Trust Investment Income subject to Medicare Surcharge


The Health Care and Education Reconciliation Act of 2010 imposes a Medicare contribution tax of 3.8% on unearned income of individuals, estates, and trusts. The net investment income tax applies to most trusts and estates beginning January 1, 2013. Trusts that are treated as business entities, certain state-law trusts, tax-exempt trusts, and grantor trusts are exempt from the tax.


How does the Health Care Reform affect me?

05-26-2013Health Care

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (often to as “Obamacare” or “Health Care Reform”) was signed into law in March 2010. (The law was upheld as constitutional by the U.S. Supreme Court in June 2012.)

The primary purpose of the law is to extend health care to millions of uninsured Americans. Here is a summary of how it may affect you so you can prepare for the short- and long-term impacts before they occur.


How will the IRS know if I have medical insurance or not?

05-26-2013Health Care

A self-employed client asked how the Federal government and the IRS will know in 2014 if she was or was not covered by health insurance. She does not currently have coverage and was evaluating not making any changes. However, unless she told the IRS, how would the government know to assess a penalty?


What increases your chances for an IRS audit?

05-18-2013Tax Information

While there is no fool proof way to guarantee your income tax return will not result in an audit by the Internal Revenue Service, there are a few things that can help you avoid way about 1.5 million Americans experience.

A return can be flagged randomly in an IRS study of the behavior of similar taxpayers, such as those in the same profession. Audits often result from:


Tips for Students with Summer Jobs

05-17-2013Children & Students

If you are a student or have a student in your household starting a summer job, please remember:

1. Fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to figure how much federal income tax to withhold from workers’ paychecks. If the student did not pay income taxes last year and does not expect to make enough to pay this year ($4,000 is probably a safe estimate), the student can file as “EXEMPT” from taxes and not have any withholding.


Arizona Sales Tax Reduction coming June 1, 2013

05-01-2013Tax Information

The 1% Temporary Transaction Privilege Tax approved by Arizona voters in May 2010 will expire June 1, 2013. That means more money in your pocket.

New Considerations for Fixed Annuities


One of the questions at last night’s Panel of Professionals hosted by KFNN Radio 1510 asked if investors should be concerned private equity firms are beginning to purchase fixed annuity companies. Bloomberg Businessweek had a story on it this morning. Fifteen percent of the fixed annuity market is handled by Wall Street-backed insurers, so you (and regulators) should be concerned.


2014 Potential Income Tax Changes

04-20-2013Tax Information

The tax law is probably going to change in 2013 and chances are, most people will be paying more to the government. The Obama administration is advocating changes to Social Security and placing a heavier burden on those with higher incomes. Understandably, there is not agreement by our elected officials. As of mid-April, here are some of the current proposals that would affect 2014:


Will a Name Change Delay My Tax Refund?

02-26-2013Tax Information

If you recently changed your name (married or divorced), be sure to notify the Social Security Administration before you file your taxes with the IRS. If the name on your tax return does not match SSA records, the IRS will flag it as an error and that may delay your refund. This includes your dependents.

File Form SS-5, Application for a Social Security Card, (, by calling 800-772-1213) at your local SSA office or by mail with proof of your legal name change if:


Your Children can help you reduce your taxes

02-13-2013Tax Information

Your children may help you qualify for valuable tax benefits, such as certain credits and deductions. If you are a parent, here are eight benefits you shouldn’t miss when filing taxes.

