2013 Year-End Personal Tax Planning Considerations & Checklist

Vince Lee, for ColdStream Guardian writes: As we approach year-end, tax planning considerations should be starting to take shape.  New tax legislation has brought greater certainty to year-end planning, but has also created new challenges.  The number of changes made to the Tax Code and the opportunities these changes bring may seem overwhelming.  However, early planning will help you to maximize your potential tax savings and minimize your tax liability.  Here is some key high level year-end tax planning strategies.

Changes for 2013 and beyond

In 2012, year-end planning was complicated by the great uncertainty over the fate of the Bush-era tax cuts.  For more than 10 years, individuals had enjoyed lower income tax rates, but these rates were scheduled to expire after 2012. Moreover, many tax credits and deductions that had been made more generous were also set to expire after 2012.  In January 2013, Congress passed the American Taxpayer Relief Act of 2012 (ATRA), which made permanent many, but not all, of the Bush-era tax cuts and also some tax benefits enacted during the Obama administration.  Congress also permanently “patched” the alternative minimum tax (AMT) to prevent its encroachment on middle income taxpayers.  The result is much greater certainty in year-end tax planning for 2013 because we know what the individual tax rates are in 2014, how many tax credits and deductions are structured, and much more.

Of course, there are always complexities in the Tax Code.  In 2013, two new Medicare taxes kicked-in (a 3.8-percent net investment income (NII) surtax and a 0.9-percent Additional Medicare Tax).  In addition, the U.S. Supreme Court ruled that the federal government’s denial of recognition of same-sex marriage was unconstitutional, opening the door to allowing married same-sex couples to file joint federal tax returns and take advantage of other tax benefits available to married couples.  Beginning in 2014, some of the most far reaching provisions of the Affordable Care Act will become effective: the individual mandate, the start of Marketplaces to obtain insurance and a special tax credit to help offset the cost of insurance.

Planning for expiring tax incentives

First, do not lose the benefit of some generous, but temporary tax incentives that are available in 2013 but may not be in 2014.  Are you planning to purchase a big-ticket item such as a new car or boat?  The state and local sales tax deduction (available in lieu of the deduction for state and local income taxes) is scheduled to expire after 2013, and you may want to accelerate that purchase to take advantage of the tax break.  A valuable tax credit for making certain energy efficient home improvements, including windows and heating and cooling systems, and a deduction for teachers’ classroom expenses are also scheduled to expire after 2013.  These are just some of many incentives that will sunset after 2013 unless extended by Congress.

Planning for new taxes and rates

Some individuals may be surprised that they owe additional taxes in 2013, even with the extension of the Bush-era tax cuts. Three new taxes are in effect for 2013: the NII surtax, the Additional Medicare Tax and a revived 39.6 percent tax bracket for higher income individuals.  The 3.8-percent NII surtax very broadly applies to individuals, estates and trusts that have certain investment income above set threshold amounts.  These amounts include a $250,000 threshold for married couples filing jointly; $200,000 for single filers.  One strategy to consider is to keep, if possible, income below the threshold levels for the NII surtax by spreading income out over a number of years or finding offsetting above-the-line deductions.

The Additional Medicare Tax applies to wages and self-employment income above threshold amounts including $250,000 for married couples filing joint returns and $200,000 for single individuals.  If you have not already reviewed your income tax withholding for 2013, now is the time to do it.  One way to reduce the sting of any Additional Medicare Tax liability is to withhold an additional amount of income tax.

As discussed, ATRA extended the Bush-era tax rates for middle and lower income individuals.  ATRA also revived the 39.6 percent top tax rate.  For 2013, the starting points for the 39.6 percent bracket, for 2013 are $450,000 for married couples filing jointly and surviving spouses, $425,000 for heads of households, $400,000 for single filers, and $225,000 for married couples filing separately.  ATRA also revived the personal exemption phaseout and the limitation on itemized deductions for higher income individuals.

Starting in 2013, ATRA also sets the top rate for capital gains and dividends to 20 percent for those taxpayers at the highest marginal tax bracket.

Planning for health care changes

Before year-end, individuals need to review how the Affordable Care Act will impact them.  The Affordable Care Act brings a sea-change to our traditional image of health insurance.  The law requires individuals, unless exempt, to either carry minimum essential health care coverage or make a shared responsibility payment (also known as a penalty).  Most employer-sponsored health insurance is deemed to be minimum essential coverage, as is coverage provided by Medicare, Medicaid, and other government programs.  Self-employed individuals and small business owners should revisit their health insurance coverage, if they have coverage, before year-end and weigh the benefits and costs of obtaining coverage in a public Marketplace (or a private insurance exchange) for themselves and their employees.  Small businesses may be eligible for a tax credit to help pay for health insurance.  Individuals may qualify for a premium assistance tax credit, which is refundable and payable in advance, to offset the cost of coverage.

