I consider myself one of the lucky ones that had the opportunity to participate in the first TEDx held in Reno at the University of Nevada. I didn’t know what a TEDx event was, but happened to run across it on a LinkedIn message from Bret Simmons, University of Nevada College of Business associate professor and TEDxUniversityofNevada event organizer. I jumped on it and bought a ticket. It sold out within 24 hours.
17 speakers were selected from 70 proposals. These great stories are depicting what is happening in our community. And imagine, if these were only 17 out of the 70, how many more are out there. Most, if not all of these speakers have a local connection, either as UNR graduates or current members of our community.
The speakers were divided into four areas:
Shawna Korgan, wife of author and motivational speaker Grant Kogan; Matt Bernardis, COO of First Warning Systems, Inc., a software and medical device company addressing early breast cancer detection; Michael Morkin, M.D., an ER physician at Renown Hospital who was on duty the day of the Reno Air Races crash; and Leilani Schweitzer, using her own experience with medical errors to become a patient liaison at Stanford Hospital.
Pedro Martinez, Lauren Ford and Deyanira Baca; superintendent for Washoe County School District, principal at Hug High School and a senior at Hug High School determined to succeed despite her difficult circumstances; Deanna LeBlanc, 2012 Nevada Teacher of the Year; Veronika Scavacini, an eighth grader with a mission to continue delivering LifeStraws to Kenya; Logan LaPlante, a 13 year old taking a different path he calls “hackschooling”; and Grant Davis, a singer/songwriter and survivor of the impact of his sister’s drug addiction on the family unit.
Brian Williams, youth motivational speaker challenging schools to compete in acts of “Kindness”; Robb Smith, a social entrepreneur and Grant Korgan, recovering from a spinal cord injury to trek to the South Pole.
So as a community let’s focus on the positive things that bring us together. What we can do individually and collectively to improve the Reno Tahoe area. Let’s keep the conversation going. I’ve tried sharing the stories from my TEDx experience but it’s tough to convey the depth of enthusiasm and emotion of those on stage. You might not want to miss the next Reno-area TEDx event that will take place on April 26th. Details: www.tedxreno.com
The IRS reported that National Taxpayer Advocate Nina E. Olson recently issued her annual report to Congress. In it she stated that tax reform was the overriding priority in tax administration. “The existing tax code makes compliance difficult, requiring taxpayers to devote excessive time to preparing and filing their returns”, Olson stated.
Since 2001, Congress has made nearly 5,000 changes to the tax code, an average of more than one a day, and the number of words in the code has approached nearly five million. To reduce the burden on taxpayers and improve the public’s confidence in the integrity of the system, the report urges Congress to simplify the tax code. If Congress were to eliminate all tax expenditures, i.e. income exclusions, exemptions, deductions and credits, the indications are that individual income tax rates could be cut by 44 percent.
The report suggests that a tax break should be retained only if a compelling argument can be made that the benefits of that break outweigh the complexity burden it creates. Does the incentive provided make sense? If so, can it be administered without imposing unreasonable burdens on either taxpayers or the IRS?
The report recommends that Congress take several steps, including:
To accomplish such a dramatic change in congressional thinking seems insurmountable, but the report does offer serious food for thought.
On Tuesday, January 15, 2013 the IRS announced that going forward, there is a simplified option for taxpayers who take the home office deduction. While the credit is capped at $1,500 a year (this may be adjusted in future years), taxpayers choosing this method will not have to deal with complex calculations of allocated expenses, depreciation and carryovers from prior years. What’s that you say? Your amazing CPA does all of these calculations for you so what does it matter? Well most importantly, the safe harbor method is an alternative to the substantiation (i.e. recordkeeping) of actual expenses. That means you don’t have to keep every utility, internet and any other home bill as substantiation for the deduction and in case of an IRS audit.
There are some important factors to consider, however. The allowable square footage used in the calculation cannot exceed 300 square feet. Also, home expenses like utilities, homeowner’s insurance, etc are not deductible under this method. Depreciation is also not allowed. Mortgage interest and real estate taxes would still be fully deductible on Schedule A (rather than apportioning it between the deduction and Schedule A) if you itemize.
