Xingli Zhang CPA PLLC - Tax, Accounting & Business Consulting
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A Glance at Obama Care
2013 Year End Tax Planning Ideas
Fiscal Cliff Would Be Avoided
Social Security and Your Retirement
AZ Tax Credits

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2012 Tax Updates
2013 Tax Update
AZ Tax
IRS
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A Glance at Obama Care

The Affordable Care Act (ACA) passed in March 2010 is generally called Obama Care.

Individual Mandate
The ACA requires most people over age 18 to have heath coverage through private insurance, employer coverage or a government program no later than March 31, 2014.

Open Enrollment
Starting October 2013, new qualified health insurance plans for individuals, families, and small groups will be available for purchase for effective dates beginning January 2014.

Who has to buy health insurance?Beginning January 1, 2014, most US citizens and legal immigrants will be required to by the federal government to have some form of health insurance.

2013 Year End Tax Planning Ideas

Year-end tax planning could be especially productive this year because timely action could nail down a host of tax breaks that won’t be around next year unless Congress acts to extend them, which, at the present time, looks doubtful. These include, for individuals: the option to deduct state and local sales and use taxes instead of state and local income taxes; the above-the-line deduction for qualified higher education expenses; and tax-free distributions by those age 70- 1/2 or older from IRAs for charitable purposes.

Fiscal Cliff Would Be Avoided

The Senate has passed the American Taxpayer Relief Act of 2012, and the bill has been sent to the House where it is currently being reviewed. The Act's key changes follow:

  • Income taxes.The Act would keep the Bush's tax rates intact for individuals with taxable income under $400,000 ($450,000 for married taxpayers, $425,000 for heads of household). Income above these levels would be taxed at a 39.6% rate.
  • AMT patch.The Act would permanently patch the alternative minimum tax (AMT).

Social Security and Your Retirement

Social Security at some point will touch the lives of nearly all Americans. It is probably the only real pension most people have.  It is a defined benefit plan - the longer you live, the more you get. 

Will social security benefits be around in the future? 

A research shows that there will be enough funds to pay full benefits till 2036. Without reform, the benefits will be reduced to 77% in 2036. The baby boomers will not likely to be affected by social security reform. 

When to take social security benefits?

AZ Tax Credits

1 - Charitable Contributions (Working Poor) Tax Credit

  • Maximum $200/yr (single) or $400/yr (married filing jointly) .
  • Your donations must be received by the agency by December 31, 2012 to be able to take the credit for 2012.
  • You have to itemize deductions on your Arizona return in order to get this tax credit.
  • The charity knows if they qualify for the tax credit.

2 - Public School Tax Credit

  • Maximum $200/yr (single) or $400/yr (married filing jointly).
  • In order to take the tax credit, your donations must be received by the school by December 31, 2012.

IRS Penalty and Relief

1. Failure to file penalty. It is usually 5% of the unpaid taxes for each month or part of a month that a tax return is late. This penalty will not exceed 25% of the unpaid taxes. If a taxpayer files his tax return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100% of the unpaid tax.

2. Failure to pay penalty. It is one-half of one percent of the unpaid taxes for each month or part of a month after the due date that the taxes aren't paid.

2011 New Tax Law - Specified Foreign Financial Assets Disclosure Requirement

Under the HIRE Act, individuals whose total specified foreign financial assets exceed $50,000 (single) or 100,000 (married filed jointly) must complete Form 8938 and attach it to their 2011 Form 1040.

A specified foreign financial asset is defined as:
  • Any financial account maintained by a foreign financial institution, and
  • Any stock or security issued by a person other than a U.S. person
  • Any financial instrument or contract held for investment that has an issuer or counterparty that is other than a U.

What are your chances for being audited?

IRS has issued its annual data bookhttp://www.irs.gov/pub/irs-soi/10databk.pdf, which provides statistical data on its fiscal year (FY) 2010 activities.

Of the 142,823,105 total individual income tax returns with a filing requirement, 1,581,394 were audited. This works out to roughly 1.1%. Of the total number of individual income tax returns audited in FY 2010, 473,999 (30%) were for returns with an earned income tax credit (EITC) claim.

Following are selected audit rates for individuals not claiming the EITC:

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