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New Deal Highlights
Act's Main Features
New Taxes
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Featured Employee:
Christi Valencia

Christi Valencia
Christi joined Linkenheimer in May 2006 and is the firm's Audit & Accounting Manager. She currently resides in Windsor with her husband Juan, a Sonoma County Deputy Sheriff, sons Matteo and Roman, and their dogs Rocky, Sophie and K9 Cougar. Christi enjoys reading, shopping, working out, hiking local trails, wine tasting, and spending time with family and friends.

New Employee:

Judy Deniz 


Judy joined Linkenheimer in January 2013. She graduated from Sonoma State University in May 2006 with a Bachelor of Science degree in Business Administration with an emphasis in Accounting.  Working in public accounting since late 2005, she has gained a wide variety of experience including tax, audit, and general accounting.   


Judy is a member of the American Institute of Certified Public Accountants. She is also a member of the Hispanic Chamber of Commerce Sonoma County, where she previously served as the board's Secretary.  Judy enjoys spending the summer months camping near the lake with her husband Greg and three daughters Madalie, Maliea, and Marlize.



For the second year running, California is a credit reduction state.  This means "we" have taken loans from the federal government to meet state unemployment benefit liabilities and have not repaid those loans within the allowable time frame.

The result of being an employer in a credit reduction state is higher tax due on the Form 940.  For the year ended December 31, 2012, the calculation results in $42 per employee as additional FUTA liability, bringing total FUTA tax per employee to $84 for the year...

For Complete Article 

New Tax Deal and Changes for 2013  


The big question leading into 2013 was will we go over the much talked about "fiscal cliff". The answer is complex and possibly still unclear to most, but the bottom line is, there are tax changes that will impact most. While we tried to highlight the major changes in this newsletter, we've included some more comprehensive guides that provide more detail. And if you have any questions, please don't hesitate to call us.   

The Highlights of the New Tax Deal

  • 39.6% Tax Rate for Incomes Above $400,000 ($450,000 for Families)
  • All Other Bush-Era Tax Rates Extended
  • 20% Maximum Capital Gains/ Dividend Tax Rate
  • Maximum 40% Estate/ Gift Tax Rate
  • Permanent AMT (Alternative Minimum Tax) Patch
  • Five-Year Extension of Enhanced Education Credit
  • One-Year Extension of Many Business Extenders
  • Over 30 Extenders Retroactive to Start of 2012 
American Taxpayer Relief Act of 2012


Here are the act's main tax features:

Individual tax rates

All the individual marginal tax rates under EGTRRA (Economic Growth and Tax Relief Reconciliation Act) and JGTRRA (Jobs and Growth Tax Relief Reconciliation Act) are retained (10%, 15%, 25%, 28%, 33%, and 35%). A new top rate of 39.6% is imposed on taxable income over $400,000 for single filers, $425,000 for head-of-household filers, and $450,000 for married taxpayers filing jointly ($225,000 for each married spouse filing separately).


Phaseout of itemized deductions and personal exemptions

The personal exemptions and itemized deductions phaseout is reinstated at a higher threshold of $250,000 for single taxpayers, $275,000 for heads of household, and $300,000 for married taxpayers filing jointly.


Capital gains and dividends

A 20% rate applies to capital gains and dividends for individuals above the top income tax bracket threshold; the 15% rate is retained for taxpayers in the middle brackets. The zero rate is retained for taxpayers in the 10% and 15% brackets.


Alternative minimum tax

The exemption amount for the AMT on individuals is permanently indexed for inflation. For 2012, the exemption amounts are $78,750 for married taxpayers filing jointly and $50,600 for single filers. Relief from AMT for nonrefundable credits is retained.


Estate and gift tax

The estate and gift tax exclusion amount is retained at $5 million indexed for inflation ($5.12 million in 2012), but the top tax rate increases from 35% to 40% effective Jan. 1, 2013. The estate tax "portability" election, under which, if an election is made, the surviving spouse's exemption amount is increased by the deceased spouse's unused exemption amount, was made permanent by the act.

For more information and the complete article from the Journal of Accountancy , click here.
New Taxes Being Introduced

In addition to the various provisions discussed above, some new taxes also took effect Jan. 1 as a result of 2010's health care reform legislation.


Additional hospital insurance tax on high-income taxpayers. The employee portion of the hospital insurance tax part of FICA (Federal Insurance Contributions Act), normally 1.45% of covered wages, is increased by 0.9% on wages that exceed a threshold amount. The additional tax is imposed on the combined wages of both the taxpayer and the taxpayer's spouse, in the case of a joint return. The threshold amount is $250,000 in the case of a joint return or surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case. For self-employed taxpayers, the same additional hospital insurance tax applies to the hospital insurance portion of SECA (Self-Employment Contributions Act) tax on self-employment income in excess of the threshold amount.


Medicare tax on investment income. Starting Jan. 1, Sec. 1411 imposes a tax on individuals equal to 3.8% of the lesser of the individual's net investment income for the year or the amount the individual's modified adjusted gross income (AGI) exceeds a threshold amount. For estates and trusts, the tax equals 3.8% of the lesser of undistributed net investment income or AGI over the dollar amount at which the highest trust and estate tax bracket begins.


For married individuals filing a joint return and surviving spouses, the threshold amount is $250,000; for married taxpayers filing separately, it is $125,000; and for other individuals it is $200,000.


Net investment income means investment income reduced by deductions properly allocable to that income. Investment income includes income from interest, dividends, annuities, royalties, and rents, and net gain from disposition of property, other than such income derived in the ordinary course of a trade or business. However, income from a trade or business that is a passive activity and from a trade or business of trading in financial instruments or commodities is included in investment income.


Medical care itemized deduction threshold. The threshold for the itemized deduction for unreimbursed medical expenses has increased from 7.5% of AGI to 10% of AGI for regular income tax purposes. This is effective for all individuals, except, in the years 2013-2016, if either the taxpayer or the taxpayer's spouse has turned 65 before the end of the tax year, the increased threshold does not apply and the threshold remains at 7.5% of AGI.


Health flexible spending arrangement. Effective for cafeteria plan years beginning after Dec. 31, 2012, the maximum amount of salary reduction contributions that an employee may elect to have made to a flexible spending arrangement for any plan year is $2,500.


Source: Journal of Accountancy 

Additional Information and Details

The details and scope of the new Act are quite large and encompassing. We have tried to provide some of the main points that we feel will impact our clients the most. That being said, there are a variety of credit expiring, other busienss and energy tax extenders that are being offered, along with other credits (too many to list in any newsletter). Below are two links with detailed information that you might find useful. And please call you CPA with any questions you might have so we can help you plan for a successful 2013.  


CCH Relief Act Guide, click here.  


Journal of Accountancy, click here.  

Now is the time to call if you have any questions about the new Medicare taxes, expiring or remaining credits or would like to chat with your CPA about upcoming tax time.




Chris Jones

Marketing Director


Linkenheimer LLP CPAs & Advisors 
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