Are you aware of how much your tax rates actually changed in 2013?

Arthur Bell writes:   We are all aware that taxes increased as a result of President Obama's American Taxpayer Relief Act ("Relief Act") enacted in January of this year. Yet, when talking to clients throughout this tax season, we realized that many clients do not fully appreciate how the tax increases actually impact them and their available cash flow. As a result, they may not have fully planned from a cash flow perspective to handle the increase. So, this email is a quick summary of the tax rate changes with some ideas on how to cope.

How did your tax rates change?

For illustrative purposes, the summary below applies to taxpayers with Adjusted Gross Income greater than $450,000 and earned income (i.e., wages and self-employment income) greater than $250,000. 

Type of   Income	2012 Rate	2013 Rate	Health Care Tax	Deduction  Phase-Out	Total Tax   Increase
Long Term  Capital Gains	15.00%	20.00%	3.80%	1.20%	10.00%
Short TermCapital Gains	35.00%	39.60%	3.80%	1.20%	9.60%
QualifiedDividends	15.00%	20.00%	3.80%	1.20%	10.00%
Interest and Non-Qualified Dividends	35.00%	39.60%	3.80%	1.20%	9.60%
Earned  Income	36.45%	41.05%	0.90%	1.20%	6.70%

How can you prepare for the impact of these tax increases?

We recommend that you:  

Whenever possible, determine your quarterly estimates using the safe-harbor method (based on your 2012 tax liabilities) to avoid underpayment penalties.

If paying in quarterly estimated tax payments based on actual 2013 earnings, be sure to account for the increased tax rates and health care tax.

Make sure you set aside additional cash for taxes to be paid in by April 15, 2014.