Exam Alert: Investment tax to take effect next year

Effective January 1, 2013, investment income of people with gross adjusted income over a certain threshold will be subject to a 3.8% tax. The threshold is $200,000 for single filers and $250,000 for joint filers. Income from certain investments will not be subject to the tax. The tax applies to investment income that causes the gross adjusted income of the individual or couple to be in excess of the $200,000 or $250,000 threshold. Continue reading

Effective January 1, 2013, investment income of people with gross adjusted income over a certain threshold will be subject to a 3.8% tax.  The threshold is $200,000 for single filers and $250,000 for joint filers.  Income from certain investments will not be subject to the tax.  The tax applies to investment income that causes the gross adjusted income of the individual or couple to be in excess of the $200,000 or $250,000 threshold.

 

The income unaffected by the tax, according to the Wall Street Journal, includes:

-payouts from a regular or Roth IRA, 401(k) plan or pension

-Social Security income

-annuities that are part of a retirement plan

-life-insurance proceeds

-municipal-bond interest

-veterans’ benefits

-Schedule C income from businesses

-income from a business on which you are paying self-employment tax, such as a Subchapter S firm or a partnership

 

Income that is expected to be subject to the tax, according to the Wall Street Journal, includes:

-dividends

-rents

-royalties

-interest, except municipal-bond interest

-short- and long-term capital gains

-the taxable portion of annuity payments

-income from the sale of a principal home above the $250,000/$500,000 exclusion

-a net gain from the sale of a second home

-passive income from real estate and investments in which a taxpayer doesn’t materially participate, such as a partnership

 

For examples of how to calculate the tax, see the linked articles below.

 

Sources:

“Get Ready for the New Investment Tax” (Wall Street Journal)

“Medicare tax hikes: What the rich will pay” (CNN)

“About That Investment Tax…” (Wall Street Journal)

This alert applies to the Series 6, Series 7, Series 62, Series 82, Series 65, and Series 66.

Exam Alert: IRS publishes outline for Registered Tax Return Preparer exam

If you prepare tax returns, no doubt you have heard about the upcoming IRS Registered Tax Return Preparer exam requirements. This new exam will focus on Continue reading

If you prepare tax returns, no doubt you have heard about the upcoming IRS Registered Tax Return Preparer exam requirements. This new exam will focus on the completion of Form 1040 series and ethical responsibilities of tax preparers. The IRS recently published an outline that shows what applicants will need to study to pass the exam.  It is divided up into seven domains:

  1. Preliminary work and collection of taxpayer data (15% of the exam)
  2. Treatment of income and assets (22% of the exam)
  3. Deductions and credits (22% of the exam)
  4. Other taxes (11% of the exam))
  5. Completion of the filing process (10% of the exam)
  6. Practices and procedures (5% of the exam)
  7. Ethics (15% of the exam)

The IRS will begin requiring this exam in October 2011, although if you have a PTIN before then, you have until December 31, 2013 to take the test. Additionally, certain tax preparers are exempt from this exam requirement. This includes attorneys, CPAs, enrolled agents and those supervised by any of the former categories. Details for this exam are still being ironed out. However, the IRS has indicated that the exam will be approximately 120 questions and will last between 2-3 hours.

Solomon Exam Prep is working on materials to help you prepare for this important new test. If you would like to be updated on our progress with materials for this exam, please join our mailing list by clicking here.

Exam Alert: IRS requires broker-dealers and mutual funds to report cost basis of stocks

Effective January 1, 2011, the IRS requires that when broker-dealers and mutual funds purchase stocks, the cost basis of the stocks must be reported to Continue reading

Effective January 1, 2011, the IRS requires that when broker-dealers and mutual funds purchase stocks, the cost basis of the stocks must be reported to the IRS and to investors.  In 2011, this reporting requirement only applies to most stocks, while in 2012 and beyond, the requirement will apply to all stocks.  In 2011, the rule will not apply to mutual fund shares and shares purchased via dividend reinvestment plans. Relevant to the Series 6, Series 7, Series 62, Series 65, and Series 66 exams.

IRS news release: http://www.irs.gov/newsroom/article/0,,id=228907,00.html

Analysis by the Securities Technology Monitor: http://www.securitiestechnologymonitor.com/photo_gallery/1_36/27400-1.html

IRS Pension Plan Limits for 2010

Deflation notwithstanding, the IRS has announced that in 2010 the maximum contribution to a 401 (k) and other defined contribution plans will stay Continue reading

Deflation notwithstanding, the IRS has announced that in 2010 the maximum contribution to a 401 (k) and other defined contribution plans will stay the same. Defined benefit limits will also stay the same. See IRS announcement