Interest Rates Remain the Same, Fourth Quarter of 2013

Interest Rates Remain the Same for the Fourth Quarter of 2013

IR-2013-74, Sept. 5, 2013

WASHINGTON — The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Oct. 1, 2013. The rates will be:

• three (3) percent for overpayments [two (2) percent in the case of a corporation];
• three (3) percent for underpayments;
• five (5) percent for large corporate underpayments; and
• one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.
The interest rates announced today are computed from the federal short-term rate determined during July 2013 to take effect Aug. 1, 2013, based on daily compounding.
Revenue Ruling 2013-16 was also released today and will appear in the Internal Revenue Bulletin 2013-40 dated Sept. 30, 2013.

Seminar descriptions for IRS Tax Forum now available

Orlando, FL July 9-11 Grapevine, TX (Dallas Area)July 30- August 1 New Orleans, LA August 13-15 Atlanta, GA August 20-22 National Harbor, MD (Washington DC Area)August 27-29 San Diego, CA September 17-19 Quick Links IRS Tax Forums Home Seminars Hotel Information FAQ Exhibitor Home CPE and CFP Certifications IRS Tax Forums Online Seminar descriptions are now available! The 2013 IRS Nationwide Tax Forums are coming to a city near you. Join your colleagues and IRS representatives for three days of seminars, hands-on workshops, networking, and exhibits of the newest products and services of the industry. View seminars such as the Overview of 2013 Tax Law Changes, Tax Provisions of the Affordable Care Act, and more. You may earn up to 18 CPE credits in one location. Reserve your room now to take advantage of the convenience of staying in the forum hotel. For exhibiting and sponsorship opportunities contact us at expo@irstaxforum.com. For questions contact us at info@irstaxforum.com. IRS Nationwide Tax Forum Registration Team Phone: (202) 495-2919 Fax: (202) 403-3871 info@irstaxforum.com

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2013 IRS Facts about Dependents and Exemptions

 

A tax client sent in her taxes to be completed.  She was planning on filing Single, as usual for the past several years.  Through our conversation, I learned that her son was not working, and was living at home for the past 14 moths.  He had finally decided to interview for the military since there were no job possibilities.  I then informed her that because her son was living at home, and she had provided more than half of his sport for the year, that she could claim her son as a dependent.  She was ecstatic, because this increased her refund, 10 fold. 

The information below from the IRS can help you better understand the tax codes when it comes to Exemptions and Dependents, which can make a big difference on your tax return.
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While each individual tax return is unique, there are some tax rules that affect every person who files a federal income tax return. These rules involve dependents and exemptions. The IRS has six important facts about dependents and exemptions that will help you file your 2012 tax return.

1. Exemptions reduce taxable income. There are two types of exemptions: personal exemptions and exemptions for dependents. You can deduct $3,800 for each exemption you claim on your 2012 tax return.

 

2. Personal exemptions. You usually may claim one exemption for yourself on your tax return. You also can claim one for your spouse if you are married and file a joint return. If you and your spouse file separate returns, you may claim the exemption for your spouse only if he or she had no gross income, is not filing a joint return and was not the dependent of another taxpayer.

 

3. Exemptions for dependents. Generally, you can claim an exemption for each of your dependents. A dependent is either your qualifying child or qualifying relative. If you are married, you may not claim your spouse as your dependent. You must list the Social Security Number of each dependent you claim on your return. See Publication 501, Exemptions, Standard Deduction, and Filing Information, for information about dependents who do not have Social Security numbers.

 

4. Some people do not qualify as dependents. While there are some exceptions, you generally may not claim a married person as a dependent if they file a joint return with their spouse.

 

5. Dependents may have to file. If you can claim someone else as your dependent on your tax return, that person may still be required to file his or her own tax return. Whether they must file a return depends on several factors, including the amount of their gross income (both earned and unearned income), their marital status and any special taxes they owe.

 

6. Dependents can’t claim a personal exemption. If you can claim another person as a dependent on your tax return, that person may not claim a personal exemption on his or her own tax return. This is true even if you do not actually claim that person as your dependent on your tax return. The fact that you could claim that person disqualifies them from claiming a personal exemption.

 

Remember that a person must meet several tests in order for you to claim them as your dependent. See Publication 501 for the tests you will use to determine if you can claim a person as your dependent.

Social Security Changes for 2013, Higher Earning Limits Before Being Taxed

The biggest news in this latest line up of Social Security changes has to do with the ability for seniors or retired persons to earn more money before being taxed.

