Comprehensive tax reform guide for income tax and wealth transfer taxes. Income tax 2013 includes tax information for the self employed, affordable health care act, income tax rate changes, and the most recent tax law changes for 2013. The wealth transfer tax covers estate taxes, gift taxes, MAGI and tax planning tips for 2013. Contact Goldin Peiser & Peiser, LLP for more information or visit www.gppcpa.com.

1. Tax Planning
For 2013
Presenter: Allan Peiser

2. The Current Environment
•The tax reform debate
•Lower rates, fewer tax expenditures,
spending driven deficit reform
•Tax reform accompanied by tax increases
that help reduce deficits
•A lingering standoff over the size of
government and tax policy

3. • Income Tax
•Wealth Transfer
Tax

4. Income Tax
• Medicare Tax
•Self Employed Income - .9%
•Net Investment Income – 3.8%
•To the extent that MAGI exceeds
$200,000 for an individual or
$250,000 for a joint return

5. Tax on Self Employed
Income
• Medicare tax increase beginning in 2013
• 0.9% Medicare Hospital Insurance (HI) tax
• on self-employed individuals and employees
• on earnings and wages received during the year
above specified thresholds
• individual wages of an employee in excess of
$200,000
• joint return in excess of $250,000

6. Net Investment Income
For purposes of the 3.8% tax Net Investment Income is
define in Code Sec. 1411(c) as “investment income”
reduced by the deductions properly allocable to such
income plus the sum of:
•Other gross income
•Gross income from derived from any business
•Interest to which the tax applies
•Dividends
•Annuities •Net gain attributable to the
•Royalties disposition of property
other than property held in
•Rents a trade or business to
•Passive income which the tax does not
apply

7. Affordable Care Act
Provisions
• Premium-assistance credit
• Small business tax credit
• Reporting requirements
• Medical care itemized deduction threshold
• Adult Dependent insurance coverage

8. Affordable Care Act
Provisions
• Health Flexible spending arrangements
• Expansion of adoption credit
• Excise tax on high-cost employer plans
• Tax on indoor tanning services
• Information reporting
• Excise tax on medical device manufacturers

9. Income Tax
Rates
Tax rates remain unchanged for 2011, ranging from 10
percent to 35 percent. These rates are set to expire at
the end of 2012 unless Congress takes action. If
Congress does not take action, tax rates will return to
those that were in effect in 2000.
•Income tax withholdings are considered paid equally
throughout the year, even if the withholdings are
made near the end of the year.
•If you anticipate being liable for underpayment
penalties on estimated tax, you may consider taking
an indirect rollover distribution from a traditional or
Roth IRA account during the year of underpayment.

10. Other Changes
Recently Enacted Tax Law Changes Affecting Individuals
• Bonus depreciation. The 2010 Act extends for two years 50-percent
bonus depreciation for qualified property. Bonus depreciation will be
available for qualified property placed in service before January 1,
2013
• Expensing. The 2010 Act provides that, for tax years beginning in
2012, the Section 179 small-business expensing limitation will be
$125,000. The limitation will be reduced if the cost of the Section 179
property for that year exceeds $500,000. Those amounts will return
to $25,000 and $200,000, respectively, after 2012.
• Miscellaneous individual provisions. The 2010 Act includes a new
temporary reduction of the Social Security payroll tax for wage
earners and self-employed individuals. The 2010 Act also extends
through 2011 the provision for tax-free distributions from individual
retirement plans for charitable purposes by individuals who are age
70-1/2 and older (up to $100,000 per taxpayer per taxable year).

11. Wealth Transfer Tax
•The Estate Tax - For 2011, the applicable credit amount is the
estate tax on the $5 million base exclusion amount, computed
using the rate structure in effect on the date of death
($1,730,800 in 2011 and slightly higher in 2012 because the
exclusion amount is indexed for inflation).
•Gift Tax - Transfers to a spouse who is a U.S. citizen are
covered by the unlimited marital deduction; therefore, such
transfers may be made totally free from gift tax.

