On January 18, 2013, the US District Court for the District of Columbia ruled that the IRS has no authority to implement its Registered Tax Return Preparer (RTRP) program.  CPAs, attorneys, and enrolled agents are not affected because they already have education and continuing education requirements in order to acquire and maintain their licenses.  With its RTRP program, the IRS is attempting to require all tax return preparers to meet certain minimum standards, which include continuing education requirements. On February 1, the court modified its order to say that the IRS can still require all paid preparers to obtain a preparer tax identification number (PTIN).  The IRS can also continue testing and registering RTRPs on a voluntary basis.  Here are three pieces of advice based on our experience:  (1) ALWAYS use a CPA, an attorney, or an enrolled agent to prepare your tax returns, (2) check their licenses, (3) run away as fast as you can from any preparer who wants to charge you a contingency fee based on the size of your refund, and (4) run away as fast as you can from any preparer who wants you to sign a return saying it was "self prepared"; i.e., if you pay for the return, make sure the preparer's name and PTIN appear on the return!  

On January 1, Congress passed the American Taxpayer Relief Act of 2012 in an attempt to avoid the so-called fiscal cliff.  Here are some of the tax highlights from the new act:

·        Employees’ portion of Social Security tax is now back to 6.2% from 4.2%, which represents a 2% tax increase for every wage earner.  For example, someone who earns $50,000 in salary will pay $1,000 in additional tax.  (For 2013, Social Security tax is paid on wages up to $113,700.)

 

·        The Alternative Minimum Tax is now permanently patched and indexed for inflation.

 

·        Lower ordinary income, capital gains and dividend tax rates are permanently extended for individuals, heads of household, and married persons filing jointly, at income levels below $400,000, $425,000, and $450,000, respectively.  Taxpayers above those thresholds will pay 20% on capital gains and dividends and could pay 35% or 39.6% on ordinary income.  (Although not part of this act, remember also the 3.8% surtax imposed by the new healthcare legislation on some investment income for high income taxpayers, which is in addition to the aforementioned rates.)

 

·        The top estate tax rate moves up from 35% to 40%. 

 

·        The exclusion amounts for the estate, gift, and generation skipping taxes are now permanently unified at $5 million and indexed for inflation.

 

·        The estate tax portability of a deceased spouse’s unused exclusion amount has been made permanent, meaning, among other things, that bypass trusts will be used less frequently.

 

·        The exclusion from income of most home mortgage debt forgiveness has been extended until the end of 2013. 

  

This is an incomplete list!  Please call us with any other questions.