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Recent Updates

Ohio Unclaimed Funds
On January 28, 2013, the City of Elyria received a check from the State of Ohio — Unclaimed Funds division for 3.4 million dollars! Well, most people aren't likely to be that lucky, but it is worth checking out the State of Ohio's unclaimed funds division at www.ohio.gov/unclaimedfunds. On a lark, I searched and there was nothing for me, but interestingly there was an amount sitting there for our son. I think it's worth checking out!

Along the same lines, the Plain Dealer has a searchable database of unclaimed inheritances for Cuyahoga County at www.cleveland.com/consumeraffairs, again, no luck, but it was fun checking. The Plain Dealer site searches by either the Estate Name or the beneficiary name — so even if you're not a resident of Cuyahoga County you could be a beneficiary of a Cuyahoga County resident. Do other counties have something similar? It's worth a little sleuthing.

The American Taxpayer Relief Act
Congress passed the American Taxpayer Relief Act on New Year's Day 2013 — ending an entire year of uncertainty regarding the planned expiration of the Bush Era tax cuts — making 2012 a most difficult year for tax planning. Due to the last minute passage, the IRS delayed processing of 2012 returns — in order to accommodate the changes to tax forms and software. IRS will begin processing Individual Income tax returns on January 30, 2013, but this date applies only to very simple and basic returns. For returns requiring forms in addition to the very basic forms – i.e. Education Credits — the processing will be delayed further until at least mid-February.

Now that Congress has acted, here is a brief (non-comprehensive) summary of the provisions of the bill that will be of interest to most taxpayers. . .

• Current income tax rates will remain in place for individuals with taxable income under $450,000/$400,000.
• Individuals with taxable income above $450,000 joint and $400,000 single will be taxed at 39.6%.
• The payroll tax "holiday" reducing Social Security tax withheld from wages was NOT extended — so all wage earners will see a 2% reduction in their take-home pay in 2013.
• Current capital gains and dividends tax rates will remain for most taxpayers, but will increase to 20% for those taxpayers with incomes above the levels discussed above.
• The act increases the AMT exemption amounts "permanently" (**see note).
• The act revives the phase outs on both itemized deductions and personal exemptions for higher income taxpayers, but it imposes higher thresholds for the limitations to take effect.
• Extends "permanently" (**see note) the $1000 child tax credit and the child and dependent care credit.
• Extends "permanently" the exclusion of up to $10,000 of adoption expenses.
• Extends through 2017 the American Opportunity Tax Credit (formerly known as the Hope credit).
• Restores the "above the line" deduction for qualified tuition and related expenses.
• Suspends the 60-month rule for the deduction of student loan interest.
• Restored the educator's $250 above-the-line expense deduction through 2013.
• Credit for energy efficient improvements to existing homes is extended for one year through December 31, 2013. However the lifetime maximum credit of $500 ($200 for windows and skylights) remains in place.
• Provision that taxpayers age 70 1⁄2 or older may make tax-free distributions to charities from their IRA accounts is extended through December 31, 2013.
• The Law extended the Section 179 maximum deduction of $500,000 for 2012 and 2013 to businesses with under $2 million in qualifying capital expenses.
• Bonus depreciation of 50% of the acquisition of new equipment is extended through 2013.

** Note — when Congress says "permanent" — it really means "until such time as Congress decides to get their hands on the Tax Code again!"

Patient Protection and Affordable Care Act
On March 23, 2010 President Obama signed the Patient Protection and Affordable Care Act.

A Summary of the tax increases resulting from the Affordable Health Care Act include:

• An increase in the Medicare tax rate by .9% for taxpayers with incomes over $250,000 AND imposes a 3.8% Medicare tax on the unearned income (interest, dividends, capital gains. . .) of said taxpayers.
• Charges annual fees on health insurance providers.
• Imposes a 40% excise tax on "Cadillac" health insurance policies (>$10,200 for an individual and >$27,500 for a family).
• Another annual fee on manufacturers and importers of certain drugs.
• Imposes a 2.3% excise tax on manufacturers and importers of certain medical devices.
• Raises the 7.5% Adjusted Gross Income floor on the medical expense deduction to 10%.
• Limits annual contributions to flexible spending accounts to $2,500.

For 2012 The Affordable Health Care Act also includes a provision requiring certain employers* to report the premiums paid for the employee's health care on their W-2's. (The premiums are not taxable income, the reporting requirement is for information purposes, only.)

* employers who filed more than 250 w-2's in 2011.

Small Business Health Care Tax Credit
The Affordable Health Care Act includes the provision for the Small Business Health Care Tax Credit for certain small employers that provide health care coverage to their employees. To be eligible, the employer must have fewer than 25 full-time employees with an average wage of less than $50,000 per employee and pay health insurance premiums under a qualifying arrangement for the employees. Business owners and their families do not qualify. The credit can be as much as 35% of the premiums paid (25% for tax-exempt small employers). An employer may take both the credit and the deduction for the health insurance premiums paid — however the deduction must be reduced by the amount of the credit. Credit available through 2013 — for 2014 the credit will be increased to 50% and 35% respectively. If you are interested, the IRS.gov website has very good information regarding the credit.

IRS has released the mileage rates for 2013 and 2012:

Kiddie Tax
A child under the age of 18 (or under age 24 if a full time student) is subject to "kiddie tax" when his unearned income exceeds $1,900 for 2012 and $2,000 for 2013.

Health Savings Accounts
Taxpayers may now contribute the maximum full year's limit to a new (first year) health savings account (no longer prorated). Contribution limits for 2012 are $3,100 for an individual plan and $6,250 for a family plan. The 2013 contribution limits are $3,250 for an individual plan and $6,450 for a family plan. The additional catch-up contribution for those age 55 and over is $1,000.

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