Get the very latest on important tax law changes that will impact returns for Tax Year 2013. There are so many changes to keep track of each year. Let us us do the legwork and keep you up to speed on the current status of tax law changes and extenders. Topics will include the Defense of Marriage Act, Post 2013 Affordable Care Act changes and other IRS initiatives.

1. 2013 Tax Law Update
Brought to you by:
Presented by:
Mike Davolio
Senior Tax Analyst
Intuit Professional Tax Group

2. Mike Davolio, CPA
Senior Tax Analyst
• With Intuit / Lacerte since 1987
• Monitor legislative and regulatory
activity
• Circulate information to employees
and customers
• Analyze and test software
• Train employees and customers
• Government liaison
• Public relations representative
2

3. Agenda
•
2013 Tax Law Changes
•
Defense of Marriage Act
•
Post 2013 ACA Changes
•
Tax Reform
•
IRS Initiatives
Let’s Get Started!
3

4. 2013 Tax Law Changes

5. American Taxpayer Relief Act
of 2012 (PL 112-240, 1/2/13)
Income tax rate increase for high earners (beginning in
TY13)
• Rates remain at 10%, 15%, 25%, 28%, 33%, 35%
• 39.6% rate applies to income above: $450,000 MFJ, QW;
$425,000 HH; $400,000 single; $225,000 MFS
Capital gain & dividend rate increase for high earners
(beginning in TY13)
• Top rate rises to 20% (from 15%)
• Applies to income above: $450,000 MFJ, QW; $425,000 HH;
$400,000 single; $225,000 MFS
• 0% capital gain and dividend rate still applies to taxpayers
whose ordinary income is taxed below 25%
Personal exemption phase-out (PEP) & itemized deduction
limitation (Pease) for high earners (beginning in TY13)
• Thresholds: $300,000 MFJ, QW; $275,000 HH; $250,000 single;
$150,000 MFS
5

6. ATRA (cont.)
Permanent AMT relief (retroactive beginning in TY12)
• Increased exemption amounts: $51,900 single, HH; $80,800
MFJ, QW; $40,400 MFS
• Nonrefundable personal credits allowed to offset AMT
Estate, gift and generation skipping transfer (GST) tax
(beginning in TY13)
• $5M exemption permanently extended (indexed for inflation,
$5.25M for TY13)
• Top rate increases to 40% (from 35%)
• Retains portability feature
Recovery Act of 2009 provisions extended for 5 years
(beginning in TY13)
• American opportunity credit
• Eased rules for refundable child tax credit
• Various elements of earned income credit
6

7. ATRA: Individual Extenders
(TY12 & TY13)
• Deduction for school teacher expenses
• Tuition and fees deduction
• State and local general sales tax deduction
• Mortgage insurance premiums treated as residence
interest
• Exclusion for discharge of principal residence debt (TY13
only)
• Tax-free distributions from IRAs for charitable purposes
• Special rule for contributions of capital gain real property
made for conservation purposes
• Parity for exclusion of employer-provided mass transit and
parking benefits exclusions
7

8. ATRA: Depreciation Extenders
(TY12 & TY13)
• Increased section 179 expensing limits
• $500,000 limit with a $2M phase-out
• Treatment of certain real property as section 179 property
• 50% bonus depreciation (TY13 only)
• Accelerated depreciation for Indian reservation property
• 15 year straight-line method for leasehold improvements,
restaurant buildings and improvements, and retail
improvements
• 7 year recovery period for motorsports entertainment
complexes
8

9. ATRA: Business Extenders
(TY12 & TY13)
• Research credit
• Work opportunity credit
• Employer wage credit for employees who are active duty
members
• Indian employment credit
• New markets credits
• Enhanced charitable deduction for contributions of food
inventory
• Railroad track maintenance credit
• Mine rescue team training credit
• Qualified zone academy bonds
9

10. ATRA: Business Extenders (cont.)
• Exclusion of 100% of gain on small business stock
acquired before 1/1/14
• Basis adjustment to stock of S corporations making
charitable contributions of property (tax years beginning
before 12/31/13)
• Reduction in S corporation’s recognition period for built-in
gains tax (10 years instead of 5 years, through 2013)
• Domestic production activities deduction for activities in
Puerto Rico (TY06 – TY13)
• Exclusion from a tax-exempt organization’s UBTI of
interest, rent, royalties and annuities paid from a
controlled entity (through 12/31/13)
• Empowerment zone incentives:
• Designation of an empowerment zone (through 12/31/13)
• 60% exclusion for small business stock (through 12/31/18)
10

