the tax filing season revs into high gear, most
taxpayers will find the rules for filing 2013 taxes are
a lot like the requirements of a year earlier. But
high-wage earners, who were facing a significant tax
increase, may be in for a nasty surprise.
Congress made most of the Bush-era tax cuts permanent
last year, affluent taxpayers were singled out for
special treatment. In many cases it means owing Uncle
Sam this year instead of getting a refund.
is happening is that those clients used to getting
refunds aren’t getting them," said Bradford Hall,
a CPA in Irvine, Calif. "Their reaction is
disbelief — like, what changed?"
changes affect a variety of personal exemptions and
itemized deductions that many taxpayers got used to
after Congress extended the Bush tax cuts during the
addition to reducing longtime breaks, Congress increased
the tax rates on the highest earners, with the impact
generally kicking in at $250,000 in adjusted gross
income for couples filing jointly and at $200,000 for
some changes affect a large number of taxpayers of all
incomes. Among them was an increase in the threshold to
claim medical expenses, making it more difficult to
write off doctor and drug bills.
new federal tax provision, intended to protect against
identity theft, is also proving to be an annoyance for
some taxpayers. The law now requires taxpayers who file
electronically to include their previous year’s
adjusted gross income on the 2013 IRS tax filing.
not a problem if you have the same person doing your tax
return this year as last year, but I have clients I’m
seeing for the first time and they can’t find their
2012 income tax filing to find their adjusted gross
income," said Bill Geideman, an enrolled agent in
Santa Ana, Calif.
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generally conforming to federal tax rules, the state of
California has some bad news for struggling homeowners
who thought they dodged a bullet last year after their
lender wrote down their mortgage.
state legislature failed to extend an exemption that
protected homeowners from having to pay California
income taxes on the reduction in their mortgage. As it
currently stands, homeowners no longer will be eligible
for the cancellation-of-debt provision and will owe
state income tax on that difference. (Federal law
continues to exempt principal reductions.)
all the 2013 tax news was bad.
made interest deductions for qualifying student loans
and employer-provided education assistance permanent.
Coverdell Education Savings Account provisions are also
workers will be able to take advantage of an increase in
the earned income tax credit. Eligibility is based on
filing status and number of children. Single workers are
eligible if they earned less than $14,340 last year,
while married couples with three children who file
jointly can get the credit if they made less than
with a home office will find a simpler alternative
calculation that allows them to deduct a flat $5 per
square foot, up to $1,500.
those taxpayers getting refunds, there is also good
news. IRS refunds are averaging $3,317, up from last
are some of the areas most affected by 2013 tax changes:
care law: The Affordable Care Act made two tax changes
for affluent taxpayers. A new 3.8 percent surcharge is
being imposed on net investment income (dividends,
interest, rent and passive activities in LLCs and
partnerships) for couples with a taxable income over
$250,000, or $200,000 for singles. There is also an
additional 0.9 percent Medicare tax on wages and
self-employment income for those top earners.
top tax rates: The tax rate for couples with ordinary
income over $450,000 and singles earning over $400,000
rises to 39.6 percent. The tax rate on dividends for
these high earners goes up from 15 percent to 20
of exemptions and deductions: Itemized deductions are
cut up to 80 percent for joint filers making more than
$300,000 and individuals at $250,000. Personal
exemptions also are phased out at those income
thresholds and eliminated entirely at $425,000 for joint
returns and $375,000 for singles.
deductions: For taxpayers 65 or younger, the threshold
for medical deductions increases from 7 percent of
income to 10 percent.
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THE INTERNAL REVENUE SERVICE:
online: Federal tax forms, IRS publications and answers
to frequently asked questions are available at
tax questions: 800-829-1040 ext. 2, M-F 7 a.m.-7 p.m.
for tax information and assistance; for hearing impaired
TDD service, 800-829-4059.
tax questions: 800-829-4933 ext. 3, M-F 7 a.m.-7 p.m.
refunds: Go online to IRS.gov and click on "Where’s
my refund?" or call the IRS hotline at:
800-829-1954. You will need your Social Security or Tax
Identification number, the filing status you used on
your return and the refund amount listed on your tax
OF TAX SCAMS:
time is high season for scams as crooks try to take
advantage of people focused on their taxes. "Scams
can be sophisticated and take many different
forms," said IRS Commissioner John Koskinen.
"We urge people to protect themselves and use
caution when viewing emails, receiving telephone calls
or getting advice on tax issues."
are three common scams identified by the IRS:
theft. Someone steals your name, Social Security number
and other identifying information, then files a false
tax return in your name to claim a refund. Taxpayers who
believe they have been the victim of identity theft can
call the IRS Identity Protection Specialized Unit at
scams. Callers pretend they represent the IRS and tell
the taxpayer they owe the IRS money. If you think you
owe taxes, hang up and call the IRS at 800-829-1040. If
you know you don’t owe taxes, call the Treasury
Inspector General for Tax Administration at
800-366-4484. Also contact the Federal Trade Commission
complaint assistant at