The election to use the safe harbor method can be made each year, meaning you can use the safe harbor method in one year and use actual in the next. So if for some reason the filing cabinet with all of your paid bills walks out the door, you could take the safe harbor method that year and still get a deduction. Taxpayers may want to look at what their home office deduction has been in the past and see if this simpler method would be worth it on an annual basis.
The IRS has just announced plans that the 2013 tax season will begin on January 30, 2013 (a Wednesday if you’re wondering). This misses the previously set date of January 22, 2013, but given that Congress passed the American Taxpayer Relief Act (ATRA) in 2013 when it should have passed it in 2012, a late start of only eight days is impressive. If we could just get Congress to get things done so quickly.
Starting on January 30, the IRS says more than 120 million households should be able to begin filing returns. Those households include people who are “affected by the late Alternative Minimum Tax (AMT) patch as well as the three major ‘extender’ provisions for people claiming the state and local sales tax deduction, higher education tuition and fees deduction and educator expenses deduction.” For the rest of tax filers unable to file starting January 30, look to late February or into March to be able to submit a return. This group of tax filers includes people who claim the residential energy credits (Form 5695), depreciation and amortization (Form 4562), or general business credits (Form 3800). The IRS has posted a list of the forms that won’t be accepted until a later date at IRS.gov. It often happens that those in this tax filing group don’t file until later in the season anyway or they just go ahead and file an extension, so the delay in being able to file may not cause much of a delay at all.
The IRS does remind all of us that it will not process paper returns before the January 30th opening date, so there’s no rush to get that return finished and in the mail in the next couple of weeks. Also, paper filing is not the most efficient way to file. If you want your tax refund sooner you should e-file with the direct deposit option checked.
If you have any questions, please feel free to contact us here at Barnard Vogler & Co.
When I advised my clients to complete their transactions in 2012, it was apparent that the effects of the actions our elected officials were going to take to avoid the “fiscal cliff” could only have a negative effect on taxes. At the twelfth hour, Mitch McConnell, Republican Senate Minority Leader bypassed Nevada’s own Harry Reid and reached out to Vice President Joe Biden with whom he had worked with when Biden was in the Senate. They worked out a compromise that was passed in the Senate and the House on January 1.
How does this affect you?
The tax rate for taxpayers with income over $450,000 married and $400,000 single increased from 35% to 39.6%. The tax rate on capital gains and dividends increase from 15% to 20% also applies to this threshold. When combined with the 3.8% healthcare tax, that tax rate on capital gains and dividends becomes 23.8%.
Some of you may be breathing a sigh of relief that the tax rate increase will apply only to those taxpayers. However, the 3.8% healthcare tax on investment income will hit those of you with taxable over $250,000 married and $200,000 single (see my blog in November 2012 regarding the healthcare tax of 3.8%). Also, itemized deductions are phased out at $300,000 for joint filers and $250,000 for singles, effectively raising their taxes.
Interestingly, the bill does not say whether the $400K/$450,000 threshold refers to adjusted gross income (AGI) or taxable income. AGI doesn’t include subtractions for itemized deductions, while taxable income does. With so many phase-outs of itemized deductions for taxpayers in the higher brackets, this may not be of much consequence to most of these affected taxpayers.
The payroll tax holiday reducing payroll taxes and self-employment taxes by 2% is over. The tax rate increases from 4.2% to 6.2%. That means for an individual earning the maximum 2013 cap of $113,700 or more, the increase would be $2,274, or nearly $200 per month.
The alternative minimum tax (AMT) still effectively eliminates many tax breaks for the higher income tax brackets. AMT was created in 1969 to ensure that wealthy taxpayers pay at least some minimum amount of federal income tax, regardless of deductions, credits or exemptions. In essence, it is a flat tax with two brackets, 26 percent and 28 percent. Under the new deal, Congress has finally created a permanent inflation “patch” that would allow millions to escape AMT. Without the patch, the AMT would have hit 31 million taxpayers this year, reaching deeply into the middle class.
What the bill did not include:
The bill only addressed the revenue side of the budget question and deferred action on the spending side for two months. Additionally, the agreement does not address any increase in the nation’s debt ceiling.
A strong economy depends upon predictable behavior and decision-making by the government. The competitive environment is unpredictable enough without our government making it more unpredictable. This has been lost on our elected officials much to the consternation of almost everyone: businessmen, employees, bankers, homeowners, and investors. Get ready for the budget and spending standoff two months from now.