11. ATRA (cont.)
Energy-related extenders (TY12 & TY13)
• Non-business energy property credit for energy-efficient homes
• Energy-efficient new homes credit
• Energy-efficient appliances credit
• 2 or 3 wheeled plug-in electric vehicle credit
• Alternative fuel vehicle refueling property credit
• Biodiesel and renewable diesel credit
• Cellulosic bio-fuel producer credit (TY13 only)
• Production credit for Indian coal facilities (extended 1 year)
• Credits for facilities producing energy from renewable resources
(extended 1 year)
Pension provision
• Retirement plans (including Roth) can allow participants to elect
to transfer amounts to designated Roth accounts (treated as
taxable rollover contribution) (after TY12)
11

12. Additional Medicare Tax (AdMT)
Individuals
• New law: 0.9% AdMT on wages, compensation and selfemployment income received in excess of
• $250,000 for MFJ; $125,000 for MFS; $200,000 for
others
• Employers collect extra 0.9% on wages exceeding
$200,000
• No employer match
• Individuals may need to increase withholding or estimates
for AdMT
• IRS Q&A: Additional Medicare Tax
12

13. New Form 8959
• Reported on
Form 1040, line
60, box a
13

14. Net Investment Income Tax (NIIT)
• New law: Medicare tax will apply to investment income
• Tax is 3.8% of lesser of
• Net investment income, or
• Excess of modified AGI over $250,000 for MFJ or QW,
$125,000 for MFS, $200,000 for others
• Estates and trusts: 2013 threshold is $11,950
• NII: interest (not tax-exempt), dividends, capital gains, rental
and royalty income, non-qualified annuities, income from
businesses involved in trading of financial instruments or
commodities, and businesses that are passive activities
• Doesn’t apply to excluded portion of gain on sale of personal
residence
• Includes child’s income on Form 8814 (after threshold)
• Reduced by deductions allocable to gross investment income:
investment interest expense, investment advisory and
brokerage fees, expenses related to rental and royalty income,
and state and local income taxes
14

15. New Form 8960
• Reported on Form
1040, line 60,
box b or Form
1041, Schedule
G, line 4
• May need to
increase
withholding or
estimates
• IRS Q&A: Net
Investment
Income Tax
15

16. Higher threshold for deducting
medical expenses
• New law: raises floor from 7.5% of AGI to 10%
• AGI floor for individuals age 65 and older will
remain unchanged at 7.5% through 2016
16

17. Dollar cap on contributions to
health FSAs
• FSA (flexible spending arrangement): taxadvantaged account that can be set up through
cafeteria plan of employer
• Allows employee to set aside a portion of earnings
to pay for expenses as established in cafeteria
plan (medical, dependent care, other)
• New law: allowable contributions to health FSAs
capped at $2,500 per year (indexed for inflation
after 2013)
17

18. Miscellaneous Changes
2% payroll tax holiday expired on 12/31/12
• Social security withheld from wages at 6.2%
rate (from 4.2%) up to social security wage
limit of $113,700
• Same increase applies to SE earnings: 12.4%
rate (from 10.4%)
New Form 4684 (Casualties and Thefts),
Section C for Ponzi-type investment
schemes
• Section C of Form 4684 replaces Appendix A in
Rev Proc 2009-20
18

19. 2013 Standard Mileage Rates
Business
• 56.5 cents/mile
Medical and moving
• 24 cents/mile
Charitable
• 14 cents/mile
19

20. Inflation Adjustments
2012
2013
Elective Deferral Plan Limits
(401(k), 403(b), SEPs, Thrift
Savings, state & local)
Base
Catch-up
Total
$17,000
$5,500
$22,500
$17,500
$5,500
$23,000
408(p) Deferral Plan Limits
(SIMPLE Plan)
Base
Catch-up
Total
$11,500
$2,500
$14,000
$12,000
$2,500
$14,500
Base
Catch-up
Total
$5,000
$1,000
$6,000
$5,500
$1,000
$6,500
IRA Deduction
IRA Phase-Out Ranges
Single/HOH
MFJ/QW
$58,000-68,000 $59,000-69,000
$92,000-112,000 $95,000-115,000
20