Individuals with health flexible spending accounts (FSAs) and similar arrangements should take a look at their spending habits for 2013 and predict how they will use these tax-favored funds in the future.  In 2013, the maximum salary-reduction contribution to a health FSA is $2,500.  Remember that health FSAs have strict “use it or lose it” rules, and the cost of over-the-counter drugs cannot be reimbursed with health FSA dollars unless you obtain a prescription (there are some exceptions).

Individuals who itemize their deductions also need to keep in mind the 10 percent floor for qualified medical expenses.  This change took effect at the beginning of 2013.  It means that you can only claim deductions for medical expenses when they reach 10 percent of adjusted gross income (for regular tax purposes and for alternative minimum tax purposes).  There is a temporary exception for individuals over age 65 for regular tax purposes.

Planning for gifts

Gift-giving is often overlooked as a year-end planning strategy.  For 2013, individuals can make tax-free gifts (no tax consequences for the giver or the recipient) of up to $14,000 to any individual.  Married couples may “split” their gifts to each recipient, which effectively raises the tax-free gift to $28,000.  Gifts between spouses are always tax-free unless one spouse is not a U.S. citizen.  In that case, the first $143,000 in gifts made in 2013 is tax-free.

There are special rules for gifts made for medical care and education that can be a valuable component of a year-end tax strategy, especially for individuals who want to help a family member of friend.  Monetary gifts given directly to a college to pay tuition or to a medical service provider are tax-free to the person making the gift and the person benefitting from education or medical care.

Gifts to charity also are frequently made at year-end.  Through the end of 2013, taxpayers age 70 ½ and older can make a tax-free distribution from individual retirement accounts to a charity.  The maximum distribution is $100,000. Individuals taking this option cannot claim a deduction for the charitable gift.

Planning for retirement savings

Year-end is a good time to review if your retirement savings plans and tax strategies complement each other.  For 2013, the maximum amount of contributions that can be made to an IRA is $5,500, with a $1,000 catch-up amount allowed for individuals over age 50.  Keep in mind that the maximum amount that can be contributed to a Roth IRA begins to decrease once a taxpayer’s adjusted gross income crosses a certain threshold.  Please note that 2013 contributions, for tax purposes, may be made until April 15, 2014.

We have reviewed only some of the many year-end tax planning strategies that could help you minimize your 2013 tax bill and maximize savings.  Please contact your Coldstream Relationship Manager with how these strategies may impact you.

Year End Tax Planning Checklist for Individuals

Not all actions will apply in your particular situation but can help narrow the decisions that are appropriate for you.

□             A new 3.8% surtax may apply to investment income if your adjusted gross income exceeds $250,000 (married filing jointly) or $200,000 (single filers).  One way to mitigate the 3.8% surtax is to get your income under the threshold levels by spreading the income out over a number of years.

□             Also new is a .9% Medicare tax on wages and self-employment income above $250,000 (married filing jointly) or $200,000 (single filers).  Your income tax withholding should be reviewed to ensure sufficient withholdings are made.

□             If you elect to claim a state and local general sales deduction instead of a state and local income tax deduction, you may want to accelerate the purchase of big-ticket items such as a new car or boat as it expires at the end of this year.

□             A valuable tax credit for making certain energy efficient home improvements, including window and heating and cooling systems also expire at the end of this year.

□             Planning for health care changes.  Self-employed individuals and small business owners should revisit their health insurance coverage, if they have coverage, before year-end and weigh the benefits and costs of obtaining coverage in a public Marketplace for themselves and their employees.

□             Individuals with health flexible spending accounts (FSAs) should review their balances and decide how they will use these tax-favored funds.  In 2013, the maximum salary-reduction contribution to a health FSA is $2,500 and Health FSAs have a strict “use it or lose it” rules.

□             Starting in 2013, individuals who itemize their deductions need to keep in mind the 10 percent floor for qualified medical expenses.  It means that you can only claim deductions for medical expenses when they reach 10 percent of adjusted gross income.  There is a temporary exception for individuals over age 65.

□             For 2013, individuals can make tax-free gifts of up to $14,000 to any individuals.  Married couples may “split” their gifts to each recipient, which effectively raises the tax-free gift to $28,000.

Tax rules on income of children

Barry Dolowich for the Monterey Herald writes: Q: Our children, ages 10, 12 and 15, just inherited a substantial amount of money from their grandfather. They will be receiving investment income through their respective trusts. What are the tax consequences of this investment income?

A: A number of years ago, Congress limited the tax benefits of using intra-family transfers of income-producing property to children under the age of 14, known as the "kiddie tax." In the past, it was common for parents (and grandparents) in high tax brackets to transfer stocks and bonds to their children (grandchildren) so that the income from these investments would either avoid tax altogether, or be taxed at lower marginal tax rates.

