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Tax News from your friendly CPA! |
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The Sunderland Group E-newsletter
| August/September, 2012 |
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Online Client Access
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Please remember that all of your tax information is available 24/7 via your Online Client Access (OCA) web portal! Access to your OCA is done via our website under the Client Login section of our website.
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Greetings!
Greetings!
Where has the summer gone? It's hard to believe fall is here and the football season is well under way. Not that football season in Boulder is such a good thing these days.
However, this also signals that we are closing in on another presidential election and many tax issues are hot for debate. This month's issue will begin to touch on some of the more pertinent tax issues. However, we don't expect much to get accomplished seen as we are relying on our wonderful politicians to actually come to an agreement of some sort.
While the political climate makes it a bit more difficult to proactively plan financially and from a tax perspective, there are still many areas that require we be diligent in our reviews and projections to ensure we take full advantage of opportunities.
Please read on!
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Obama vs. Romney - the breakdown:
President Obama has spelled out his tax plan in pretty good detail; Romney, not so much. However, we have been able to compile a high level view of the potential tax plans each candidate will try to push forward if elected:
- Individual Tax Rates: Obama would retain the current 10%, 15%, 25%, & 28% tax brackets, but would raise the top two rates for those with "higher income" ($250k+ for married folks, $200k+ for single filers) to 36% & 39.6%; Romney would reduce all current tax rates by 20%, resulting in six rates of 8%, 12%, 20%, 22.4%, 26.4%, and 28%
- Deductions & Credits: Obama is not too detailed here but says he would eliminate "tax subsidies for millionaires that they do not need" and reduce the value of itemized deductions and other tax preferences to 28% for families with incomes over $250k; Romney has stated that his plan would be revenue-neutral, and that his tax cuts would be paid for by broadening the tax base - i.e. reducing or eliminating current deductions, etc. - but he has not yet specified what those tax breaks are; and the Tax Policy Center has recently released a high-profile study questioning whether revenue-neutral, base-broadening reform could realistically be obtained
- Investment Income: Obama would keep the maximum capital gains rate at 15% for those with incomes under $250k and raise the rate to 20% for those making more than $250k; Romney wouldn't impose any tax on investment income for those making less than $200k, and would tax interest, dividends, and capital gains at 15% for those making more than $200k (currently only dividends and capital gains are afforded 15% treatment); he would also repeal the addt'l 3.8% investment income tax that is scheduled to take effect in 2013 as part of the Health Care package
- AMT: Obama would index the AMT to inflation so that it keeps pace with "reality" and he has also endorsed the so-called "Buffett Rule" under which households making more than $1 million a year would pay at least 30% of their income in taxes (somewhat of a modified AMT); Romney would repeal the AMT (we personally feel this would never happen - the gov't would give up way too much revenue)
- Estate Taxes: Obama would restore the estate taxes to a $3.5 million exemption and a 45% tax rate; Romney would repeal the estate tax
- Corporate Taxes: Obama would reduce the top corporate rate from 35% to 28%; Romney would enact a 25% corporate tax rate
We've just given a brief summary of the two candidates' proposal, and there are other components involved. We will continue to monitor these issues and update as needed.
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What's this "Fiscal Cliff" all about?
We keep hearing about this so-called "fiscal cliff" that our country may fall from, but what does this actually mean? If Congress does nothing and we do indeed fall from this "cliff" in three months, taxes would rise for 90 percent of Americans due to automatic increases in income and payroll taxes and other financial shocks.
The tax increases will come in the form of the expiration of the "Bush-era" tax cuts, which would result in an overall increase in all the tax brackets, including the long-term capital gains rate and the qualified dividends rate, which currently stands at 15% (for most). The payroll tax increase will most likely happen as there is not much support for extending this 2% break that employees have benefited from the past two years (too much pressure on a dwindling Social Security "fund").
The other part of this cliff comes in huge cuts from gov't spending. Because our "lawmakers" failed to reach a deal to cut the deficit appropriately, the federal government is on track for draconian spending cuts in 2013 and beyond unless there is agreement on an alternative before the end of the year. They are expected to revisit this after the Nov 6th election.
No matter who wins in November, the country has to face these big issues, especially that of the looming tax increases. At this point, it's very difficult to predict how this will shake out, but we'll keep you posted! |
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Political Incompetence May Delay Refunds
Congress could delay billions of dollars in 2013 tax refunds if it waits too long after the upcoming elections to finalize tax law.
We've seen this issue arise in most of the past several years as our wonderful politicians cannot make any decisions in a timely manner. When tax issues are involved, it impacts all of the various tax forms that are used in preparing returns. The IRS says it needs six to eight weeks to incorporate tax-law changes in federal tax-return documents. Even a short delay to the start of the 2013 tax season (for filing 2012 tax returns) can hold up billions of dollars in tax refunds.
There are many tax-related issues that need to be addressed, including many of the expiring tax provisions - principally the AMT tax fix; however, the larger individual tax rate debate may rule the roost, leaving many of us wondering how best to plan for 2013 and beyond.
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2012 Client Appreciation Party!
Thanks to all who attended our annual celebration!!
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