Beyond the Noise of Health Care Initiatives

A dozen tax planning triggersTax provisions for individuals and families impacted by the Affordable Care Act (also known as Obamacare) will be upon us in 2014. We are seeing the approach of Obamacare in many forms; by Congress members filibustering, through nightly news reports, constant advertisements, and announcements of businesses migrating away from offering health care insurance for some of their employee groups. How does someone make sense out of all this?What is happening now

From October 2013 thru March 2014, the open enrollment phase to obtain health insurance through the Health Insurance Marketplace begins. This Insurance Marketplace is a legal requirement for each state to publish health insurance options and related costs to all residents in their respective state. So please be prepared to be inundated with commercials from each state promoting their new Health Insurance Marketplace and the need for you to review your health coverage. Remember, unless something changes, those who do not have health insurance in 2014 could face additional federal tax in 2014.

What you need to know

Check Employer-provided insurance. If you currently have health insurance through your employer, the current media storm will, in all likelihood, not apply to you.
Check Sole-proprietors. If you are a sole-proprietor you may wish to review your current insurance coverage with the policies available in the Health Insurance Marketplace.
Check Currently without health insurance. If you do not have health insurance, pay attention. Not only will the Marketplace be a good resource to shop for a health insurance policy, your income may also qualify you for a federal Premium Tax Credit to lower your health insurance cost.

If you wish to learn more and determine the best course of action for you and your family visit

As always, should you have any questions or concerns regarding your situation please feel free to call.

2014 Social Security Benefits Announced

poolThe Social Security Administration recently announced monthly social security and supplemental security income benefits (SSI) will increase in 2014 by 1.5%. This increase is based upon the Consumer Price Index over the past 12 months ending in September 2013. In addition, other figures based on the national average wage index will also be changed. A recap of the key amounts is outlined here:

2014 Key Social Security Benefits

2013 Social Security Benefits

What does it mean for you?

  • Up to $117,000 in wages will be subject to Social Security Taxes (up $3,300 or $205 in additional Social Security tax per employee and per employer)
  • The average Social Security retirement beneficiary will receive an additional $228 in 2014.
  • For all retired workers receiving Social Security retirement benefits the average monthly benefit of $1,275/mo. in 2013 will become $1,294/mo. in 2014.
  • SSI (Supplemental Security Income) is the standard payment for people in need. To qualify for this payment you must have little income and few resources ($2,000 if single/$3,000 if married).
  • A full-time student who is blind or disabled can still receive Supplemental Security Income (SSI) benefits as long as earned income does not exceed the student exclusion amounts listed above.

Social Security & Medicare Rates

After temporary payroll tax rate cuts that ended in 2012, the rates do not change from 2013 to 2014.

2013 Withholding Limits

Note: The above tax rates are a combination of 6.20% Social Security and 1.45% for Medicare. There is also a Medicare .9% wages surtax that began in 2013 for those with wages above $200,000 single ($250,000 joint filers) that is not reflected in these figures. Please recall that your employer also pays Social Security and Medicare taxes on your behalf. These figures are reflected in the self-employed tax rates, as self-employed individuals pay both halves of the tax.

Document those Non-cash Charitable Donations!

Tips to ensure their deductibility


One often over-looked way to reduce your tax obligation is to donate gently used items to a favorite charity. Too often this is done without the necessary forethought to ensure you can deduct the value of these donations on your tax return. Here are some tips to ensure you can receive this tax benefit.

  • Good or Better Condition. Remember only items donated that are in good or better condition can be used as a charitable contribution on your tax return.
  • Document your donation. Fill out a donation sheet each time you donate. The sheet should include the name of the charitable organization, address, date, and types of items donated. It should also include a detailed list of the items donated, their initial value and the donated value. Note the value you are assigning to each item donated.
  • Take a Photo. Use this photo as a visual documentation of what you donated.
  • Get an acknowledgement and receipt. Even if the donation is small, always ask for an acknowledgement of your donation. Even churches should be ready and willing to do this for you.
  • Establish reasonable value. Do not overstate the value of the items you donate. Use places like e-bay, Amazon, the Salvation Army and used book/consignment stores to establish the used values of your items.
  • Donate entire ownership. The IRS does not like donation of part ownership of items. It is always best to make donations with no strings attached.
  • Track your mileage too. Remember even your miles driven to and from the charitable location are deductible too.
  • Have your warning antenna go up. The IRS has special rules for charitable donations. While they can be complex, here are some red flag items that should warrant consultation prior to donating the following:
    • Any stocks and investments owned for one year or longer
    • Any items valued over $250 or $500 or $5,000. Each of these levels can introduce new documentation requirements and a potential requirement for appraisals.
    • Cars, boats, RVs, and other major assets
    • Giving items to unfamiliar charitable organizations

Tax Change is Coming

Tax Change is ComingWhile a distant memory, in January of 2013 Congress passed sweeping tax legislation. Many of these tax law changes will now be felt as you file this year’s tax return. Here are five worth noting.

