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A new form is in the works to implement a portion of the healthcare law related to net investment income.
The IRS has released the first draft of Form 8960, Net Investment Income. Form 8960 will be used to report the new 3.8 percent Medicare tax on net investment income. The form will be attached to the 2013 Form 1040, U.S. Individual Income Tax Return, and the 2013 Form 1041, U.S. Income Tax Return for Estates and Trusts.
Beginning this year, individuals, estates and trusts whose modified adjusted gross income exceeds the threshold amount will be subject to the new 3.8 percent tax.
The threshold amounts are:
Net investment income (NII), for purposes of the 3.8 percent tax calculation, includes the following:
NII is the income after deductions for expenses that are “properly allocable” to the income, such as investment interest expense, investment advisory and brokerage fees, expenses related to rental and royalty income, etc. Investment income does not include wages, active business income, pension/IRA distributions or tax-exempt income.
Many of the entries on Form 8960 refer to instructions that the IRS expects to release later in the year.
©2013 CPAmerica International
There are many signs that the economy is strengthening and expanding. What could this mean for businesses?
Some people are expecting the Federal Reserve to begin to back off quantitative easing during the upcoming months. From a tax standpoint, economic improvement may mean the end of the line for several stimulus-type tax breaks that are scheduled to expire Dec. 31, 2013.
If you own or operate a business, a number of favored depreciation tax breaks may not be available next year, including:
In addition, the Code Section 179 expensing limit – $500,000 in 2013 – is slated for a drastic reduction next year.
Although the above benefits may be extended beyond 2013, there is no guarantee. If your business is planning to purchase machinery and equipment or invest in eligible real estate assets in the next year, you should consider accelerating your buying plans if it makes sound business sense. You may be able to lock in the accelerated deductions by buying qualifying assets this year and placing them in service by year-end.
Check with your tax adviser to be sure your planned purchase qualifies for an enhanced write-off.
©2013 CPAmerica International
As tax season begins to draw to an end, the Internal Revenue Service is issuing its annual “The Dirty Dozen” warning to consumers about fraud on and by taxpayers.
This year’s list is little changed from 2012, and is again headed up by identity theft. A growing problem every year worldwide, the IRS is stepping up its vigilance in this area, from establishing an Identity Protection Web Portal, and increased prosecution of offenders. 
Last year over $20 billion in fraudulent refunds were prevented, up from $14 billion in 2011.
Another scam is “phishing”, where taxpayers are sent fake e-mails asking them to provide the IRS with sensitive personal information such as social security numbers. A good rule of thumb to remember is that the IRS never will attempt to contact you by e-mail, text message or social media.
Tax fraud is not just committed by outsiders, however. Unscrupulous tax preparers are also lurking. The amount of fraud committed (or attempting to be committed) by taxpayers rises every year as well.
Beware of any tax preparer that offers to get you “free money” by claiming tax credits that you do not in reality qualify for. Some preparers have also been known to exaggerate wages or self-employment income to inflate refundable credits.
Taxpayers have also been known to try to avoid taxes with hiding income offshore. While offshore income was always reportable income, only in recent years did it come to light that many people were not in fact reporting it. In 2009 the IRS implemented an Offshore Voluntary Disclosure Program that to date has 38,000 participants. In 2012, the program was extended indefinitely. Penalties for not reporting this income can be steep.
So whether it’s a scam artist, an unscrupulous tax preparer or just you, remember that the IRS is watching out for you AND over you.
Leslie C. Daane, CPA, Managing Director of Barnard Vogler & Co. in Reno, NV has been certified as an Accredited Estate Planner® (AEP®) by the National Association of Estate Planners and Councils.
The Accredited Estate Planner® designation is awarded by the National Association of Estate Planners & Councils (NAEPC) to recognize estate planning professionals who meet stringent requirements of experience, knowledge, education, professional reputation and character.
NAEPC is a national organization of professional estate planners and affiliated local Estate Planning Councils focused on establishing and monitoring the highest professional and educational standards.
Barnard Vogler & Co. is one of Reno’s oldest and most respected accounting firms with over four decades of experience providing quality service to a wide variety of clients. For more information or to contact Leslie, please call us at (775) 786-6141 or visit our website at bvcocpas.com.
