December 13, 2013
Joseph Perry, Partner-in-Charge, Tax & Business Services, Quoted in The New York Times Article "For Top Earners, a Bigger Tax Bite This Year"
By Paul Sullivan
LESS than a year ago, people were worried about a variety of tax increases in 2013, from income and investment taxes going up to the exemption on estate and gift taxes going down. This year, without any last-minute negotiation around major tax policy, people are far less focused on taxes, and that has accountants and tax lawyers worried.
Joe Perry, partner in charge of tax and business services at Marcum, took his analysis a step further. He looked at his firm’s 1,200 individual clients who made more than $400,000 a year — the threshold for all the highest rates, new taxes and reduced deductions to kick in. He calculated that they were looking at paying 7 percent more this year, but then he translated that into a real number: It equated to $250 million more.
|Joseph Perry, a partner in charge of tax services at Marcum, said he thought his clients were “going to be shocked” when they saw what they owed in taxes.|
“People will focus on the percentages until they see what that dollar amount is and then they’re going to be shocked,” Mr. Perry said.
While most of these clients have been paying estimated taxes throughout the year, most have been paying the minimum to avoid incurring a penalty, he said. Like other accountants, he is concerned that come tax day these people are going to have a bill that will not just shock them but may cause some to scramble to come up with the money.
In other words, 2013 should be a more stressful time for tax planning than it has been.
There are several planning considerations for people, particularly those on the cusp of various tax increases and deduction limitations.
The biggest is to understand how the new Medicare taxes are going to affect them. But several popular deductions are also set to end, and there are lingering opportunities with the new estate and gift tax exemption.
First things first: People need to understand what their tax risks are as they move up the income ladder. Individuals earning more than $200,000 a year and couples earning more than $250,000 are subject to a 0.9 percent Medicare tax on their wages; those are the same income levels for the 3.8 percent Medicare tax on investment income. (The law applies the surtax to the lower of either the modified adjusted gross income or net investment income.)
Itemized deductions will be reduced for individuals earning more than $250,000 and couples earning more than $300,000 a year. People making more than $400,000 a year and couples making over $450,000 will face the highest marginal taxes on income (39.6 percent) and capital gains (20 percent) in addition to the 3.8 percent Medicare surtax. At that point, taxpayers even lose their personal exemption — the $3,900 deduction people and their dependents get just for being alive.Click here to view full article on www.nytimes.com >>