Monthly Archives: January 2015

Details of the President’s State of the Union Tax Proposals

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

President Barack Obama used Tuesday’s State of the Union address to announce that he will propose tax increases for higher-income individuals and provide tax relief for middle-class taxpayers. Ahead of the speech, the White House provided details of what the president plans to propose, which it characterized as simplifying the Internal Revenue Code, eliminating loopholes, and helping “middle class families get ahead and grow the economy.”

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Specific proposals on the president’s wish list include:

  • Eliminate the step-up in basis for assets that are transferred at death, treating transfers at death as realization events for capital gains tax purposes;
  • Raise the top tax rate on capital gains and dividends to 28%, which would be imposed on taxpayers with incomes over about $500,000;
  • Impose a 7-basis-point fee on the liabilities of large financial institutions to discourage “excessive borrowing”;
  • Create a $500 second-earner tax credit for families in which both spouses work (5% of the first $10,000 of the lower-earning spouse’s income; credit would phase out for couples with incomes between $120,000 and $210,000);
  • Modify various child care tax incentives, including increasing the earned income tax credit (EITC) for childless taxpayers, increasing the EITC phaseout level, making permanent EITC increases that are scheduled to expire after 2017, tripling the maximum child and dependent care credit and making the income cutoff $120,000, and eliminating child care flexible spending accounts;
  • Consolidate and expand education tax benefits, including making the American opportunity tax credit permanent and folding the lifetime learning credit into it, increase the refundable portion to $1,500, and make it available to more students; and
  • Reform retirement tax incentives, including automatically enrolling workers in IRAs, requiring employers to allow more part-time workers to participate in their retirement plans, and providing a cap of about $3.4 million in an IRA.

The White House did not provide a timeline for when legislation embodying these proposals would be introduced. Since both houses of Congress are now controlled by Republicans, any proposal by the president will face a steep uphill climb.

Article: The Tax Advisor

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Tax email gets 2015 taxes wrong

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

Tax filing season doesn’t officially open until Jan. 20, but tax-savvy folks are getting ready now. Unfortunately, some of them are starting off the 2015 tax year with erroneous information.

They got an email detailing all the tax changes that supposedly took effect Jan. 1. That mailing, however, got many of its dire tax warnings all or partially wrong. And the information that is correct is incomplete in most instances.

© Goodluz/Shutterstock.com

In case you didn’t get the email, or it went directly to your spam folder, it’s full of tax rate hike announcements. Recipients are told to look out for higher taxes in connection with Medicare and other payroll taxes, capital gains and other investment earnings, and the final estates that folks leave behind.

The biggest problem with this mailing, note analysts with Tampa Bay Times Politifact.com, is that it’s a recycled version of an email circulated last year about purported Jan. 1, 2014, tax hikes. Back then, the fact-checking website gave the mailing its totally untrue, “Pants on Fire” rating.

It gets the same ignominious ranking this year.

Wrong rates, incomplete information

While some of the tax rates included in the email are correct, the mailing presents them as affecting every filer. They don’t.

Most of the tax increases over the last few years will be felt only by wealthier individuals.

Another clue that there’s a problem with the mailing is its definite political perspective. “These taxes were all passed only with democrat votes, no republicans voted for these taxes. These taxes were all passed under the Affordable Care Act, aka Obamacare,” according to the email.

You don’t have to like Democrats or, for that matter, Republicans. And you’re very welcome to your thoughts about the new health care law. But if you spread wrong information about any of those folks or matters, then expect to get called out.

Changes made years ago

The taxes cited in this latest email actually were changed on Jan. 2, 2013, when the American Taxpayer Relief Act became law. You probably remember it as the “fiscal cliff” deal that passed with bipartisan support.

And while there are some tax changes under Obamacare, most of the incorrect taxes listed in the email have nothing to do with the health care law.

This latest tax email made some minor changes to its original version, but, says Politifact, is still “so riddled with errors — and gets so few things correct” that it, too, is determined to be “Pants on Fire.”

Article Credit: BankRate.com

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Social Security and Medicare Amounts for 2015

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

The annual inflation adjustments have also impacted the various Social Security amounts and thresholds for 2015.

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The Social Security wage base, for computing the Social Security tax (OASDI only), increases to $118,500 in 2015, up from $117,000 for 2014. There is no taxable earnings limit for Medicare (HI only) contributions. However, there is a 0.9% Medicare surtax that is imposed on wages and self-employment (SE) income in excess of the modified adjusted gross income (MAGI) threshold amounts of $250,000 for joint filers, $125,000 for married separate filers, and $200,000 for all other taxpayers. The MAGI thresholds are not adjusted for inflation. The surtax does not apply to the employer portion of the tax.

For Social Security beneficiaries under the full retirement age, the annual exempt amount increases to $15,720 in 2015, up from $15,480 in 2014. These beneficiaries will be subject to a $1 reduction in benefits for each $2 they earn in excess of $15,720 in 2015. However, in the year beneficiaries reach their full retirement age (FRA), earnings above a different annual exemption amount ($41,880 in 2015, up from $41,400 in 2014) are subject to $1 reduction in benefits for each $3 earned over this exempt amount. Social Security benefits are not reduced by earned income beginning with the month the beneficiary reaches FRA. But remember, Social Security benefits received may be subject to federal income tax.

The Social Security Administration estimates the average retired worker will receive $1,328 monthly in 2015. The average monthly benefit for an aged couple where both are receiving monthly benefits is $2,176. These amounts reflect a 1.7% cost of living adjustment (COLA). The maximum 2015 Social Security benefit for a worker retiring at FRA is $2,663 per month, up from $2,642 in 2014.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.