atreasure, Author at Whalen & Company, CPAs

The new 0.9% Medicare tax: Watch out for withholding issues

atreasure on July 2, 2013

Under the health care act, starting in 2013, taxpayers with earned income over $200,000 per year ($250,000 for joint filers and $125,000 for married filing separately) must pay an additional 0.9% Medicare tax on the excess earnings. Employers are required to withhold the tax beginning in the pay period in which wages exceed $200,000 for the calendar year — without regard to the employee’s filing status or income from other sources. So, it’s possible your employer:

Will withhold the tax even though you aren’t liable for it. You can’t ask your employer to stop withholding the tax, but you can claim a credit on your income tax return.

Won’t withhold the tax even though you are liable for it. You may use Form W-4 to request additional income tax withholding to cover your liability and avoid interest and penalties.

If you have questions about how withholding issues related to the new 0.9% Medicare tax might affect you, please contact us.

Planning to make a large cash gift for high school graduation? Consider paying some college tuition instead

atreasure on May 23, 2013

With commencement ceremonies for high school seniors coming up, many parents and grandparents are contemplating making cash gifts the student can use for college expenses. But if gift and estate taxes are a concern, consider a potentially more tax-efficient gift: paying some of the child’s college tuition.

Cash gifts to an individual generally are subject to gift tax unless you apply your $14,000 per beneficiary annual exclusion or use part of your $5.25 million lifetime gift tax exemption (which will reduce the estate tax exemption available at your death dollar-for-dollar). Gifts to grandchildren are generally also subject to the generation-skipping transfer (GST) tax unless, again, you apply your $14,000 annual exclusion or use part of your $5.25 million GST tax exemption.

But tuition payments you make directly to the educational institution are tax-free without using any of your exclusions or exemptions, preserving them for other asset transfers. If you’d like to learn more about tax-smart ways to fund education expenses or make gifts to reduce your taxable estate, please contact us.

Do you need to file a 2012 gift tax return by April 15?

atreasure on March 26, 2013

Generally, you’ll need to file a gift tax return for 2012 if, during the tax year, you made gifts:

That exceeded the $13,000-per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse),
That you wish to split with your spouse to take advantage of your combined $26,000 annual exclusions, or
Of future interests — such as remainder interests in a trust — regardless of amount.

If you transferred hard-to-value property, consider filing a gift tax return even if you’re not required to. Adequate disclosure of the transfer in a return triggers the statute of limitations, preventing the IRS from challenging your valuation more than three years after you file.

There may be other instances where you’ll need to file a gift tax return — or where you won’t need to file one even though a gift exceeds your annual exclusion. Contact me at anne.treasure@whalencpa.com for details.

Author: atreasure

News & Tech Tips

The new 0.9% Medicare tax: Watch out for withholding issues

Planning to make a large cash gift for high school graduation? Consider paying some college tuition instead

Do you need to file a 2012 gift tax return by April 15?