To prevent abuse or tax avoidance, Congress provided that children under 14 with net unearned income (interest, dividends, capital gains, etc.), after certain adjustments, are subject to tax at the top marginal tax rate of their parents. A few years ago, Congress threw up another roadblock in the Tax Increase Prevention and Reconciliation Act, Congress raised the age at which the unearned income of minor children is taxed at the parent's rate from under age 14 to under age 18.

The 2007 Small Business Act contained changes impacting college-aged children. For a child subject to these rules, the child's unearned income over $1,900 will be taxed at the parent's rate, which is presumably higher. For children under age 18, nothing has changed. However, the new law expands the kiddie tax to apply to children who turn 18 during the tax year, or turn age 19 to 23 if the child is a full-time student. These older children are exempt from the new kiddie tax rules if their earned income exceeds one-half of their total support for the year.

Basically, the first $1,000 of each child's 2013 unearned income is not taxable because it is offset by their allowed personal exemption. The next $1,000 of unearned income is taxable at the lowest marginal tax rate of 10 percent. The unearned income in excess of $2,000 is taxable at the parents' highest marginal tax rate. These special rules apply to children who have not reached age 18 before Dec. 31 (or ages 19 to 23 if the child is a full-time student) and do not apply to the child's earned income. The law specifies, however, that the kiddie tax does not apply to a child who is married and files a joint return for the tax year. It also adds an exception to the kiddie tax for distributions from certain qualified disability trusts.

The parent of a child under the age of 18 (or 19 to 23 if the child is a full-time student) may elect to include the gross income of the child in excess of $2,000 (but less than $10,000) in his or her income for the 2013 tax year using Form 8814 provided that such income consists of interest and dividends. If the parents elect not to report the child's income on their return or do not qualify to use Form 8814, then the child must file his or her own tax return and attach Form 8615 to calculate the tax due.

Depending on the amount of taxable investment income earned by your children, they may have to file their own 2013 income tax returns (or you may have to file Form 8814) and pay tax at your (assumed) higher marginal tax rate. You may want to consider the economics of having their windfall invested in tax-free instruments rather than taxable investments.

Property Tax Planning Essential For Foreign Investors

Richard M. Goldstein and Joshua A. Kaplan for Daily Business Review write:  It is no secret that the South Florida real estate market has been a buying opportunity for wealthy foreigners in light of the decline in U.S. home prices and the lower value of the U.S. dollar against some foreign currencies. According to the National Association of Realtors, foreign buyers have purchased more than $68 billion worth of U.S. residential real estate over the 12 months ending March 2013, with approximately 23 percent of those sales (over $15 billion) taking place in Florida.

Buyers from all over the world have been acquiring U.S. real estate for their own personal use, as well as for investment purposes, and Latin Americans have become one of the largest purchasers of real estate in Florida. According to a study conducted by the Miami Association of Realtors, Brazilians are ranked second in terms of foreigners buying real estate in Florida, while Venezuelans are ranked third, Argentineans are fourth and Colombians are ranked sixth. When considering an investment in U.S. real property, proper tax planning is essential for foreign investors.

Those planning to purchase U.S. real estate have many considerations to take into account. The ownership structure and intended use of the property can have dramatically different tax consequences to the foreign investor, so a well-advised foreign investor will consider the tax implications of an investment in U.S. real estate prior to making an acquisition. Unfortunately, many foreign investors do not consider the U.S. tax consequences related to an investment in U.S. real estate until they are ready to dispose of the property. Changing the ownership structure after acquisition can be time consuming and costly, though it may still be possible to avoid income tax.

When the direct foreign investor ultimately sells the real property, they will have to pay U.S. taxes pursuant to the Foreign Investment in Real Property Tax Act. Under FIRPTA, the foreigner is required to file a U.S. federal income tax return and pay U.S. taxes on gain from the sale of such U.S. real property as if the foreigner was a U.S. person. The tax is generally enforced by requiring the purchaser to withhold 10 percent of the gross sale proceeds of the sale at closing. With direct ownership of income-generating properties, the foreign investor is also faced with the implications of a 30 percent withholding tax on gross rental income and the potential for annual federal, state and local tax return filing obligations.

Purchasing real property directly is not always the best choice. In addition to the income tax consequences noted above, the direct ownership of U.S. real estate would also subject the foreign investor to U.S. estate taxes upon his or her death. In addition, direct ownership does not provide the foreigner with privacy or liability protection that is often desirable for foreigners investing in U.S. real estate and easily attainable with proper planning prior to the acquisition.