  1. Dependents. In most cases, you can claim a child as a dependent even if your child was born anytime in 2012.
  2. Child Tax Credit. You may be able to claim the Child Tax Credit for each of your children that were under age 17 at the end of 2012. If you do not benefit from the full amount of the credit, you may be eligible for the Additional Child Tax Credit.
  3. Child and Dependent Care Credit. You may be able to claim this credit if you paid someone to care for your child or children under age 13, so that you could work or look for work.
  4. Earned Income Tax Credit. If you worked but earned less than $50,270 last year, you may qualify for EITC. If you have qualifying children, you may get up to $5,891 dollars extra back when you file a return and claim it.
  5. Adoption Credit. You may be able to take a tax credit for certain expenses you incurred to adopt a child.
  6. Higher education credits. If you paid higher education costs for yourself or another student who is an immediate family member, you may qualify for either the American Opportunity Credit or the Lifetime Learning Credit. Both credits may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000.
  7. Student loan interest. You may be able to deduct interest you paid on a qualified student loan, even if you do not itemize your deductions.
  8. Self-employed health insurance deduction. If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child. It applies to children under age 27 at the end of the year, even if not your dependent.

Identity Theft

02-12-2013Tax Information

Identity theft concerns:

  • Thieves normally file early in the tax-filing season, often before the IRS has received Forms W-2 or 1099, to thwart information matching and avoid receiving duplicate return notices from the IRS.
  • In 2011, the IRS processed about 145 million returns. About 109 million were claims for refunds, with an average refund amount of almost $3,000.
  • The IRS had pulled 2.6 million returns for possible identity theft, and that trend is on the increase.
  • Until recently, the IRS would hold suspicious refunds while verifying the underlying W-2 information, for up to 11 weeks. With the increase in the number of cases and budget limitations, refunds may take longer.
  • Identity theft typically starts when thieves (illegally) buy or steal information from individuals, employers, hospitals, or nursing homes. They also use the public list of deaths with SSNs issued by the Social Security Administration. With a number or list of numbers, they file false tax returns for refunds.

2013 Social Security Changes

02-05-2013Tax Information
  • Payroll tax cut ends. The temporary payroll tax cut was allowed to expire at the end of 2012. Workers who paid 4.2 percent of their income into the Social Security system in 2011 and 2012 will now resume contributing 6.2 percent of their earnings in 2013, up to the payroll tax cap of $113,700.
  • Higher Social Security Ceiling. The payroll tax cap increased by $3,600, from $110,100 in 2012 to $113,700 in 2013. Workers who earn more than this threshold don’t need to pay Social Security taxes on that income.
  • More online Social Security services. A trip to the Social Security office is no longer necessary to start your Social Security payments. A growing number of retirees are claiming Social Security payments online, workers can access their Social Security statements online, including their complete earnings history and expected payments, Social Security added online services including the ability to access a benefit verification letter and payment history, retirees can also change their address and start or change direct-deposit information online.

Simplified home-office deduction

02-05-2013Tax Information

On January 15, 2013, the IRS released Rev. Proc. 2013-13, which gives taxpayers an optional safe-harbor method to calculate the amount of the deduction for expenses for business use of a residence during the tax year under Sec. 280A, beginning with the current tax year. The highlights are:

  • Individual taxpayers who elect this method can deduct an amount determined by multiplying the allowable square footage by $5. The allowable square footage is the portion of the house used in a qualified business use, but not to exceed 300 square feet. The maximum a taxpayer can deduct annually under the safe harbor is $1,500.

Specified foreign financial assets postponed for one year

02-02-2013Tax Information

On January 23, 2013, the IRS announced that it is postponing for at least one year the requirement that domestic entities report interests in specified foreign financial assets. In Notice 2013-10, the IRS says that when it issues final regulations, they will apply no earlier than to tax years beginning after Dec. 31, 2012.

Sec. 6038D requires individuals to report interests in “specified foreign financial assets” (SFFAs) when filing their federal income tax returns. The IRS is also authorized under Sec. 6038D to apply the reporting requirement to any domestic entity that is formed or availed of principally to avoid reporting (a specified domestic entity). In December 2011, the IRS issued temporary and proposed regulations (T.D. 9567; REG-130302-10) on the Sec. 6038D reporting requirement. The proposed regulations set out conditions under which a domestic entity will be considered a specified domestic entity and, therefore, required to report SFFAs in which the entity holds an interest. They were proposed to apply to tax years beginning after Dec. 31, 2011.