Kossel and Associates, Inc.

Douglas A Kosse, E.A. Enrolled to practice before the IRS

Tax Increases Coming

I think we all know by now that there are some hidden tax increases in the Health Care Education Affordability Reconciliation Act patient Protection and Affordable Care Act (long title).  Effective 1/1/2013 we will see the medicare tax increase from 1.45% to 2.35% on wages above $250,000(MFJ)/$200,000(Single).  We will also see a 3.8% medicare tax on investment income for the same taxpayers.  Starting in 2011, Capital Gains has gone up from 15% to 20% and Dividends go from 15% up to as much as 39.6%.  Along with this we will see a 3% AGI Itemized Deduction Phase out.  I am sure we will see some additional attempts to raise the taxes on those that show an income of $250,000(MFJ)/$200,000(Single). 

Every single client that I have in this income range are small business owners that are trying to stay above water, working 60, 70 or 80 hours or more a week.  Spending many hours per week just to keep some regulator or state agency happy by filling out paperwork, forms, submitting to audits and inspections.  Many want to expand and grow their businesses, but have a hard time justifing the return on the time that they spend in the business.  Yet, their are those in this country that believe they should take more of their money and give it to the goverment so they can hand it out to people that have become use to living on handouts. 

I think these people are missing something in how everything works.  The group that could be the most effective in getting this country out of the problems that we have are being pressured to give up more of what resources that they have to others that won’t do anything productive with those resources.  This is excluding the enormous amount of time that is wasted on all the regulations they have to put up with.

Eight Things to Know if you Recieve an IRS Notice

Every year, the IRS sends millions of letters and notices to taxpayers. Many taxpayers will receive this correspondence during the late summer and fall. Here are eight things every taxpayer should know about IRS notices just in case one shows up in your mailbox.

1.     Don’t panic. Many of these letters can be dealt with simply and painlessly.

 2.     There are number of reasons the IRS sends notices to taxpayers. The notice may request payment of taxes, notify you of a change to your account or request additional information. The notice you receive normally covers a very specific issue about your account or tax return.

 3.     Each letter and notice offers specific instructions on what you are asked to do to satisfy the inquiry.

 4.     If you receive a correction notice, you should review the correspondence and compare it with the information on your return.

 5.     If you agree with the correction to your account, usually no reply is necessary unless a payment is due.

 6.     If you do not agree with the correction the IRS made, it is important that you respond as requested. Write to explain why you disagree. Include any documents and information you wish the IRS to consider, along with the bottom tear-off portion of the notice. Mail the information to the IRS address shown in the upper left-hand corner of the notice. Allow at least 30 days for a response.

 7.     Most correspondence can be handled without calling or visiting an IRS office. However, if you have questions, call the telephone number in the upper right-hand corner of the notice. Have a copy of your tax return and the correspondence available when you call to help us respond to your inquiry.

 8.     It’s important that you keep copies of any correspondence with your records.

 If you receive a notice, contact your tax advisor immediately, don’t wait.