In lieu of making a direct investment, there are several business structures available to foreign investors purchasing U.S. real estate. It is possible to purchase real estate through corporations, pass through entities, and even through certain trusts, but the best structure for a particular investor depends upon his or her particular circumstances. With proper tax planning, a foreigner investing in U.S. real estate can avoid a personal U.S. tax return filing obligation and the U.S. estate tax, while minimizing the U.S. federal income taxes incurred from the operations of the property and gain upon the ultimate disposition of the property.

For example, by acquiring the real property through a U.S. corporation, the foreign buyer can avoid the obligation to file an income tax return with the Internal Revenue Service and minimize the amount of U.S. taxes incurred by capitalizing the corporation with a combination of debt and equity. Through the application of a carefully structured non-U.S. lending entity, this corporate structure often allows a foreign related party lender to receive the interest payments free from U.S. federal income tax, while also permitting the corporation to deduct the interest payments and reduce its U.S. income tax liability. This structure also permits the foreigner investor to avoid U.S. estate taxes by holding his or her ownership of the U.S. corporation through a separate foreign corporation.

For a foreign investor, identifying a property and seizing the moment is typically the easiest part of the process. Choosing the right structure for the acquisition from a legal, tax and risk standpoint, is not quite as simple. Although tax planning can (and often does) occur after purchasing U.S. real estate, the most effective tax planning occurs prior to making the acquisition.

6 Best Accounting Apps for Your Small Business / 10 Best Accounting Apps for Personal and Business Use

Sara Huter writes: When you want to find an accounting app, you’re likely to look to the big players such as Intuit or QuickBooks. But there are a lot of Cloud based web applications out there that can be a great asset to you and your team.

We’ve put together a list of six accounting apps that offer different features at affordable prices. Check them out and let us know which one is your favorite or if you use one that didn’t make our list.

1. LessAccounting

$36/monthThis accounting app was built by entrepreneurs who wanted to spend less time on accounting and more time on their business. The app turned into a viable product and is beloved by entrepreneurs who dread accounting. It is a Cloud based web app that also works on the iPhone. LessAccounting does all the tasks of bookkeeping, including entering revenue and expenses, directly through a link from your bank or PayPal. It also sends invoices, tracks mileage, and calculates foreign exchange rates.

Related: 4 Best Tools for Creating a Financial Statement

2.GoDaddy Online Bookkeeping

$9.95/monthFormerly known as Outright Plus, GoDaddy Online Bookkeeping is a convenient, simple Cloud based accounting app that links with your bank accounts and downloads transactions every night. The user codes recurring transactions so they are categorized correctly into expense accounts. The app offers profit and loss graphs to show you where your money is coming and going. It also offers a handy feature to pre-fill worksheets to help you fill out your Schedule C tax form. Users can sign up and start using Outright for free, then unlock the full version of Outright Plus for $9.95 a month to gain access to all of the features.

3. Wave

FreeWave is a free Cloud based app that’s made for freelancers, consultants, and other businesses that have fewer than 10 employees. As with other apps, it eliminates manual entry by linking to your accounts. It creates balance sheets and sales reports and also offers modules for payroll, invoicing, and payments. Its selling feature is there are no tiers, meaning it’s free with no strings attached. Wave earns its revenue with advertisements so customers never pay for the service.

4. FreshBooks

$19.95/monthFreshBooks is one of the few accounting apps that can say it offers complete mobile access, offering alternatives for the iPad, iPhone, Android devices, etc. This mobility is FreshBooks’ selling point, as it allows users to log billable hours wherever they are. It also offers multiple payment options from your clients, boasting 12 payment gateways including credit cards. It’s slick timesheet feature allows the user to enter billable hours, non-billable hours, and categorize by project.

5. Kashoo

$20 per month/$192 per yearKashoo boasts it is the No.1 iPad accounting app in the app store. Kashoo’s Cloud based app offers invoicing, multicurrency functionality, and communication features so users can collaborate right from the app. You can enter your own expenses or link it to your bank account. There is also a feature to scan in receipts to attach to each expense item.

6. Monchilla

$5-$10/monthMonchilla is a simple program that offers pro forma reports based on if-then analyses. Users enter a scenario like “If I increased advertising expense by 10 percent, what would happen to my profit margin?” The system predicts your revenue and each expense item that would be affected. Monchilla bases its forecasts on aggregated recurring transactions from banks. The app also offers invoicing and payroll direct deposit. It does not link to your bank accounts, however, but does link to your QuickBooks account.

The best accounting app will achieve your particular goal. Each app above does something a little different that makes it stand out from the others. If you’re looking for the ultimate mobility solution, FreshBooks is your best bet while Kashoo is great for in-app collaboration. Whichever you choose, all offer a pay-as-you go option, so the risk is minimal.

