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2013 tax changes that may surprise taxpayers
With significant changes made to the federal and Minnesota tax rules in 2013, the Minnesota Society of Certified Public Accountants would like to remind taxpayers of the importance of tax planning and understanding how the new rules affect their respective tax situations.
“It’s especially important this year, what with new, higher rates and complicated changes,” says Chris Wittich, a Certified Public Accountant and tax manager with Boyum & Barenscheer in Bloomington. “Taxpayers who do not understand the new rules may be surprised by their tax bill and may miss opportunities to minimize their tax burden.”
Here are some important changes and considerations for 2013:
• New limitations are in place regarding personal exemptions and itemized deductions that will increase the tax liability for many taxpayers.
• Creation of a Minnesota gift-tax system has changed the landscape for people considering making gifts as part of their estate planning. Taxpayers should consult a CPA before making gifts.
• There are two new surcharges as part of the 2013 federal tax return. A surcharge of 0.9 percent applies to earned income, and a 3.8 percent surcharge applies to net investment income for taxpayers at certain income levels. New regulations recently passed related to the 3.8 percent surcharge on net investment income are especially complex.
• For 2013, there are a number of important items for which Minnesota does not conform to the federal tax treatment. The list includes debt forgiveness on a home, depreciation on leasehold improvements, IRA exclusions for distributions made directly to charity and a host of others.
• Proper consideration of the Alternative Minimum Tax is critical, especially for middle-income taxpayers. Miscalculation of the AMT by do-it-yourselfers is a common error, according to MNCPA. In 2013, the Minnesota AMT rate changed, so it could affect even more taxpayers this year.
• This year, both the IRS and the State of Minnesota agreed to recognize same-sex marriages for tax purposes. It’s important that same-sex couples understand the pros and cons of the Married Filing Jointly status and how this change will affect their tax situation.
The MNCPA encourages taxpayers to get their tax information together sooner rather than later for tax filing. Family members should remind each other to save and file receipts - labeling them properly - for any expenses related to deductions.
The MNCPA advises that early planning with a CPA is the best way to plan for this year’s changes.Don’t have a CPA? Visit http://www.mncpa.org/referral or call 800-331-4288.