12. Wealth Transfer Tax
Basic Blocking and Tackling
•You may want to shift wealth down generational lines through
an annual gifting program.
•If a child or grandchild has earned income, consider making a
cash gift. The child or grandchild may use that gift to contribute
$5,000 or the amount of the donee’s earned income, whichever
is less, to a traditional IRA or Roth IRA.
•Remember to make any payments on behalf of others directly
to providers of medical and educational services.
•Consider funding future educational expenses through gifts
into a § 529 educational plan for children and grandchildren.

13. Wealth Transfer Tax
Potential Gift Tax Changes – the President’s Budget
Proposals
•Grantor retained annuity trust limitations
•Discount valuation limitations
GST tax

14. MAGI
In computing MAGI for purposes of the 3.8% threshold, gross
income does not include items such as interest on tax-exempt
bonds, veterans’ benefits, and excluded gain from the sale of
a principal residence that are otherwise excluded from
income.
Watch out for theses situations:
• Gain over and above the $250,000 amount protected by the
principal residence exclusion does increase MAGI as well as net
investment income
• Lump-sum distributions from retirement plans, while excluded from
net investment income, are included in MAGI
• Converting traditional IRAs to Roth IRAs after 2012 will increase
MAGI by the amount of the converted amount

15. Planning for 2013
Planning in Uncertain Times
•Adopt a multiyear perspective in reviewing your tax situation,
evaluating the tax implications of shifting income or deductions.
•Consider the effect of the AMT. The expected outcome of
deferring or accelerating income and deductions may be
different after determining the AMT consequences. The result
may not necessarily be intuitive.
•View transactions with regard to both their economic and tax
implications.
•Stay engaged with understanding the tax changes debated or
adopted by Washington. Be prepared to act quickly once
Congress agrees on tax rates or reform.

16. Planning for 2013
Ordinary Income
•If you believe ordinary tax rates will increase, you may want to
consider accelerating receipt of commissions, bonuses,
nonqualified stock option exercises, or billings prior to 2013.
•If you are generating a net operating loss (NOL) and believe
that ordinary rates will rise, you should consider having your
NOL carried forward to offset future ordinary income taxed at
higher rates, rather than carried back to offset income taxed at
lower rates. Careful modeling of this decision is critical and must
focus on cash flow as well as tax considerations.

17. Planning for 2013
Medicare Tax
•Consider realizing capital gains prior to 2013 when cap gains
and unearned income tax rates increase
•For 2011 and 2012 sales, consider electing out of installment
sale treatment (where available) and recognizing the entire
amount of gain in the year of sale (instead of deferring it over
the payment period).
•Consider rebalancing your investment portfolio by increasing
investments in growth assets and decreasing emphasis on
dividend-paying assets prior to 2013.

18. Planning for 2013
Medicare Tax
•If you have an investment interest expense carryover into
2012, consider electing not to tax qualified dividends and long-
term capital gains at ordinary tax rates on your 2012 tax return
in anticipation of qualified dividends reverting to ordinary income
in 2013.
•Passive income is subject to the 3.8-percent unearned income
tax; therefore, if you have multiple passive activities, consider
reviewing current grouping elections in light of any new factual
patterns for each activity that may reclass such activity from
passive to active or vice versa.

19. Planning for 2013
Investment Income
•If you anticipate an increasing capital gains rate environment
beginning in 2013, you may want to consider accelerating
capital gains prior to 2013 to capture the lower tax rate.
•Conversely, if you believe capital gains rates will decline or
remain constant, you would want to explore accelerating losses
prior to 2013 and deferring gains into future years.
•Determine whether it is better to invest funds in a taxable
account or a tax-deferred account, and consider asset allocation
and investment strategies in light of the impact of tax rates on
portfolio income.

20. For Additional Information
Contact
Allan Peiser, Managing Partner
Goldin Peiser & Peiser, LLP
Apeiser@GPPcpa.com
214-635-2503
www.GPPcpa.com