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Valentine Belonwu writes:  According to Apple, customers download more than 800 apps per second. How do you choose the apps you will download? Some people look for entertainment, some look for education, and some look for news. If you are paying good money for your cell phone plan, you should be making it work for you. Here are 10 of the best accounting apps available:

1.LessAccounting

The iPhone app is free to install, and it works cohesively with PayPal. You can connect the application to your online banking center and the credit cards you choose. One of the favorite options among users is the ability to compare what you’ve spent this month with what you spent last month.

2.QuickBooks Mobile

If you are in charge of the finances for your company, you need the QuickBooks app. The app connects to the brand’s online software, allowing you to complete your tasks from anywhere you see fit. One of the biggest benefits is the ability to create invoices and estimates from where you stand.

3.Shoeboxed

Do you have a drawer full of receipts that you can’t seem to organize? The Shoeboxed app allows you to take a photo of your receipt, upload it to your Shoebox account and store it for use later. The app is incredibly useful when it comes time to fill out your taxes. It takes some getting used to; throwing away your receipts, that is. But once you start scanning instead of saving, you’ll wonder why you didn’t think of it sooner.

4.PayPal

The PayPal app works in the same way as your banking app. You can accept and send payments via your app, keep track of your transactions, and send invoices to clients. With a PayPal debit card, you may quickly find that PayPal is your go-to financial center for your personal and business needs.

5.InDinero

Use InDinero to control your personal finances or to keep track of money coming and going in your company. The app pulls bank and credit card statements, puts expenses into proper categories, and prepares various financial reports for you. The app also tracks your monthly spending habits, sends you a report, and helps you set up a budget.

6.Mint

If you need to take control your personal budget, you better install Mint on your mobile device. Mint allows you to upload your income and expenses. When you purchase something at the store, input it and the app instantly tells you your bank balance. The app is customizable, allowing each customer to use it to their advantage.

7.Debt Dog

For many people, credit cards are the go-to when it comes to making a purchase. With the Debt Dog app, you can figure out if buying an item on sale with your credit card is really saving you money. For example, while an item may be on sale for 30 percent off, the interest rate you end up paying by using your credit card may far overshadow any money you would save.

8.iExpensonline

Don’t live with the train wreck of finances you’ve created for yourself. Instead, install this app and get yourself back on track. Everyone knows that eating in and cutting the cable bill can help save money; this app offers more unique advice provided by real-life financial advisors. The app helps you make plans for your financial health, set targets and prioritize expenses.

9.BillTracker

If you’re one of those people that has good intentions and bad follow-through, BillTracker is for you. The app allows you to keep track of your bills, keeps a record of when they were paid last, and helps you see when they are do again. The app also allows you to store the contact information and addresses of all of your payees.

10.moneyStrands

The moneyStrands app shows you your balances in one place. Keep an eye on your accounts on one simple, easy-to-use application. Customizable alerts, the ability to add and delete budgets, and individual account tracking, the app is absolutely fantastic for personal use.

Don’t let your smartphone sit idly by while your finances take a tumble. Whether you need help with your personal or business finances, any of these 10 apps can be of assistance. Install several and see which you find the most useful; there’s sure to be at least one that can help you organize your finances.

Cloud Computing in Tennessee Ruled Exempt / The taxation of cloud computing services is relatively unchartered territory.

Gail Cole writes: The taxation of cloud computing services is relatively unchartered territory. Cloud computing transactions have been called “the new ‘wild west’ sales tax frontier,” and that seems fitting. It took time for the law to effectively reach the wild west, and it will take time for lawmakers to pass laws on new technologies. The process has begun: Idaho exempts software as a service; Vermont taxes cloud computing; Massachusetts can’t decide. The Bay State imposed a tax on computer software and services this summer and repealed it less than 2 months later.

Tennessee legislators haven’t yet passed a law specific to the taxation of cloud computing services; however, the Tennessee Department of Revenue has published a number of letter rulings regarding the issue. Most recently is Letter Ruling # 13-12, on the application of the Tennessee Retailers’ Sales Tax Act to various cloud computing services.

Letter rulings are binding only upon the Department of Revenue and apply to the individual taxpayer being addressed, not all taxpayers. That said, letter rulings are a useful sounding board and are helpful in determining how a state regards issues.

The Taxpayer discussed in Letter Ruling #13-12 “offers information technology infrastructure services to customers via the Internet … [that] allow customers to access applications and platforms, server bandwidth, and storage capacity without significant information technology capital investment.” The Taxpayer is not headquartered in Tennessee, nor does it have offices or data centers in Tennessee.

