Tax planning for 2013

Tom's take
At the end of 2012, there was a lot of shake up surrounding the “fiscal cliff” and members of Congress (on both sides of the aisle) and the president were overwhelmingly upset in front of the TV cameras about the issue…blah, blah, blah.  We’re deep into the third quarter of 2013 and in just six more months it’ll be your turn to be really upset. If you haven’t already run a 2013 tax projection based upon 2012 income, or had your CPA do so for you, it’s time to do so.  You may not be happy, but it’s better to find out now and have time to adjust your withholding and/or estimated taxes for the remainder of 2013 to soften the blow, rather than find out in March or April of next year when all you can do is yell at your CPA. I’ve been running these projections since February for all of my higher income clients, and the tax increases for physicians have been anywhere from 14 to 22 percent year-on-year (on the same data). 

There are six tax increases just off of the top of my head that can affect almost all taxpayers. Even though you are physicians by profession, you are all taxpayers to the IRS and Uncle Sam will be visiting to collect. The taxes are coming from all directions, but the first two items listed below are impacts from Obamacare:

tax planning 2013

The rules regarding the 3.8 percent increase on investment income are more complicated than you might think. You do not include income from S Corporations or from a trade or business in which you are actively involved, but you do include interest, dividends, annuities, royalties, rents and net gain from the disposition of non-business property. Like I said, this is a complicated provision and you may need help getting through this piece.

The itemized deduction phase-out can be very costly if you are disposed to give significant amounts to charity, pay significant home mortgage interest or pay state and local income and/or property taxes. The personal exemption is equal to $3,900 (in 2013), per exemption you claim, and all exemptions are lowered by two percent for each $2,500 of income above the above numbers. The larger your family, the larger the tax increase.

Although Obamacare insinuates there is marriage penalty relief, looking at the two rates presented above I don’t see the tax increases kicking in at twice the single rate for married couples filing a joint return…welcome to (Washington, D.C.) the land of double-speak. 

Agree or disagree with my political opinions, but please run your projection now to inform and protect yourself. Marc and I care about what happens to you. I wish I could say the same for the geniuses in Washington, D.C.  What say you, Marc?

mcguinnessTom McGuinness, CPA, CVA, is is one of the founding partners of Reimer, McGuinness & Associates, P.C. He can be reached at .

Marc's take
Tom, I agree 100 percent regarding the “early warning” provided by a tax projection using 2013 rates… in a lot of cases it won’t be pretty. Better to find out now, when taxes can be adjusted rather than April 10 when you either have to drain your savings or take out a loan to pay your tax bill. 

Another item that readers should be aware of, per your chart above, is the .9 percent additional FICA tax charged to taxpayers filing a joint return starting at $250,000. However, the tax code [Section 3101(b)(2)(a) to be specific] specifies that employers are to begin the additional withholding at $200,000 for each individual wage earner without regard to their spouse’s earnings. Some readers may already be seeing this additional tax deducted from their paychecks. If this happens to be you, that’s the “mystery” deduction.

Marc H LionMarc H. Lion, CPA, CFP, is the founding member of Lion & Co., CPAs LLP, an accounting and consulting firm. He can be reached at .

Reimer, McGuinness & Associates and Lion & Co. are both proud members of the National CPA Health Care Advisors Association (HCAA), a nationwide network of CPA firms devoted to serving the healthcare industry. Members provide proactive solutions to the accounting needs of physicians and physician groups. For more information contact the HCAA at .