January 17, 2014 You Just Can’t Make This One Up In September, John Beale, the senior policy advisor in the Environmental Protection Agency’s Office of Air and Radiation which develops policies and regulations related to air pollution and climate change pleaded guilty to theft of government property and agreed to pay $886,186 in restitution and to forfeit another $507,207 and serve 32 months in prison. His crime, being paid for long absences from work by pretending to be a secret agent. He told his EPA colleague he was a CIA operative while he was on imaginary missions for “Langley.” In case you agree with me that the man, who was instrumental in formulating the EPA Clean Air regulations for over 20 years, was slightly off his rocker, there is no mention that his work at the EPA was the product of careful and honest analysis rather than of his lies. What Congress should examine is whether the policies that the EPA shaped to a large degree by Beale were also based on fraud and lies. And, by the way, who should take the fall for not overseeing the regulators? Wall Street Journal 12/20/13 p. A18. HAPPY NEW YEAR!! The following tax rates and amounts are effective for 2014: OASDI rate for employees remains at 6.2%. The wage base rises $3,300 to $117,000 from $113,700. Medicare rate remains at 1.45% for employers. The employee portion is 1.45%, and a 0.9% Medicare surtax on earned income will be calculated on single filers with wages over $200,000 and married filers with wages over $250,000 as part of health care reform. There is a 1.5% cost of living hike for Social Security beneficiaries this year. The maximum earnings one can earn before social security benefits will start to be withheld is $41,400 for those under age 66. Those between age 62 and age 66 can earn $15,480. For each $2 earned above that, $1 of benefits is lost. There is no limit on earnings for those older than 66. The retirement age for social security continues to rise this year. Those turning 62 this year are affected. They will get reduced benefits if they start receiving payments before they attain age 66. Personal exemptions rise $50 to $3,950. Personal exemptions will phase out for single filers with income over $254,200andjointfilers with income over $305,050. Standard deduction rises to $12,400 plus $1,200 for each spouse 65 or older. For children age 14 who must file returns, it risesto$1,000. Income tax rates will be 10%, 15%, 25%, 28%, 33%, 35%, and 39.6% for single taxpayers earning over $406,750 or married taxpayers earning over $457,600. The 20% top rate for long term capital gains and qualified dividend starts at a higher level for2014;singles with taxable income over $406,750 and joint filers above $475,600. For those earning less than the thresholds, the tax rate has remained at 15%. Under the 2010 health care law, the new 3.8% Medicare net investment income tax remains effective for single taxpayers earning more than $200,000 and married taxpayers earning more than $250,000. Alternative Minimum Tax rate remains at 26% on the first $182,500 of income for marrieds and 28% over that. Exemptions from the minimum tax will rise in 2014 to $82,100 for couples and $52,800 for singles. Back up withholding rate remains at 28%. 401(k), 403(b), and 457 contribution pay-in limitation remains at $17,500, with $5,500 additional for employees 50 and older. Ceiling on SIMPLE plans stays at $12,000 but folks age 50 or older can put in an additional $2,500 in 2014. Maximum level of pay on which pay-ins to plans can be based upon rises to $260,000 with the maximum pay-in for defined contribution plans rising to $52,000. Percentage of compensation that can be put in remains at 100%. Profit Sharing percentage remains at 25%. Benefit limit rises to $210,000. Business meal and entertainment deductibility remains at 50%. Federal estate and gift tax exemption increases to $5,340,000 from $5,250,000. The maximum Estate and Gift rate remains at 40%. Maximum amount of equipment eligible for expense election for small businesses is reduced to $25,000 from $500,000 of assets with useful lives of 20 years or less. 50% bonus depreciation is eliminated. Simplified per diem allowances are up slightly. Phaseout for IRA deductions start at $96,000 and ends at $116,000 for couples. Phaseout for singles is from $60,000 to $70,000.If only one spouse is covered by a plan, the phaseout zone for deducting a payin for the spouse who is not covered begins at $181,000 of AGI and ends at $191,000. Contribution limit remains at $5,500. If 50 or older, can contribute up to $6,500. The interest exclusion on U.S. Savings Bonds redeemed to pay qualified higher education expenses starts to phase out at AGI above $113,950 for marrieds. Eligible portion of long term care premium rises to $4,660 for those age 71 and older, $3,720 between ages 60 and 70, $1,400 between ages 50 and 60, $700 from 40 to 50 and $370 for age 40 and under, deductible as medical expenses. Limit for tax-free payouts rises to $330 per day. Medicare Part B premium remains at $104.90 monthly for those singles with AGI under $85,000, maximum premium rate is $300.10 per month. The Nanny tax threshold