The 11+page letter ruling is an interesting read. It references the Tennessee Retailers’ Sales Tax Act, telecommunications, and virtual computing service software. It discusses remote storage services and fees. In the end, the ruling boils down to three questions, answered:

1. Is the Taxpayer’s [REMOTE STORAGE SERVICE] subject to the Tennessee sales and use tax?
2. Is the Taxpayer’s [VIRTUAL COMPUTING SERVICE] subject to the Tennessee sales and use tax?
3. Is the Taxpayer’s [FEE] subject to the Tennessee sales and use tax?

The department answered all questions with a “No.” Since the Taxpayer’s data centers are located out of state, there is no sale or use of tangible personal property in Tennessee. Furthermore, “the sale or use of intangible intellectual property generally is not subject to Tennessee sales and use tax unless stored on a tangible storage media” in the state. In this case, customers can’t download software for their own use—they can only use it “in conjunction with [THE VIRTUAL SERVICE]….” Additional details are in the ruling itself.

Other letters issued by the Tennessee Department of Revenue have served up similar rulings. The American Institute of CPAs in June wrote a summary of cloud computing rulings. As the title of the article suggests, the CPAs found the taxation of the cloud to be a hazy subject. Still, they note that the Tennessee Department of Revenue repeatedly found various computing services to be not subject to sales tax.

Tax shock: Wealthy to be 'very surprised' in 2013

Mark Calvey for BizJournal.com writes: There has been no shortage of media coverage on this year's higher tax rates and new taxes, but accountants expect many of their clients to still be surprised when the bill comes due next April.

My take: You can count on it.

And next year will be too late for the wealthy to take steps this year to reduce taxes owed for 2013.

Marcum, the New York accounting firm with a Bay Area office, says it debuted an online tax calculator to help clients avoid nasty surprises next year.

"Most people are aware of the increase in tax rates, but have not focused on how the new rates will impact them in real dollars," said Joseph Perry, partner-in-charge in Marcum's tax and business services practice.

"Many are likely to be very surprised when they receive their 2013 projections, extensions or actual returns and find out how much they owe."

To be certain, Marcum and its rivals have been talking to their clients about the impact of higher taxes for some time. But denial can be a wonderful thing, especially when it comes to the prospect of writing big checks to Uncle Sam.

Even Marcum says its online calculator doesn't take into consideration the 3.8 percent Medicare tax on investment income.

But before those who decidedly fall into the less-than-wealthy dig a tissue out of their pocket for these folks, the latest results in BMO Private Bank's Changing Face of Wealth surveys finds that those with $1 million or more are feeling better off today than they were in September 2008, when the financial markets were slammed with the bankruptcy of Lehman Brothers and government seizure of Fannie Mae and Freddie Mac.

BMO's survey finds that 66 percent of California's affluent say they're better off now than in 2008 and 68 percent expect the economy to improve over the next year. (I'll add a cautionary note, investor confidence can shift on a dime, especially if a shock hits the financial markets.)

Meanwhile, Bloomberg reports that Walmart is cutting orders as unsold merchandise piles up while shoppers keep a tighter grip on their wallets. The nation's top retailers typically don't look at the final months of the year as a time to pull back on inventory.

But for now, sentiment among millionaires might best be described as "What — me worry? The BMO study finds that 80 percent or more of millionaire respondents are spending more on entertainment, travel, club memberships and collections and hobbies than they were five years ago.

"We are seeing increased confidence in the overall California economy, and the momentum is led by high-net-worth individuals and families," said Ron Gong, managing director of CTC Consulting/Harris MyCFO, which is part of BMO Financial Group. "The affluent in our state are feeling more secure about their financial health than they were five years ago and are optimistic about the future.

"The tech sector is leading this recovery, but the current environment of increased investing, spending and job creation is also positive, which reinforces this outlook," Gong said.

Hopefully the good times roll for this crowd well into next April. Because even Walmart shoppers know the consequences of bigger-than-expected tax bills.

"If these tax increases are not properly planned for, and cash flow is insufficient to meet the tax obligation, clients may have to reduce their discretionary spending or draw down invested assets," Marcum's Perry said. "Planning before year-end is imperative. Timely planning can help minimize tax exposure, gain the greatest benefit and avoid that 'surprise, surprise' moment."

But before we assume America's wealthy have little in common with those shopping at Walmart, I received the results of a poll of the nation's millionaires this morning from Natixis Global Asset Management, which manages $783 billion through affiliates such as Active Investment Advisors in Oakland. True, the firm found that millionaires are more optimistic about retiring earlier and living longer than most Americans.

But their key concerns about what could tarnish their golden years is the cost of long-term care not covered by insurance, 42 percent; investments falling sharply in value, 40 percent; and cognitive impairment or dementia, 17 percent.

And what if things go wrong and they run out of money in retirement? The nation's wealthiest investors said they would first turn to their families, 41 percent, then the government, 40 percent, to support them. Just 16 percent of the millionaire respondents said they'd go back to work, which may simply reflect the bleak employment prospects of the over-80 set.