The Social Security Administration has implemented a variety of new rules and features for 2013. The two-year payroll tax cut has officially ended, and paper Social Security checks will soon cease to be printed. A growing number of Social Security services will also be online this year. Here's a look at some of the recent Social Security changes that go into effect this year:

1. 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.

2. Higher payroll tax cap. 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.

3. More online 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, largely thanks to an advertising campaign starring actors Patty Duke and George Takei. For the first time in 2012, workers could access their Social Security statements online, including their complete earnings history and expected payments, and about 3 million people have already done so.

In early 2013, 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. "The ability to do this online, it will be a real convenience for the people who are required to have these benefit verification letters," says Social Security Commissioner Michael Astrue. "It is going to allow us to focus on the kind of conversations that we really do need to have face to face."

4. Reduced office hours. Social Security offices are reducing the hours they are open to the public to save money and avoid paying overtime to workers. Social Security locations nationwide have been closing 30 minutes early each day since Nov. 19, 2012, and they began closing to the public at noon every Wednesday on Jan. 2.

5. Paper checks will end. On March 1, the Treasury department will stop mailing paper checks to Social Security recipients. Retirees will be required to choose to have their Social Security payments either directly deposited into a bank or credit union account or loaded onto a prepaid Direct Express Debit MasterCard. "If you already have a bank account or credit union account, we encourage you and it's our preference that you sign up for direct deposit," says Walt Henderson, director of the electronic fund transfer strategy division at the Treasury Department. "The debit card is primarily for unbanked benefit recipients. We don't want people who already have a bank account to feel that they have to get the debit card." New Social Security beneficiaries have been required to choose an electronic payment option since May 2011, and approximately 93 percent of Social Security and Supplemental Security Income (SSI) payments are already being made electronically.

6. Higher earnings limit. People between ages 62 and 66 who work and collect Social Security benefits at the same time might have part or all of their Social Security benefit temporarily withheld. Workers between ages 62 and 65 can earn up to $15,120 in 2013, after which $1 in benefits will be withheld for every $2 of income above the earnings limit. People who turn 66 this year can earn up to $40,080, and then $1 of benefits will be withheld for every $3 earned above the limit. However, once you turn age 66, the earnings limit no longer applies. And benefits may be recalculated at age 66 to reflect the withheld benefits and continued earnings.

7. Bigger payments. Social Security beneficiaries began receiving payments that were 1.7 percent larger in January. The average monthly Social Security benefit in January increased from $1,240 to $1,261 as a result of the cost-of-living adjustment.

IRS RELEASED ANNUAL INFLATION ADJUSTMENTS FOR 2013

OK people, the numbers are in.  The vote is still out on reaction to these numbers, check them out and see what you think.  It is clear we as taxpayers are going to have to share more of a tax burden in the coming decade.  If you will notice this informatin is being presented as "inflation adjustments" not as new tax laws, I guess it all how you look at it.


The Internal Revenue Service has released the annual inflation adjustments for 2013, including the tax rate schedules and other tax changes from the recently enacted fiscal cliff legislation with its new tax rate of 39.6 percent and permanently patched Alternative Minimum Tax.

 

Revenue Procedure 2013-15 provides the 2013 cost-of-living adjustments for inflation for certain items, including the tax tables. It also includes items whose values were specified in the American Taxpayer Relief Act of 2012 (ATRA), such as the beginning of the 39.6 percent income tax brackets; the beginning income levels for the limitation on certain itemized deductions, and the beginning income levels for the phaseout of the personal exemptions.

In addition Rev. Proc. 2013-5 modifies Rev. Proc. 2011-52 to reflect an amendment to Section 132(f)(2) made by ATRA concerning qualified transportation fringe benefits. Specifically, for 2012, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $240.

The tax items for 2013 of greatest interest to most taxpayers include the following changes.

• Beginning in tax year 2013 (generally for tax returns filed in 2014), a new tax rate of 39.6 percent has been added for individuals whose income exceeds $400,000 ($450,000 for married taxpayers filing a joint return). The other marginal rates—10, 15, 25, 28, 33 and 35 percent—remain the same as in prior years. The guidance contains the taxable income thresholds for each of the marginal rates.

• The standard deduction rises to $6,100 ($12,200 for married couples filing jointly), up from $5,950 ($11,900 for married couples filing jointly) for tax year 2012.

• The American Taxpayer Relief Act of 2012 added a limitation for itemized deductions claimed on 2013 returns of individuals with incomes of $250,000 or more ($300,000 for married couples filing jointly).

