in
Colorado
Springs
is
critical.
Tax Planning — Healthcare reform Medicare surtax on earned income
This
tax
is
.9%
on
any
earned
income
and
has
the
same
income
thresholds
as
the
surtax
on
unearned
income.
Employers
need
to
update
payroll
systems
to
catch
this
or
face
huge
penalties
for
under
withholding.
The
end
result
of
these
two
taxes
is
for
those
with
higher
incomes
they
get
a
tax
increase
even
if
the
Bush
tax
cuts
are
extended.
If
the
tax
cuts
expire
and
the
top
tax
rates
climb
back
to
the
old
rates,
it
could
mean
8
to
9
cents
more
of
every
dollar
will
go
to
tax
for
those
with
higher
incomes.
Tax
planning
is
crucial.
Flynn Accounting, LLC • flynnaccounting.com • Colorado Springs CO • 719-593-9338

2. Tax Planning — Medical expense deduction climbs out of reach for most
Currently
medical
expenses
must
exceed
7.5%
of
adjusted
gross
income
before
deducting
any
expense.
Starting
in
2013
the
healthcare
reform
law
increased
the
threshold
to
10%
before.
The
end
result;
only
those
with
catastrophic
claims
will
get
any
deduction.
For
some
reason
being
old
is
a
tax
bene?it,
because
those
over
age
65
get
the
old
deduction
limit
until
2017.
Understand
the
need
for
tax
planning
in
Colorado
Springs?
Tax Planning — Reporting of health insurance
For
2012
large
employers
must
report
the
cost
of
health
insurance
on
the
W-­‐2
form
and
for
2013
all
employers
must
report
the
cost
of
health
insurance
on
the
W-­‐2
form.
This
is
causing
confusion
because
the
amount
shown
on
the
W-­‐2
is
for
informational
purposes
only.
The
IRS
can
penalize
the
employer
anywhere
from
$30
to
$100
per
W-­‐2
for
not
reporting
this
information.
Isn’t
that
great,
make
the
employer
report
a
number
that
means
nothing
to
the
employee
and
penalize
the
employer
if
they
don’t
report.
Tax
planning
is
crucial.
Tax Planning — Capital Gains Tax Rate
Effective
January
1,
2013
the
top
capital
gains
tax
rate
increases
from
15%
to
20%.
Let’s
see
what
lawmakers
do
with
the
Bush
tax
cuts.
Social
Security
Tax
Deduction
on
your
Paycheck:
For
2011
and
2012
there
has
been
a
temporary
2%
reduction
used
to
withhold
your
social
security
tax.
That
means
earning
$50,000
over
these
last
two
years
has
netted
you
an
additional
$1,000
per
year
in
take
home
pay.
That
reduction
is
going
away
(even
for
the
beloved
middle
class).
You
have
just
lost
2%
of
your
annual
take
home
pay
starting
January
1,
2013.
Tax
planning
in
Colorado
Springs
is
critical.
My
magic
8
ball
says
taxes
will
be
higher
next
year,
regardless
of
the
promises
made
during
the
election.
The
de?icit
is
out
of
control.
In
de?iance
to
promises
made,
the
middle
class
will
be
hit
the
hardest
due
to
the
loss
of
the
10%
tax
bracket
which
will
create
an
additional
$1,700
in
income
tax.
Add
this
to
the
social
security
tax
increase
and
a
middle
class
person’s
income
tax
just
went
up
by
$2,700
—
an
increase
of
32%!!!
My
suggestion
is
to
push
income
into
2012
and
delay
deductions
to
2013,
unless
it
is
one
to
expire.
Those
in
the
highest
tax
brackets
may
want
to
move
investments
to
tax
free
bonds
to
save
the
new
medicare
surtax
as
well
as
any
increases
in
tax
rates.
Tax
planning
in
Colorado
Springs
is
crucial.
Flynn Accounting, LLC • flynnaccounting.com • Colorado Springs CO • 719-593-9338

3. Tax Planning — Miscellaneous Items
The
latest
trend
in
fraud
is
to
take
stolen
social
security
numbers
and
?ile
for
an
unauthorized
refund
early
in
the
tax
?iling
season.
Victims
later
discover
their
identity
has
been
stolen
when
they
try
to
?ile
their
tax
return.
Often
times
the
identity
theft
starts
when
someone
clicks
on
a
fake
email
from
the
IRS.
The
IRS
never
sends
notices
of
refunds
or
audits
by
email
so
never
click
on
such
emails.
As
a
result,
the
IRS
will
take
longer
to
issue
refunds.
Tax
planning
is
critical.
Your
Social
Security
Earnings
History
and
Bene?its
Statement
is
now
available
online:
Go
to
www.socialsecurity.gov.
If
you
are
below
the
age
of
60,
you
will
no
longer
receive
paper
statements
so
to
verify
that
your
earnings
history
is
correct
get
the
report
online.
For
some
reason
they
will
also
mail
a
statement
to
those
who
turn
25.
All
others
have
to
go
online
to
get
the
statement.
Tax
planning
is
crucial.
Flynn Accounting, LLC • flynnaccounting.com • Colorado Springs CO • 719-593-9338