And that's a survey of millionaires. I suspect the government is already at the top of the list when it comes to providing support in retirement for many of Walmart's loyal shoppers.

Meanwhile, this week some in Washington are making the case to avoid default by giving high priority to paying interest to the Chinese government and other holders of U.S. Treasury bonds and worry later about grandma and her Social Security check. The fact that some of Wall Street's top CEOs had to inform the nation's political leadership that such a move would have devastating economic consequences underscores how disconnected Washington is from the rest of us these days.

And yes, the revolution will be tweeted.

The Best Tax Moves for Fall / It’s not too early to start planning for your 2013 tax filings

Kimberly Palmer for US NewsWorld Report writes: Fall is the best time for last-minute tax planning because you still have a few months to meet end-of-the-year deadlines that can minimize your tax bill in the spring. Follow these five tips and you might even get some money back from Uncle Sam.

Bulk up your retirement contributions.

You can contribute up to $17,500 for your 401(k) in 2013. If you're age 50 or over, the limit is $23,000. If you're nowhere close to that amount, you can ramp up your contributions to take advantage of tax-advantaged individual retirement accounts. The same goes for Roth IRAs and traditional IRAs. If you want to max out your retirement savings, now is the time to start putting more money away. (You can contribute up to the 2013 limit until April 15, 2014.)

Check out one-time benefits that might apply.

Investments in certain energy-efficient products, water heaters, central air conditions, new windows and doors, and insulation could make you eligible for tax credits this year. A new water heater or air conditioner with an Energy Star label, for example, may result in a $300 credit, while window credits are available up to $200. If you install a solar energy system (or other type of renewable energy system), you could be eligible for a tax credit of up to 30 percent of the cost. Details about these types of tax credits are available at www.energysavers.gov.

Delay deductions.

Because tax experts say tax increases are likely in the future, they recommend saving big deductions until next year, if possible. So if you're planning to make a sizable charitable contribution, for example, you might want to hold off for the sake of your tax bill. Similarly, if you have flexibility over when you receive income, you might want to put as much in the bank before Dec. 31 so it counts as income in 2013 – before any potential tax increases.

Check that you've been paying enough taxes.

If you received income beyond your usual paycheck because of freelance work or income from a side business, then you might end up owing a lot of money in April. You're also at greater risk if you got married this year and earn a relatively high salary similar to your spouse. That's because of the so-called marriage penalty, which often means dual, high-earning couples owe more when they file taxes jointly than they did when they were single.

As a result of the Internal Revenue Services' recent announcement that it will now recognize same-sex marriages, even if couples live in a state that does not recognize their marriage, gay couples that include two high-earning spouses might also face the marriage tax. Likewise, they can start preparing for it by paying more to Uncle Sam throughout the year by lowering their tax deductions on their W-4 form. Other financial moves, such as buying a home, donating to charity or putting more money into retirement accounts can also help reduce your tax burden.

People who earn significant chunks of their salary in cash also need to make sure they're saving enough of that cash to pay the appropriate amount of taxes in the spring. The IRS keeps a close eye on people in professions that pay in cash, like waiters, by using formulas that estimate expected income. If you report less, you could be flagged for an audit – not something you want.

A big tax bill can not only shock your budget – you might owe the government additional fines, too. Check to see if you've been paying the correct amount of taxes by reviewing your payroll stubs or other documentation. If you're going to owe money, prepare by starting to save now.

Keep track of important receipts.

If you run your own business, are self-employed or spend money on education to boost your career, then many of your expenses may be tax deductible. Make sure you put your receipts in an easy-to-find filing system so you can claim them when you file your taxes next year. If your employer offers flexible spending accounts for health care costs, you also want to make sure to keep eligible receipts for doctor visits, pharmaceuticals and other health-related expenses. You often have until April 15 to file those claims.

Talking taxes might not be as fun as picking out your Halloween costume, but it can get you a much bigger treat in the spring.

Will Same-Sex Couples Save or Lose Money By Filing a Tax Refund?

Mike Anderson for US News World Report writes: The Internal Revenue Service changed its policies in August and decided to recognize same-sex marriages regardless of whether couples live in a state where their marriage is legal.

With the switch, couples who were denied federal benefits under the Defense of Marriage Act – which the Supreme Court struck down in June – have the opportunity to claim a retroactive refund and correct their tax return from 2010 to 2012.

Buyer beware, not every couple benefits from the change. Some couples will pay more as a married couple filing jointly than when filing as two individuals. Read below to see if the tax refund will save you money or cause you to fork over more to the IRS.

Will my marriage lower my tax bill?

When a couple gets married, their tax filing status changes. According to the IRS, they are no longer two individuals – they are a married couple – and they can file jointly or separately.