rise to $1,900. No social security tax is due for domestics paid $1,900 or less this year. Itisnotindexed forinflation. FUTA is due whenever a domestic employee is paid $1,000 or more in a calendar quarter in the currentor prior year. The exemption from the Kiddie Tax for 2014 remains at $2,000. A parent will be able to elect to include a child’s income on the parent’s return for 2014 if the child’s income is more than $1,000 and less than $8,500 and the child needs to be less than 20. If earned income of child is less than ½ the support, age rises to 24. If Kiddie Tax applies, a child’s earned income over $2,000 is taxedat the parents’ marginal rate. Low and middle income savers can still get a tax credit of up to $1,000 for contributions made to IRAs and qualified plans. Credit disappears for marrieds when AGI hits $59,000, $29,500 for singles. Adoption tax credit increased to $13,190 of expenses, from $12,770. Phaseout starts at $197,880 AGI. The Lifetime Learning credit phaseout for MFJ starts at $108,000, $54,000 for singles. Gift tax exclusion remains at $14,000 per donee for gifts made in 2014. The limit on deducting payins to Health Savings Accounts rises to $6,550 for family coverage and $3,300 for individual coverage. Account owners born before 1960 can put in an additional $1,000. Ceiling on out of pocket cost rises to $12,700 for family coverage and $6,350 for individual coverage. HSAs can be rolled into IRAs. Bonus rate or flat rate withholding for supplemented wages less than $1,000,000 remains at 25%. If more than $1,000,000 the rate rises to 39.6%. Monthly limitation on tax-free parking goes up to $250 and the cap on transit passes and commuter vans falls to $130 per month. Companies can deduct 9% of income from U.S. production activities. U.S. production activities in Puerto Rico are eligible for the deduction. U.S. taxpayers working abroad have a higher exclusion, $99,200, up from $97,600. Landlords must file 1099s if they pay a service provider $600 or more. Federal minimum wage remains unchanged at $7.25, food service employees, $2.13. New Jersey is $8.25 and New York Minimum wage is $8.00. New York tipped employees are $5.65, $5.00 for food service workers. Connecticut minimum wage is $8.70, tipped employees $5.69. Pennsylvania minimum wage is $7.25 with tipped employees $2.83. Credit and Debit Card companies will continue to issue 1099s on payments made to merchants in 2014. Third party networks such as Paypal will issue 1099s to payees with over 200 sales transactions and more than $20,000 in sales income. S Corporations and partnerships will continue to owe a penalty of $195 per owner or partner per month for up to 12 months for failure to file on time. High income taxpayers can continue to convert their IRAs to ROTHs. The $100,000 AGI cap is gone. Nearly all businesses must wire tax deposits to the IRS. Standard mileage allowance for business decreases to 56¢ per mile. 23.5¢ a mile for medical purposes and job related moves, a ½¢ decrease. Remains at 14¢ per mile for charitable driving. 2013 income ceiling on ROTH IRA payins go up. Contributions phase out at AGIs of $181,000 to $191,000 for couples and $114,000 to $129,000 for singles. Mandatory health care payments under the Patient Protection and Affordable Care Act (Obamacare) are effective after 12/31/13. The tax for being uninsured is normally the higher of two amounts; $95 a person and $47.50 per family member under 18 years of age with a ceiling of $285 per family or an income based penalty of 1% of the excess of the household AGI over a minimum level of AGI; $10,150 for singles and $20,300 for couples. Tax Inequality In 2011, the top tax inequality 1% of filers paid 35.1% of all income taxes on 18.7% of total adjusted gross income. The highest 5% paid 56.5% of total income taxes. They had AGI of at least $167,728. The bottom 50% of filers paid just 2.9% of total federal income taxes due to substantial tax relief from the earned income credit. Kiplinger Tax Letter 12/20/13. NJ In The News Lately, the media is infatuated about whether Chris Christie allegedly causing a traffic jam in Fort Lee. No relationship is made to the current hit movie, American Hustle, which is also about New Jersey where in the 1970s, the FBI ran the sting Abscam operation using a money tossing fictitious sheik that ultimately resulted in the convictions of the Camden mayor, a U.S. senator and a U.S. congressman. What the media overlooks is that New Jersey politics is personal, bare knuckled, and often illegal. Of official note, the media overlooked the momentous election of reformer Steven Fulop as the mayor of Jersey City, which means, for the first time in one hundred years the massively corrupt Hudson County Democratic organization that was started by Frank Hague (see Boardwalk Empire’s first two seasons) no longer holds the purse strings of the city government. In the grand scheme of things that go on in New Jersey, we in New Jersey, regarding Chris Christie, have New Jersey advice to y’all…… FUHGETTABOUTIT! As always, if you have any questions about these or any other matters, do not hesitate to call us. Remember, We’re Here For You!