• The personal exemption rises to $3,900, up from the 2012 exemption of $3,800. However beginning in 2013, the exemption is subject to a phase-out that begins with adjusted gross incomes of $150,000 ($300,000 for married couples filing jointly). It phases out completely at $211,250 ($422,500 for married couples filing jointly.)

• The Alternative Minimum Tax exemption amount for tax year 2013 is $51,900 ($80,800, for married couples filing jointly), set by the American Taxpayer Relief Act of 2012, which indexes future amounts for inflation. The 2012 exemption amount was $50,600 ($78,750 for married couples filing jointly).

• The maximum Earned Income Credit amount is $6,044 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $5,891 for tax year 2012.

• Estates of decedents who die during 2013 have a basic exclusion amount of $5,250,000, up from a total of $5,120,000 for estates of decedents who died in 2012.

• For tax year 2013, the monthly limitation regarding the aggregate fringe benefit exclusion amount for transit passes and transportation in a commuter highway vehicle is $245, up from $240 for tax year 2012 (the legislation provided a retroactive increase from the $125 limit that had been in place).

Details on the inflation adjustments and others are contained in Revenue Procedure 2013-15, which will be published in Internal Revenue Bulletin 2013-5 on Jan.28, 2013. Other inflation-adjusted items were published in October 2012 in Revenue Procedure 2012-41.

TEN TAX ISSUES WHICH COULD HAPPEN BY JAN 1, 2013

The reason that I have taken to time to list the 10 changes which could occur if certain decisions are NOT made in Washington, is because, I am willing to bet you that within the next four years, all or most of these changes will be implemented, one way or another.Here are 10 ways your money could be affected if there is no deal reached by the end of the year
:

1. Your Income Tax Rates Will Go Up The expiration of the Bush-era tax cuts on Dec. 31 means nearly every American taxpayer will see their rates go up when the rates go back to their 2001 levels. President Obama’s plan to avert the cliff includes keeping the current rates for middle- and low-income earners, while allowing the rates to increase for the highest income levels from 35 to 39.6 percent. Republicans have pushed to keep the tax cuts for everyone.
2. Your 2012 Tax Bill Will Be Huge As many as 28 million Americans are about to be slammed with the alternative minimum tax because a "patch" to adjust the AMT for inflation will not go into effect unless Congress acts. For middle-class households with kids and earning around $75,000, the AMT will add $3,700 on average to the tax bill for 2012 alone.


3. Your Paycheck Will Be Smaller The first paycheck of the year is going to be smaller for up to 125 million Americans after the Social Security payroll tax holiday expires on Dec. 31, raising the rate from 4.2 to 6.2 percent.


4. Your Tax Refund Will Be Delayed The Internal Revenue Service has said that without a deal by Dec. 31, tax refunds could be delayed for as many as 100 million taxpayers as the government agency scrambles to revise tax forms to reflect the changes post-cliff.


5. Your Kids Will Cost You More Money Among the tax credits that expire on Dec. 31 are several that help lower- and middle-income families with kids, including the Child Tax Credit, Earned Income Tax Credit, Child and Dependent Care Credit, and the American Opportunity Credit. All four revert to lower levels on Jan. 1, which could cost families hundreds to thousands of dollars in lost tax credits, according to CNN Money.


6. You Cannot Collect Extended Unemployment As many 2 million unemployed Americans won’t be able to collect extended benefits after Jan. 1, when the federal government’s unemployment extension ends as part of automatic spending cuts.


7. Your Stocks Could Wobble The stock market tumbled on Thursday after Senate Majority Leader Harry Reid (D-Nev.) said it looked like the the country was going to go over the fiscal cliff. Uncertainty over taxes could create more market volatility, experts say, but there is a silver lining: The Fed has promised to keep interest rates low for the next year, and that could help stabilize the economy overall.


8. If You Use Medicare, It Will Be Harder To Find A Doctor One of the spending cuts that will be enacted on Jan. 1 is a 30 percent reduction in the rates Medicare pays doctors. According to physicians' groups, the pending change has already sent doctors fleeing some health care plans, Forbes reported.


9. Finding A New Job Will Be More Difficult Mandatory spending cuts slated to start on Jan. 1 will cut into government jobs and jobs dependent on federal contracts. One report from George Mason University estimated that the cuts could cost 2.14 million jobs, the Christian Science Monitor reported.


10. High Earners Will Pay New Taxes For Obamacare High-earning taxpayers will pay a new 3.8 percent tax hike on net investment income, including income from interest, dividends, capital gains, rental and royalty income. Much of that same income group is also subject to a new .9 percent increase in Medicare taxes. These tax hikes are part of the Affordable Care Act and go into effect on Jan. 1.