Benjamin Franklin said two things are inevitable in life: death and taxes. But he forgot to mention the third: gridlock.
2013. It was a year that came and went and if you wondered what the heck happened, you joined the rest of us.
It started out with the second Obama administration and the announcement by the press of the death of the Republican Party. Then came Obamacare and the announcement by the press of the death of the Democratic Party. Somewhere in between the Tea Party died. If it wasn’t for gerrymandering, we might not have any parties.
I tried to come up with a great Obamacare joke but it didn’t work.
2013 was somewhere between the movies “All is Lost” and “Enough Said.”
Being sixty became the new forty. But twenty became the new sixty.
NSA, the National Security Agency, was discovered to be investigating “The Secret Life of Walter Mitty.” They heard that remakes can be dangerous.
Many Americans have come up with their own version of “The Hunger Games.”
The words “transparency” and “compromise” have been eliminated from the dictionary.
Goethe described “civilization… as a drunken man on a horse.” The modern version of this is Rob Ford walking through the Toronto City Hall .
41% of Americans believe that we have reached the “End of Time.” At the same time 41% of Americans have given up wearing watches.
In it’s great to be alive to enjoy this, Pope Francis and Miley Cyrus are finalists in Time Magazine’s “Person of the Year.”
Lincoln said, “that you can fool all of the people some of the time, but you can not fool all of the people all of the time.” Anthony Weiner added to this “but you can fool yourself all of the time.”
And then we have taxes. There’s the light fun side for those making under $200,000 and then dark side for those who make more. Ironically, it’s George Bush that has provided the bright fun side to the poor and the middle class. The tax cuts that happened during that administration has stayed on for those single people who make under $200,000 and those married couples who make under $250,000. Which does cause a 11th commandment.
Those “single” people who each make $200,000 shall not fall in love.
For those “lower” income people, they get to keep lower tax rates. From zero per cent to 28 per cent.
Personal exemptions. You get $3,900 a person. Up a hundred dollars from last year. One can now adopt an entire village in either Mexico or Canada and possible eliminate all your taxes.
The child tax credit for children under 17 stayed at $1,000. If you have a 17 year-old at home, you can throw them out.
The IRA has gone up too. The IRA can now be up to $5,500. And for those of you who have tried to avoid being 50, there’s no reason to do that now. There’s a catch-up provision that allows you deduct an extra $1,000.
In this season of gift giving, the annual gift tax exclusion is $14,000. There is a misnomer that the gift tax exclusion is helpful for everyone. Giving money away is not a tax deduction. Getting money as a gift is not income. So in this case it’s better to receive than to give.
For those people still under the Bush Tax Cut rules, Capital gains are from zero to 15 %.
Business mileage is now 56.5 cents a mile. Charity is still 14 cents a mile. This seems to be statement enough.
And now for those who get affected negatively by the new tax laws of 2013.
There is now a 39.6% top marginal tax rate for singles making $400,000 and married people making $450,000. There was once a 91% tax bracket but it was a tax system that allowed J. Paul Getty to make hundreds of millions of dollars a year but pay $600 in taxes. I do enjoy his museums.
Those people in the previous paragraph also now have a capital gains rate of 20%. It’s the same for qualifying dividends.
For those singles making $250,000 and married people making $300,000 they begin to lose their exemptions and deductions. The best way to fully understand this is by watching “Back to the Future.” Exemptions for children can fully disappear. This partially explains Bill Gates decision not to give his children an inheritance. The itemized deductions can be reduced by 80%.
There is also a new Medicare Tax for those singles making $200,000 and married people making $250,000. There is an additional .9% tax on income earned and a 3.8% on net investment income, which includes dividends, interest, rental income and capital gains.
Strategies to lower your taxes. STRATEGY ONE. Reduce income. Give back your raises. Consider contributing as much as you can to your 401(K) plan. If you’re self-employed, it may benefit you to set up a solo 401K. This gives you both a 401K and a SEP plan. You can put away up to as much as $51,000.
STRATEGY TWO. Manage capital gains and dividends. Minimizing capital gains is important to these taxpayers. They pay 20% taxes plus the 3.8%. California state tax can be as high as 12.3%. Take into account the tax consequences when you sell highly appreciated stock or land. You may consider selling securities that lost money to off-set the gains. If you end up with more capital losses than gains, you can use the losses to offset up to $3,000 a year.
STRATEGY THREE. Be more charitable. It begins at home and ends up on your tax return. You can send your IRA distribution to charity. You can donate appreciated stock to charity. You can declutter and give away clothes and furniture. The best group to contribute to is the National Council of Jewish Women. They will figure out how much everything you give away is worth. If you’re giving away a Picasso and it’s worth over $5,000, it has to be appraised.
STRATEGY FOUR. It may pay to prepay your property taxes, state estimated taxes, and business deductions before the end of 2013. All of this will however be subject to minimum tax and may not help you. Business deductions for the self-employed and businesses are always helpful.
ON December 11, 2013, EDWARD SNOWDEN LEAKED THIS NSA DOCUMENT ON L.A. TAX SERVICE.
It’s 31 years old. 96 in tax season years.
Dom Gelband, the office manager, was originally offered the job when she was a young child in Thailand. She signed an illegal lifetime contract.
Patty Alvarez, the mysterious and has never been given a title, is probably the most suspicious. She hides the business secrets behind a disarming sense of humor.
Nataliya Shur was born in Ukraine. She was the one who was responsible for getting rid of calling it “the” Ukraine. She is an expert of payroll and something suspiciously called Quickbooks. She also was the one that eliminated the space between Quick and Books. She is also the least likely to give up information under torture.
Viky Zelaya , their receptionist, speaks three languages. Don’t be fooled by her innocent smile. She is most likely to be recruited by a foreign tax service.
Natasha Shumakova is actually named Nataliya. NSA is currently looking into whether everyone worked at L.A. Tax Service is named Natiliya and have taken other names. Natasha also does Quickbooks. She works perfectly but something is suspiciously out of balance.
L.A. Tax Service has two of the founders own kids working for them. Aaron Rubenstein. E.A. has been working here three years and Beth Eisenstein CPA is in her second year. NSA is doing a DNA test on them. Neither child looks at all like their parents. And strangely enough, both of the children have a middle name of Nataliya.
Have a wonderful season, looking forward to seeing you in 2014.