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Taxpayers, especially high earners, should note a number of tax changes
Due to the partial government shutdown in 2013, tax season will begin somewhat later this year. Filers will be able to begin sending their returns January 31, about a week and a half later than the originally planned start date. As always, taxpayers have until April 15 to file.
For early filers, the delay might not be such a bad thing, as there are a number of changes for the 2013 tax season that may need to be addressed. Failure to take notice of these changes could put filers at risk of an IRS tax audit and a potential tax penalty.
Rates have gone up and new taxes have been imposed for some filers
Some of the most significant changes for this filing season are for high income individuals. While the Bush-era tax cuts were made permanent for most income brackets, the top marginal rate for high earners returned to 39.6 percent (it had been 35 percent). This rate applies to single filers earning in excess of $400,000, married couples filing jointly with incomes exceeding $450,000 and head of household filers with more than $425,000 in earnings. The tax on long-term capital gains as well as qualified dividends for these filers also went up, from 15 percent to 20 percent.
In addition to the increased marginal tax rate and capital gains rate, high earners will be subject to a handful of new taxes. Medicare tax applies to all wages, but those who make more than $200,000 – or $250,000 for married couples filing jointly – will now also have to pay a Medicare surtax. The Net Investment Income Tax is another new tax applied to interest, dividends, rents, royalties, annuities and other types of investment income for those with adjusted gross incomes in excess of $125,000 ($250,000 for married couples).
Another change for 2013 is a limit on the range of itemized deductions available to those with higher incomes. Similarly, personal exemptions begin to phase out for earners at higher incomes.
Contact a tax attorney if you are concerned over an audit
This is merely an overview of some of the most significant tax changes for this filing season; the tax code has become wildly complicated, and there are a number of other provisions that may affect you depending on your individual circumstances. To put it in perspective, there were 55 tax breaks that expired at the end of 2013, more than one for every week of the year – and this in a year in which no truly broad changes to the tax code were considered to have been implemented. When Congress meets in 2014, things could change even more dramatically.
For any taxpayer, the complexity of the tax code means it can be easy to make mistakes. This is particularly true for high income individuals, who must navigate more complex tax requirements and are more likely to be audited. If you are facing an audit or are worried that you could soon be in the sights of the IRS, be proactive: get in touch with an experienced tax attorney and get the sound advice you need to take care of any tax issues you may be facing.