The affluent are getting caught off guard as Tax Day draws near, say Ventura County-area accountants.
“The theme of 2013 is more taxes on the wealthy,” said Chris Housel, a partner in the Camarillo accounting firm of Farber Hass Hurley LLP.
Thousand Oaks accountant Marilyn Doyle said her high-income clients are asking: “Why do I owe more this year when everything’s the same?”
The answer can be found in changes to the tax code that came about with the enactment of the Affordable Care Act. Among the revisions is a phaseout of certain itemized deductions and personal exemptions. For example, a couple with adjusted gross earnings of $450,000 would see their itemized deductions drop from $89,500 to $85,000, according to H&R Block. Increases in
Medicare taxes, and new tax rates on net investment income are also contributing to higher taxes for the well-to-do. But prosperous taxpayers also are benefiting from more favorable gift and estate taxes, like the permanent extension of no estate tax on estate assets less than $5.25 million.
As for the middle class, there’s not a lot that’s different this year.
“For everyone else, it’s business as usual,” Housel said.
But he said the one exception is that this is the first year that the IRS is accepting joint returns from same-sex married couples.
The change comes after the U.S. Supreme Court decision last summer in United States v. Windsor, which struck down the federal prohibition against gay marriage. The U.S. Department of the Treasury and IRS ruled in August that legally married same-sex couples will be treated as married for federal tax purposes. The ruling applies even if the couple lives in a jurisdiction that does not recognize same-sex marriages.
“To me, that was the biggest monumental change,” Housel said of this year’s changes for personal income tax filers.
Aaron Martinez, a tax adviser with H&R Block in Beverly Hills, said a lot of his clients have been confused about the tax code changes, but overall the return process has been trouble-free.
“This year, it’s been really, really smooth,” he said. “I wish every tax season was like this one.”
At Doyle’s office, a trend she has noticed among her clients is more people applying for early Social Security instead of waiting for full retirement age because they’ve lost their job or business.
“I think the statistics will bear out that the recession hit those 55 and over heavily such that they opted for early retirement,” she said.
As of March 14, the Internal Revenue Service had received about 75 million of a projected 149 million individual tax returns, more than half of all the expected for the year, according to the agency. Tax returns are due Tuesday.
Mid-March figures show the average tax refund is up 1.9 percent to $2,917, compared with last year. It also shows tax returns are being filed at a slightly faster rate than they were last year. And the IRS is processing returns 5.8 percent faster than it did last year.
Nearly 6 percent more people had self-prepared their e-returns as of mid-March than had by mid-March a year ago, and 1.8 percent fewer people are using tax professionals to e-file, according to the IRS. But Housel said those numbers are likely skewed because most tax firms wait to focus on individuals until after they’re done handling corporations’ filings, which are due March 15.
©2014 Ventura County Star (Camarillo, Calif.)