How much you like your CPA often depends on how much you end up owing the IRS on April 15. CPAs across the United States are bracing for drops in their approval ratings this spring because of a series of tax changes that will cause many high-income taxpayers to owe more than they did in 2012. See our article, Small Tax Changes for 2013 Could Cost You Big.
Here’s a list of the Top 10 reasons why you might hate your CPA this spring:
Your itemized deductions will be lowered if your income is more than $250,000 for individuals and $300,000 for married couples.
You are in the new 39.6% bracket (> $400,000 individual; > $450,000 married) and one spouse earns much less than the other. In this case, the lower-earning spouse might have taxes withheld during the year at the lower rate, but the income will ultimately be taxed at the higher rate. For example, if the lower-earning spouse has $100,000 of wages, the amount withheld from paychecks (25%, or $25,000) will fall short of the year-end tax bill (39.6%, or $39,600) by $14,600.
You and your spouse each earn $200,000 in wages, so the additional Medicare tax of 0.9% was not withheld. Your combined $400,000 of earnings will be subject to $1,350 of additional Medicare tax in April.
Your investment income is taxed at 3.8% more than in 2012 if your income exceeds $200,000 single or $250,000 married.
Your capital gains and dividends are taxed at 8.8% more than in 2012 if your income exceeds $400,000 single or $450,000 married.
The state of Illinois continues to expect you to pay a “use-tax” for items you bought outside of Illinois and didn’t pay any sales tax on.
Personal exemptions, which are worth $3,900 per member of your household, are phased out if your income exceeds $250,000 single; $300,000 married.
Your accountant tells you: “Good news! The loss of the personal exemptions mentioned in No. 7 doesn’t apply to you because you’re in the AMT. Bad news! You’re still in the AMT.”
Your CPA didn’t warn you about the new taxes for 2013 and didn’t send you a handy newsletter explaining how those taxes work. Also, your CPA didn’t offer to run projections of your numbers this fall so you could begin preparing for the bigger tax bill next April.
Your CPA will brag about how he will take every Friday off from April 15 to Labor Day.
At Eilts & Associates, we are doing our best to make sure our clients don’t hate us this spring. Although we can’t change the tax laws, we can educate our clients about the changes and help them prepare for April 15. To learn more about how the new tax laws could affect you, contact us at 773.252.6171 or firstname.lastname@example.org.