2013 Year End Tax Planning Tips 


Dear Clients and Business Partners,

Please take the time to review important year end Tax Planning Tips for 2013 by clicking on the link below.

2013_Year_End_Tax_Planning.pdf


We believe its content will be interesting and valuable for you.  Should you have any questions please feel free to contact us by calling  412-904-2693 or emailing us at rgargani@globalatg.com.

With best regards

Global Advisory Tax Group

The U.S. Department of the Treasury and the Internal Revenue Service (IRS) today ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.

The ruling implements federal tax aspects of the June 26 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act.

Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions or similar formal relationships recognized under state law.

Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.

Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations.

Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011 and 2012. Some taxpayers may have special circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.

Additionally, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.   www.irs.gov

How to File a Claim for Refund

Global Advisory Tax Group is available to help you file a refund claim for income taxes, as well and gift and estate taxes.   Please contact us and we would be happy to assist.
rgargani@globalatg.com 
412-904-2693

The number of U.S. taxpayers renouncing citizenship or permanent-resident status surged to a record high in the second quarter, as new laws aimed at cracking down on overseas assets increase the cost of complying and the risk of a taxpayer misstep.

Taxpayers aren't required to explain the move, but experts said the recent rise is likely due to tougher laws and
enforcement. "The IRS crackdown on U.S. taxpayers living abroad seems to be having an effect," said Mr. Mitchel.
The IRS declined comment.
Lags in reporting renunciations might mean that many who appeared on the current list made the move months earlier. Taxpayers who renounced can be subject to an exit tax, and people who renounced last year may have avoided higher taxes on capital gains and income that went into effect in 2013. The U.S. is rare in that all income earned by citizens and permanent residents, even those living abroad, can be subject to U.S. tax, according to Bryan Skarlatos,
a New York lawyer. The U.S. also confers citizenship on people who are born on American soil.
The U.S. launched the tax crackdown after the terrorist attacks of Sept. 11, 2001, and ratcheted up its efforts after 2009, amid evidence that UBS and other foreign institutions helped U.S. taxpayers hide assets.
Some taxpayers have applied for IRS limited-amnesty programs, in which they pay stiff penalties for past noncompliance but avoid prosecution. Tax lawyers say the crackdown has ensnared smaller violators who weren't
intentionally evading U.S. taxes.
-NY Times 

FBAR v Form 8938
 
Although worldwide income must be reported on your tax return, it is legal to have money and/or assets overseas. Depending on the nature of the account or property abroad, it is important to understand the differences and requirements of each. U.S. citizens utilize IRS Form 8938 when reporting the ownership of specified foreign assets, and a FBAR (Foreign Bank Account Reporting TD F 90-22.1) for certain foreign bank accounts.
 
Form 8938 was designed to aid in tax administration, while the FBAR was designed to aid in law enforcement. The filing dates and administrative agencies are different but some of the required information may be the same.

The US Internal Revenue Service (IRS) has released frequently asked questions (FAQs) regarding the streamlined filing compliance procedures for non-resident, non-filer taxpayers, which went into effect on 1 September 2012.

The streamlined procedures were introduced to provide US taxpayers residing overseas, including dual citizens, who have not filed US federal income tax returns or Form TD F 90-22.1 (Report of Foreign Bank and Financial Accounts, FBAR) with an opportunity to comply with their tax requirements by filing their delinquent income tax returns for the past 3 years and filing their delinquent FBARs for the past 6 years.

The exemption amounts for the individual alternative minimum tax (AMT) have been increased for 2012 under the American Taxpayer Relief Act of 2012 (ATRA, H.R. 8) , which was signed into law on 2 January 2013. 

The AMT exemption amounts for 2012 are as follows:
Married individuals filing joint return ($78,750)
Unmarried individuals ($50,600)
Married individuals filing separate returns ($39,375) 

The fiscal cliff is otherwise known as the sharp decline in the budget deficit that could have occurred beginning in 2013 due to increased taxes and reduced spending as required by previously enacted laws. The fiscal cliff was largely eliminated by the eleventh-hour passage of the American Taxpayer Relief Act of 2012.
 
HIGHLIGHTS
 

• 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 Patch
• One-Year Extension of Many Business Tax Extenders

Why Keep Records?
 
There are many reasons that you may keep records. The top reasons include tax purposes, insurance, and for getting a loan. Good record keeping will also help you:
 

• Identify sources of income
• Keep track of expenses
• Keep track of the basis of property
• Prepare tax returns
• Support any and all items reported on tax returns.

The alternative minimum tax (AMT) was created in 1969 in an effort to ensure that wealthier Americans pay a minimum tax by preventing them from using credits, deductions and other shelters for tax avoidance purposes. The AMT is not indexed for inflation, so it needs to be updated, or "patched" every year.
 
Although the AMT was created for a specific purpose, its design and function is beginning to fail. For example, since tax bills of the rich are most likely over the AMT rates, the AMT has ceased to affect them. Instead, the inflation-adjusted AMT has begun to target 4 million to 5 million taxpayers with annual incomes between $200,000 and $1 million. Without an adjustment for inflation (or a "patch"), the AMT will possibly affect 28 million taxpayers this year, reaching deeply into the middle class – and increasing taxes for families it was never meant to reach.