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IRS Rules: .9% Additional Medicare Tax In 2013

With Obamacare kicking into to full speed here in 2013, last week I blogged about the 0% long-term capital gains tax. With so many different tax law changes happening, my fear is some tax-payers aren’t planning correctly and will get stung with an extra bill come tax time. For those individual filers who make more than $200,000 modified adjusted gross income (MAGI) and married couples making more than $250,000 MAGI, it is really important to understand how the additional .9% Medicare Tax will be collected here in 2013. Will your payroll company do this for you? Will you have to do it yourself? Is there a special form to fill out this year? Here it is straight from the IRS Website- BTW, this was about 46 different questions and answers, but I trimmed down the key items for you. (Source for all questions: www.irs.gov) When does Additional Medicare Tax start? Additional Medicare Tax applies to wages and compensation above a ...

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Can You Pay 0% Capital Gains Tax?

Most of us have heard through the major media outlets how tax law changes will adversely affect our overall income taxes here in 2013. It doesn’t take a rocket scientist to realize that when your expenses consistently exceed your revenue, cost cutting alone won’t improve your bottom line. This means that raising various types of taxes will definitely be one strategy to increase revenue in order to pay off the massive U.S. debt. The American Taxpayer Relief Act (ATRA) of 2012 was passed by Congress on January 1st, 2013 and was only a partial resolution to the fiscal cliff; just wait until fiscal cliff part II which will look more like ‘Hangover Part II’, Mike Tyson tattoo and all. While the ATRA did impose more taxes on the upper end of the scale and raised capital gains taxes on the very upper end of the income brackets, there is a unique opportunity for many Americans to look at their overall ...

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Your Taxes Will Go Up If Earn Less Than $250,000

I watched the second half of the State of the Union last week.   Needless to say that after listening to the program and then all of the commentary after, it confirmed in my head how far out of touch our current administration is with reality.   Maybe a better way to put it is that they are in touch with how to wordsmith conversations as many politicians do with their campaign speeches.    To lead the public on that there will be no tax increases if they make less than $250,000 . . . well I guess it can be done if you want to defy centuries of simple accounting principles. Let’s be clear first all that what the current administration is talking about when they say there will be no tax increases is INCOME TAX.    Income tax is only one form of tax that generates revenue.    Let’s list below just some of the kind of taxes that you could pay as ...

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Should You Sell Your Business Now?

If you have owned a business for a long period of time and were considering selling, 2012 may be year for you find a buyer to take over your shop.   The Presidential election and many open tax patches/increases loom on the horizon in 2013 which could alter tax rates substantially.   2012 could actually prove to be a much more a favorable year to play let’s make a deal for your business.  Here are four reasons to consider selling your business now. 1.) Historically low capital gain rates –   Currently, we have long term capital gain rate of 15% on most items.    It has been very uncertain where this rate will head in 2012, but 20% at a minimum has been the number thrown about over the past year.    If that occurs in 2013, it will represent a 33.33% increase in your capital gains tax.   The Government will spin it as if it is only a 5% increase, but in really ...

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Personal Finance 101 – Who Buys The Business?

Part of any good business plan is an exit strategy if the unexpected happens.  A good Buy-Sell Agreement should anticipate certain unfortunate but foreseeable events, and make sure a plan is in place that is fair and reasonable for the owners and the business itself.  One important detail to include in any Buy-Sell Agreement is: Who has the right to buy an owner’s interest after a triggering event occurs?  There are a few main options discussed below. Redemption. In a Buy-Sell Agreement using the Redemption structure, the business agrees to purchase (“redeem”) the interest of an owner after a triggering event.  The owner agrees that he, or his estate, will sell the business interest back to the business for the agreed price.  The main advantage of the Redemption approach is that it is usually the simplest form of buy-sell transaction, and when there are many owners involved, the simplest structure can sometimes be the best. However, there are certain key ...

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Tax advice or Investment advice- Which will be more important?

It doesn’t take a financial expert to recognize The United States Government cannot keep spending money at the current rate.  I don’t care whether you are a Republican or Democrat, we have spent ourselves into a problem and it’s time to pay the piper.  The question becomes with tax increases a foregone conclusion, which will be more important to you over the next 25 years, how well manage your assets or how well you manage your taxes. For those of you reading this that think taxes surely can’t impact me that much, consider the following – if you double a dollar per day for 20 years you will have a little over 1 million dollars.  Take the same dollar and apply a 28% tax before you double it each time and you will be left with just over $50,000.  Ouch!  Consider the following tax increase next year alone! Capital Gains tax rates will be increasing 33% Tax on Dividend income ...

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