W. Edward Newton Jr., CPA, CFP | 13850 Ballantyne Corporate Place, Suite 500 | Charlotte, NC 28277 | 704-552-8689

 

 

 

Financial Services by Newton Financial Network

Ed Newton, CPA, CFP

As a Certified Financial Planner I recently attended a financial services workshop in Indianapolis, IN.

It was hosted by Archer Funds, the registered advisor firm we work through to provide financial advice to our clients here in the Charlotte / Mecklenburg County area.

This forum allowed for two days of learning and networking. Speakers included the President of Archer Funds, Troy Patton, who spoke on the state of the market.

Troy is known for understanding how world events and complex factors affect our U.S. Market.

Steve Demas, Portfolio Manager, spoke on client services. Steve has a long history of working with clients on their personal finances and individual investments before dedicating all of his time to researching appropriate investments for the Archer portfolios.

John Rosebrough, Chartered Financial Analyst, provided insight into the technical aspects of portfolio management.

Troy, Steve and John actively manage the Archer Funds and the portfolios that are built around these funds. We offer investment advice through our Newton Financial Network.

For a free review of your investments, give me a call at 704-552-8689 or download one of my 4 FREE reports on investing at my Newton Financial Network website.  Thanks!  Ed

 


 

 

Ed Newton, CPA


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Tax Breaks for Families and Students & Increased Medicare Payroll Tax

 

Recent legislation made permanent or extended several tax breaks for families. In addition, several education breaks were made permanent or extended.

 

Child Credit. For 2013 and beyond, the maximum credit for an eligible under-age-17 child (Child Credit) was scheduled to drop from $1,000 to only $500. The legislation permanently installs the $1,000 maximum credit.

 

Adoption Expenses. The Bush tax cut package included a major liberalization of the adoption tax credit and also established tax-free employer adoption assistance payments. These taxpayer-friendly provisions were scheduled to expire at the end of 2012. The credit would have been halved and limited to only special needs children. Tax-free adoption assistance payments from employers would have disappeared. The legislation permanently extends the more-favorable Bush-era rules.

 

Education Credit. The American Opportunity Credit, worth up to $2,500, can be claimed for up to four years of undergraduate education and is 40% refundable. It was scheduled to expire at the end of 2012. The legislation extends the American Opportunity Credit through 2017.

 

 

College Tuition Deduction. This write-off, which can be as much as $4,000 at lower income levels and as much as $2,000 at higher income levels, expired at the end of 2011. The legislation retroactively restores the deduction for 2012 and extends it through 2013.

 

Student Loan Interest Deduction. The student loan interest write-off can be as much as $2,500 (whether the taxpayer itemizes or not). Less favorable rules were scheduled to kick in for 2013 and beyond. The legislation permanently extends the more favorable rules that have applied in recent years.

 

Coverdell Education Savings Accounts. For 2013 and beyond, the maximum contribution to federal-income-tax-free Coverdell college savings accounts was scheduled to drop from $2,000 to only $500, and a stricter phase-out rule would have limited contributions by many married filing joint couples. The legislation makes permanent the favorable rules that have applied in recent years.

 



Increased Medicare Payroll Tax

The Medicare payroll tax is the primary source of financing for Medicare, which generally pays medical bills for individuals who are 65 or older or disabled.

 

Wages paid through December 31, 2012, were subject to a 2.9% Medicare payroll tax. Workers and employers pay 1.45% each.

 

Self-employed individuals pay both halves of the tax, but are allowed to deduct the employer-equivalent portion (i.e., 1.45%) for income tax purposes.

 

Unlike the social security payroll tax, which applies to earnings up to an annual ceiling ($113,700 for 2013), the Medicare tax is levied on all of an employee's wages subject to FICA taxes.

Beginning in 2013, individuals who have wage and/or self-employment income exceeding $200,000 ($250,000 if married, filing a joint return; $125,000 if married, filing separately) are subject to an additional 0.9% Medicare tax (i.e., 2.35% total) on their earned income exceeding the applicable threshold. The employer portion of the Medicare tax is not increased.

 

However, employers are required to withhold and remit the additional tax for any employee to whom it pays over $200,000. Companies are not responsible for determining whether a worker's combined income with his or her spouse makes the employee subject to the additional tax.

 

Therefore, many individuals (especially those who are married with each earning less than $200,000, but earning more than $250,000 combined) should adjust their federal income tax withholding (FITW) by submitting a new Form W-4 to the employer or make quarterly estimated tax payments to be sure they are not hit with an underpayment penalty when filing their income tax return each year.

Self-employed individuals who pay both halves of the Medicare tax (i.e., 2.9%) will pay a total Medicare tax of 3.8% on earnings above the thresholds. The additional 0.9% tax is not deductible for income tax purposes. Self-employed individuals should adjust their quarterly estimated income tax payments to account for this additional tax.

Married couples with combined incomes approaching $250,000 should keep tabs on their total earnings to avoid an unexpected tax bill when filing their individual income tax return. At this time, the threshold amounts ($200,000/$250,000) are not adjusted for inflation.

 

Therefore, it is likely that increasingly more people will be subject to the higher payroll taxes in coming years.

 


 

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As always you may call our offices if you have any questions about these or any other accounting, tax, financial planning or Quickbooks related issues, at 704-552-8689. 

 

Regards, W. Edward Newton Jr., CPA, CFP

Certified Public Accountant

 

 

 

W. Edward Newton Jr., CPA, CFP | Certified Public Accountant

13850 Ballantyne Corporate Place, Suite 500 Charlotte, North Carolina 28277 Phone: (704) 552-8689 | Email: ednewton@ednewtoncpa.com