Check Self-employed FICA. Wage earners have already felt the impact of the social security tax rate reset to the traditional 6.2% (temporary rate in 2012: 4.2%). However, self-employed workers may feel this impact when filing their annual tax return.right arrowaction: If receiving self-employed income, review your quarterly filings to ensure you have accounted for this incremental tax hike.
Check Higher Taxes. If your income is above $200,000 single or $250,000 married filing jointly, your taxes will be going up. In some cases it may be up dramatically. Why? Your tax return may be subject to the following increases; a new 39.6% tax rate, itemized deduction phase-out, personal exemption phase-out, increase in long-term capital gains taxes, and more.right arrowaction: Conduct an income tax forecast to review the potential impact on your situation. This is especially true for small business owners in sole proprietorships, Sub Chapter S Corporations, and partnerships as your business profits will be taxed on your individual tax return.
Check Medicare Surtax. To help pay for the health care initiatives, 2013 marks the first year of new Medicare surtaxes for those whose incomes surpass $200,000 single or $250,000 joint. The extra tax may have been applied to your paycheck, but because of the marriage penalty in this part of the code, you may be subject to the additional tax when your income is combined with your spouse’s income at tax filing time.right arrowaction: Conduct a 2013 tax forecast. This is especially important for married couples whose individual incomes do not pass the threshold, but when combined with a spouse do.
Check Dividends and Long-term Capital Gains. While qualified dividends will not be taxed as ordinary income, the maximum tax rate goes up 33% (from 15 to 20%). The maximum tax rate on qualified capital gains also goes from 15 to 20%.right arrowaction: Year-end planning is now more important to determine whether to sell investments. Try to offset gains with losses wherever possible.
Check Medical Expense Threshold Moves to 10%. For those under the age of 65, the medical expense threshold is now 10% of your Adjusted Gross Income (AGI). You may only deduct qualified medical expenses that exceed this percentage of your AGI. The threshold remains 7.5% if you are 65 years old or older.right arrowaction: Avoid the tendency to stop tracking medical expenses because you think you will never hit the threshold. Remember it often only takes one major medical emergency to make all other medical, dental, and vision care expenses deductible.

While the impact of these changes will not be felt until you file your 2013 tax return, it may make sense to review your situation and be prepared for these upcoming changes.

2013 Filing Status Change for Married Same-sex Couples

The U.S. Treasury Department and the IRS issued new regulations as a direct result of the recent Supreme Court ruling regarding same-sex couples. Under the ruling any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, or a U.S. territory that recognizes same-sex marriage will be treated as married for all federal tax purposes. This includes:
Check filing status
Check personal deductions
Check dependency exemptions
Check standard deductions
Check employee benefits
Check tax credits
Check retirement plans and contributions
More importantly, this ruling applies regardless of where the same-sex couple currently lives. In other words, if the same-sex couple is legally married in one state, but then moves to another state that does not recognize the marriage, they are still married for Federal Income Tax purposes.Things to note
Check Beginning in 2013, same-sex couples within this ruling must file either married filing jointly or married filing separately. You may no longer file as single taxpayers.
Check You may choose to, but are not required to, file amended tax returns as being married for any prior tax years that are still open under the statute of limitations. This usually means three tax years (2010, 2011, and 2012).
Check This ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships.
Check If you paid for same-sex health insurance coverage from an employer in after-tax dollars you may be able to shift these premiums into pre-tax dollars.
Check State laws are more complex and are currently evolving so try to keep informed of any new developments on this front.

More information will be forthcoming on this subject from the IRS and other government agencies.

Avoid These Common Financial Mistakes

Throughout life there are many ways to achieve financial success. Some of that success can be achieved by avoiding these common financial mistakes.

Avoid These Common Financial Mistakes

Shield Under-insuring your property. Often policy owners hold an insurance policy for 10 years or more and never conduct a review to ensure their coverage is still adequate. This is made more complicated each year as insurance companies change the details of coverage within legal documents. Your best defense is to review homeowner, life, and auto insurance with your agent one month prior to your renewal dates.
Shield Paying too much interest. If you carry a balance on a credit card you are probably paying some of the highest interest rates in the country. Try to get in the habit of paying enough to cover your current monthly purchases, PLUS the minimum monthly payment, PLUS a little extra. You’d be surprised how much money you can save in credit card interest expense.
Shield A costly divorce. A divorce that goes to trial can easily cost thousands of dollars. Using a lower cost mediation option or settling amicably can be a financially wiser way to go. During this emotional time, financial analysis often takes a back seat. Conducting a tax review of the proposed divorce settlement prior to signing could also save you thousands.
Shield Unhealthy living costs. Bad health habits can not only hamper and shorten your life, but they can also cost you plenty in the form of higher life-insurance premiums and higher out-of-pocket medical expense. This can be especially expensive with higher insurance policy deductibles and the new 10% medical expense itemized deduction threshold. Consider slight health changes now to pay you dividends in the future.
Shield Insufficient emergency savings. If you lost your job or became unable to work, how many months of bills could you pay? Often one major accident is all that is between you and financial hardship. Try to accumulate between six months and one year of financial resources to keep on hand in case this happens to you. Review and consider appropriate short-term and long-term disability insurance.
Shield Purchasing with credit. Consider saving enough money to purchase bigger items versus buying on credit. Do you remember saving money as a child to buy a bike or a favorite toy? For some reason, we have now decided we should buy it first and then pay the bill. Why not return to the old way of purchasing? It might just keep you out of a financial hole.
Shield Protecting against fraud. With advances in technology have come more devious ways to steal your identity. This includes theft of tax information, social security numbers and credit cards. Conduct a regular review of your online profile and credit reports to identify suspicious activity before it gets out of hand.

While it is hard to account for every possible financial pothole in the drive-through of life, by paying attention to the obvious ones, the risk of a large financial surprise can be reduced.