This presentation discusses the American Taxpayer Relief Act of 2012, better known as the “fiscal cliff” legislation, extended many key tax provisions from the Bush era for both individuals and businesses. Also addressed were the key tax provisions contained in this Act as well as a number of other tax planning issues that you should be aware of this year. This presentation was part of a CPE webinar. Full details at http://www.macpas.com/webinar-recap-2013-tax-update/. More info at www.macpas.com

1. 2013 Tax Update
Daniel Matarrese, CPA
Michael Eby, CPA

2. Welcome
Dan Matarrese, CPA Michael Eby, CPA
Tax Manager Tax Supervisor

3. Ordinary Income Rates
• 10%, 15%, 25%, 28%, 33%, and 35% tax brackets are made permanent;
• Added 39.6% rate after 2012 – thresholds are:
• $450,000 for married-filing-jointly and surviving spouses
• $425,000 for head-of-households
• $400,000 for singles;

4. Long Term Capital Gain
• Current
• Two lowest tax brackets pay 0%
• Everyone else pays 15%
• 2013
• Two lowest tax brackets pay 0%
• Those in the 25% - 35% bracket pay 15%
• Those in the highest bracket pay 20%
• Note: These rates apply to Qualified Dividends

5. Affordable Care Act – The 2013 Impact
• Additional Medicare Surcharge
• Applies to individuals with modified AGI greater than $200K, or $250K if married
• Additional .9% on earned income
• 3.8% on “net investment income”
• Note: Employers must withhold the additional tax from wages paid in excess
of $200,000, without regard to the person's filing status.

6. Alternative Minimum Tax
• For 2012, Exemptions amounts are increased to:
• $78,750 for married couples filing jointly
• $50,600 for single individuals
• $39,375 for married filing separate
• Amounts are set to permanently increase for inflation

7. Itemized Deduction Phaseout Restored
• For tax years beginning after Dec. 31, 2012, overall limitation on itemized
deductions applied when AGI exceeds:
• $300,000 (joint returns)
• $275,000 (head of household)
• $250,000 (single filers)
• The total amount of itemized deductions allowed is reduced by 3 cents for
each dollar of AGI in excess of the above amounts. A taxpayer can't lose
more than 80% of his deductions as a result of the limitation.

8. Exemption Phaseout Restored
• For tax years beginning after Dec. 31, 2012, Personal exemption phaseout (PEP)
applies when AGI exceeds
• $300,000 (joint returns)
• $275,000 (head of household)
• $250,000 (single filers)
• A taxpayer's personal exemption amount is reduced by 2% for
each $2,500 ($1,250 for married filing separately), or fraction
thereof, by which the taxpayer's AGI exceeds those thresholds

9. Estate & Gift Tax
• 2012 estate, gift and GST tax rules made permanent, but top rate increases
from 35% to 40%
• 2012 Estate Exemption: $5,120,000
• 2013 Estate Exemption: $5,250,000
• Portability of Exemption is made permanent

10. Fixed Assets & Depreciation
• Section 168(k) “Bonus” Depreciation
• 50% of qualifying assets
• Auto limit increased by $8,000
• AMT credit in lieu of bonus depreciation
• All are extended to 2013
• Section 179 Deduction
• Expanded deduction - $500,000
• Expanded phase-out limit - $2 million
• Retroactive to 2012 in addition to 2013 extension

11. Fixed Assets & Depreciation (cont.)
• Favorable Tax Treatment of Certain Improvements
• Qualified leasehold improvements, qualified restaurant buildings and improvements and
qualified retail improvements
• 15 year straight-line life
• Eligible for “Bonus” depreciation
• Retroactive to 2012 in addition to 2013 extension
• IRS Amended Temporary Repair vs. Capitalization Regulations (IRS Notice 2012-73)
• Requirements delayed until January 1, 2014
• Provides the option to apply temporary regulations in 2012 and 2013 tax years.

12. Business Tax Credits/Deductions
• Research & Development (R&D) Tax Credit
• Credit base further increased for acquisition
• Retroactive to 2012 in addition to 2013 extension
• Work Opportunity Tax Credit (WOTC)
• Available for hiring certain veterans and non-veterans
• Retroactive to 2012 in addition to 2013 extension
• Low-income housing tax credit minimum 9% rate extended

13. Business Tax Credits/Deductions (cont.)
• Enhanced Deduction for Food Inventory
• Extended to 2013
• Equal to lesser of:
• Property’s basis plus one-half appreciation, or
• Twice the basis of the property
• Cannot exceed 10% of aggregate income
• Domestic Production Activities Deduction (Section 199) Puerto Rico qualifying activities
extended
• Many energy-related tax provisions extended!

14. Other Business Provisions in the ATPR Act
• S Corporation built-in-gains (BIG) tax
• Reduced to 5 year lookback
• Retroactive to 2012 in addition to 2013 extension
• 20% capital gains/“qualified” dividends rate for top marginal tax bracket individual
taxpayers (plus 3.8% Medicare tax for MFJ with income > $250k)

15. New Business Provisions outside ATPR Act
• 1099-K reporting payment card and third party network transactions
• 2.3% excise tax on medical devices
• Beginning January 1, 2013
• Imposed on importers and manufacturers of such devices
• Business Standard Mileage rate is 56.5 cents in 2013
• Repair vs. Capitalization regulations

16. Pennsylvania Update
• Form 1099-MISC for Pennsylvania
• Reporting PA sourced payments for nonemployee compensation and oil & gas leases
• Similar provisions to the IRS reporting requirements
• Effective beginning in 2012 tax year
• Department of Revenue Computer Modernization Project
• New PA tax account number in March 2013
• Corporate tax ledgers will no longer be available
• Capital Stock/Foreign Franchise Tax phase-out

17. Upcoming Webinars
• View all upcoming events at www.macpas.com/events
• Accounting and Auditing Update Webinar
• Thursday, February 21 | 2:00PM-3:00PM
• Skimming: The Auditor’s Miss Webinar
• 2013 | Thursday, March 21 | 2:00PM-3:00PM
• Professional Ethics Webinar
• 2013 | Thursday, April 18 | 2:00PM-3:00PM

18. Questions
Dan Matarrese, CPA Michael Eby, CPA
Tax Manager Tax Supervisor