21. Defense of Marriage Act
(DOMA)

22. U.S. Supreme Court holds
DOMA unconstitutional
• U.S. v. Windsor, 6/26/13
• DOMA required same-sex spouses to be treated
as unmarried for federal law purposes
• Impacts many sections of IRC that involve
definition of spouse
• Many tax breaks now available to legally
married same-sex couples
• Right to file a joint return
22

23. IRS guidance on DOMA ruling
• Same-sex couples who were legally married in
jurisdictions that recognize their marriages are treated as
married for federal tax purposes
• Regardless of whether resident state recognizes samesex marriage
• Applies for all federal tax purposes and to all federal tax
provisions where marriage is a factor
• Filing status change (MFJ or MFS) mandatory going
forward: 2013 tax returns or original 2012 returns filed
after 9/15/13
• Amended returns can be filed (not required) within statute
of limitations
• Gender neutral terms in Code referring to marital status
(spouse, marriage) include lawful same-sex individuals
and marriages
23

24. IRS guidance on DOMA ruling (cont.)
• Taxpayer's spouse cannot be dependent of taxpayer;
taxpayer who is considered married cannot file as HH; if
spouses file as MFS and have a child, only one can claim
child as dependent
• “Marriage” doesn’t include RDPs and civil unions (even if
opposite sex)
• Some states will need to issue guidance
• State returns filed by same-sex married couples in
states that don’t recognize their marriages
• In 24 states that don’t recognize same-sex marriage,
taxpayers need to rely on federal return (start with
federal TI or AGI, or utilize federal filing status)
• IRS guidance: IR-2013-72
24

25. States that recognize same-sex marriage
• California: June 17, 2008 through Nov. 4, 2008; June 26, 2013
through present
• Connecticut: Nov. 12, 2008
• Delaware: July 1, 2013
• Iowa: Apr. 20, 2009
• Maine: Dec. 29, 2012
• Maryland: Jan. 1, 2013
• Massachusetts: May 17, 2004
• Minnesota: Aug. 1, 2013
• New Hampshire: Jan. 1, 2010
• New York: July 24, 2011
• Rhode Island: Aug. 1, 2013
• Vermont: Sept. 1, 2009
• Washington: Dec. 6, 2012
• Washington, DC: Mar. 9, 2010
25

26. Affordable Care Act (ACA)
Post 2013 Changes

27. Penalties and Subsidies for Individuals
• Beginning in 2014, U.S. citizens and legal residents must
carry health insurance or be subject to a penalty
• Penalty is the greater of: (phased in)
• $695 per year ($2,085 maximum per family), or
• 2.5% of household income
• Beginning in 2014, people who purchase insurance
through an exchange may be eligible for the Premium
Assistance Credit (i.e. subsidy) for low and middle income
individuals
• Credit is refundable and payable in advance directly to
the insurer
• Individual then pays difference between total
premium and credit
• For employed individuals, premiums can be made
through payroll deductions
27

28. Penalties and Credits for Businesses
• Businesses with 50 or more full-time employees must
offer insurance or face a penalty
• $2,000 per year for every employee starting with the
31st employee
• Recently delayed until 2015
• Businesses with fewer than 50 full-time employees are
exempt from penalty for not offering coverage to
employees
• Tax credit is available for small businesses that offer
insurance
• Less than or equal to 25 employees with an average
salary of less than or equal to $50,000
• Employer must cover at least 50% of premium
28

29. Key Dates
• On January 1, 2014, all individuals, except for a
few, will be required to purchase health
insurance or face a tax penalty
• On October 1, 2013, uninsured Americans will
be able to enroll in health plans through state
and federal exchanges
• Your 2012 tax return will help determine your
eligibility for an insurance subsidy from the
government
29

30. ACA Online Resources
Intuit has launched a new ACA website for
accountants
• http://accountants.intuit.com/health/index.jsp
• Educate accountants and clients about new
health care law
• Basic and advanced content relating to
individuals and small businesses
IRS website explains tax provisions of
health care law
• IRS.gov/aca
• Publication 5093: Health care law online
resources (http://www.irs.gov/pub/irspdf/p5093.pdf)
30