The good news for same-sex couples: Married couples are considered a unit and can share tax deductions – something two individuals cannot do.

Here's the bad news: Tax brackets for couples and individuals are not equal. Married couples hit a higher marginal tax rate much quicker than an individual would. Sam-sex couples who collectively earn more than $146,400 in taxable income – that's income minus deductions – will likely see their tax bill go up. If you fall into that category, then you might not be eligible for a tax refund.

Marginal Tax Rates for a Gay Couple of Equal Earners
	Under DOMA	After DOMA
Marginal Rate	Income Threshold	Income Threshold
10%	$0	$0
15%	$17,850	$17,850
25%	$72,500	$72,500
28%	$175,700	$146,400
33%	$366,500	$223,050
35%	$796,700	$398,350
39.6%	$800,000	$450,000

How to claim your refund: File the 1040X

Same-sex couples can file for a refund three years from the date their original return was filed or two years from the date the tax was paid. This means, at most, couples are eligible for refunds from tax years 2010, 2011 and 2012. You must have been married each year for which you'd like a refund. Note that domestic partnerships, civil unions and other formal relationships are not offered this benefit.

The statute of limitations applies not only to income tax but also to gift and estate taxes. For a refund on income tax, file Form 1040X (the amended U.S. individual income tax return). Simply check your new filing status in line C, adjust your income and deductions accordingly and submit.

An additional bonus for the income-tax refund: You can reclaim any taxes on fringe benefits, which are usually provided by an employer and tax exempt for married couples. For example, married couples may purchase spousal health insurance from their employer on a pre-tax basis. Under DOMA, the spousal benefits for same-sex couples were often taxed. Now, couples are eligible for a refund on those taxes.

The refund on gift and estate taxes applies to couples who have lost their spouse and whose inheritance was heavily taxed. Same-sex couples who were taxed before the rule change can file Form 843.

It usually takes eight to 12 weeks for the IRS to process amended returns, but it may take longer during busy periods.

TaxAct buys Balance Financial

John Cook for Geekwire writes: Balance Financial, a 9-year-old Bellevue company that specializes in personal finance tools and services, has been acquired by Blucora’s TaxAct subsidiary. Terms of the deal were not disclosed, but Balance Financial CEO Devin Miller wrote in a blog post that the deal will benefit “customers, partners and employees.”

“TaxACT is well-capitalized and boasts the valuable resources of a larger company which will help us further expand the growth of the Balance Financial brand,” wrote Miller in a blog post. “Together, we will leverage our combined knowledge and expertise in the digital personal finance market, enabling us to enhance the premium solutions for both TaxACT and Balance Financial customers.”

Balance Financial will continue to operate under its name, and Miller and the rest of the team will stick in place. “In the end, this transaction is about adding the financial resources and talent to better meet your needs and ensure that our services remain at the forefront of our industry,” said Miller, who previously worked at Finsphere and Premier Payment Services.

Bellevue-based Blucora, formerly InfoSpace, purchased Cedar Rapids, Iowa-based TaxAct in January 2012 for $287 million.

Balance Financial was backed by Crosslink Capital, angel investors Geoff Entress. Michael Buhrmann and others. It employs 11 people. The company, which combines elements of the online financial management service Mint.com with the personal brick-and-mortar touch of H&R Block, raised $2 million in funding last year.

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Devin Miller, CEO of Balance Financial writes: I am excited to share some news today that we are certain will benefit all of our customers, partners and employees. Today marks another significant milestone as Balance Financial becomes part of the TaxACT family in agreeing to be acquired by the company.

TaxACT is a national brand with a strong market position in the tax preparation market, particularly the growing digital do it yourself tax filing market for both consumers and professional preparers. TaxACT is well-capitalized and boasts the valuable resources of a larger company which will help us further expand the growth of the Balance Financial brand. Together, we will leverage our combined knowledge and expertise in the digital personal finance market, enabling us to enhance the premium solutions for both TaxACT and Balance Financial customers.

We will continue to operate under the Balance Financial name, and you will still work with the same people and products that you've come to know and trust, we just have new owners now to help grow the business. In the end, this transaction is about adding the financial resources and talent to better meet your needs and ensure that our services remain at the forefront of our industry.

We're extremely proud of the accomplishments our dedicated team has worked so hard to achieve, without their hard work and dedication we wouldn't have this great opportunity. When we originally launched, we focused exclusively on consumer bookkeeping services, and now, several years later, we have established ourselves as leaders within the consumer and professional space. This deal will contribute to our forward momentum, and create significant opportunities to enhance our offerings to our clients.

This is an exciting time for Balance Financial and we look forward to continuing to serve our customers as part of TaxACT. 

Devin Miller

Co-Founder and CEO