31. Tax Reform

32. Tax Changes in President’s Budget Proposal
Individual
• Reduce value of itemized deductions and other preferences (taxexempt interest, retirement contributions, etc.) to 28% for
taxpayers in top 3 tax brackets
• Buffet rule: millionaires pay no less than 30% of income in taxes
• Permanently extend American opportunity credit, elements of
child tax credit and earned income credit
• Prohibit individuals from accumulating over $3M in tax-preferred
retirement accounts
Business
• Permanently extend increased section 179 limit
• Permanently extend and enhance research credit
• Require employers that have over 10 employees and don’t offer
a retirement plan to enroll employees in a direct deposit IRA
(with ability to opt out)
• Repeal LIFO accounting method
• Bar use of lower of cost or market and subnormal goods
methods of inventory accounting
32

33. IRS Initiatives

34. IRS statement on court ruling related to
return preparers
• On 1/18/13, U.S.D.C. enjoined IRS from
enforcing regulatory requirements for registered
tax return preparers
• Tax return preparers covered by program not
required to complete competency testing or
secure continuing education
• Ruling doesn’t affect regulatory practice
requirements for CPAs, attorneys or enrolled
agents
• On 2/1/13, court clarified that order doesn’t
affect requirement for all paid tax return
preparers to obtain a PTIN
• Appeal filed on 3/29/13
34

35. Intuit Resources
Intuit & National Association of Tax
Professionals (NATP) team up for
professional development
• http://www.natptax.com/intuit
• More than 300 live nationwide workshops,
facilitated online, self-study & webinar courses
designed by tax professionals
• Maintain CPA, EA status with CPE courses
• EA Exam Preparation Course
35

36. IRS combats identity theft and
refund fraud
Top priority for IRS
Refund fraud detection and prevention
• During 2012, IRS protected $20B of fraudulent refunds,
including ones related to identity theft
• Expanded for 2013
Increasing efforts to help victims
• Identity Protection Personal Identification Numbers (IP
PIN) expanded
• More resources devoted to victim case resolution
IRS criminal investigation
• Tripled number of investigations in 2012
• See special identity theft section
36

37. Victims of refund fraud
• Identity thieves try filing fraudulent refund claims using another
person’s identifying information, which has been stolen.
• Innocent taxpayers are victimized because their refunds are
delayed.
• If taxpayer receives a notice from IRS or learns from tax
professional that:
• More than one return was filed;
• There is a balance due, refund offset or collection action for a
year a return wasn’t filed;
• IRS records indicate more wages received than earned; or
• State or federal benefits were reduced or cancelled because
agency received information reporting an income change
• Respond immediately by calling number on notice
• Fill out IRS Identity Theft Affidavit: Form 14039
• Taxpayer Guide to Identity Theft:
http://www.irs.gov/uac/Taxpayer-Guide-to-Identity-Theft
37

38. Tips to protect you from becoming
a victim of identity theft
• Don’t carry Social Security Card or any documents with
SSN or ITIN
• Don’t give a business your SSN or ITIN unless required
• Protect your financial information
• Check your credit report every 12 months
• Secure personal information in your home
• Protect your personal computers
• Don’t give personal information via phone, mail or
internet unless you initiated contact or you know whom
you’re dealing with
38

39. Notices related to Form 1099-K
• Form 1099-K: information return that reports payment
card and third party network transactions
• Used to complete return and retained for records
• Transactions should already be reflected in gross receipts
on return
• Gross receipts comprised of payment card receipts and
other forms of payment (cash, checks)
• Taxpayers receive notices because gross receipts may be
underreported
• Tips
• Read notice and complete any worksheets
• Gather tax records, including 1099-Ks, and determine if
you agree with notice
• Contact IRS with any questions
39

40. Free tax help from IRS social media tools
IRS2Go: Smartphone application for iPhone,
iTouch and Android
YouTube
• English | Spanish
Twitter (@IRSnews, @IRStaxpros)
Tumblr: Up-to-date tax news
Facebook: Useful posts for tax professionals
Podcasts: Useful facts on many tax topics
• English | Spanish
40

41. Questions?

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42

43. Thank you for viewing!