Sullivan & Company - Certified Public Accountants 4709 Montgomery Lane #201 - Bethesda, MD, 20814 Phone: 301-657-8080



Financial Services by Sullivan & Company

Kathy Grow EA/IAR

Financial services are now offered at Sullivan & Co., CPAs.  The story WHY:


You may wonder why your accounting firm wants you to invest with them. Years ago, CPAs were not allowed to venture into the investment world, but it always bothered us to see how poorly our clients were treated at their broker. It is not that the broker was not nice or attentive; it was the quality of the investments and, oftentimes, the lack of understanding for how the investments were going to affect the client in the future.


The amount of commissions and fees were oftentimes much larger than the client realized. Principles taught in universities were ignored by greedy advisors. Some forward thinking CPAs worked hard to get the accounting industry to see that we could, at the least, counsel our clients so that their investing experience was successful.


Our function is to work with you in all areas of your financial life. We prepare your tax returns and financial statements, of course, but there's a lot more decisions you make that we should be involved in. These include: succession planning for business owners such as HOW TO:

1) Sell your business

2) Retire comfortably

3) Handle your finances now that you are divorced or widowed

4) Provide for loved ones if you die

5) Pay for the education of your children

6) Determine if a trust is right for you

7) Minimize estate taxes


Worse than hearing that the IRS is going to audit is the call from a client who has plunged into an investment, whether stocks, bonds or another home without consulting us first.


Sometimes these decisions have unfortunate results and are difficult or impossible to undo. So, in response to this need, your CPA firm has well trained accountants and financial services professionals to help you navigate the financial world..

For a free review of your investments, give me a call at 301 657-8080 X 135.




Paul Sullivan, CPA

Sullivan & Company


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This Month's Feature Articles

- Net Investment Income Tax: What You Need to Know
- Sell Your Home But Keep the Profits
- Eight Ways Children Lower Your Taxes
- Starting a Business? Three Things You Must Know

Tax Tips

- Start Planning Now for Next Year's Tax Return
- 6 Facts on Tax Refunds and Offsets
- Are Your Social Security Benefits Taxable?
- 8 Facts to Know if You Receive an IRS Letter


If your CPA isn't providing this type of information to you as a

client each month, maybe it's time to talk with or switch to Paul

Sullivan at Sullivan & Company CPAs.  To set up an appointment to

talk with Paul at 800-652-6521 or in Bethesda call 301-657-8080.

New IRS Net Investment Income Tax: What You Need to Know


Now that the 2012 tax season is over, it's time to focus on tax planning for 2013.


One of the most significant tax changes this year is the Net Investment Income Tax (NIIT), which went into effect on January 1, 2013 as a result of health care reform enacted in 2010. Here's what you need to know.

What is the Net Investment Income Tax?

The Net Investment Income Tax is a 3.8% tax on certain net investment income of individuals, estates, and trusts with income above statutory threshold amounts, referred to as modified adjusted gross income (MAGI).

What is Included in Net Investment Income?

In general, investment income includes, but is not limited to: interest, dividends, long and short term capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities, and passive business activities such as rental income or income derived from royalties.

What is Not Included in Net Investment Income?

Wages, unemployment compensation, operating income from a nonpassive business, Social Security Benefits, alimony, tax-exempt interest, self-employment income, Alaska Permanent Fund Dividends, and distributions from certain Qualified Plans are not included in net investment income.


Individuals whose modified adjusted gross income exceeds $250,000 (married filing jointly) or $200,000 (single filers) are taxed at a flat rate of 3.8% on investment income. Net Investment Income Tax is paid in addition to other taxes owed and threshold amounts (e.g. $200,000 for single filers) are not indexed for inflation.

Non-resident aliens are not subject to the tax; however, if a non-resident alien is married to a US citizen and is planning to file as a resident alien for the purposes of filing "married filing jointly" tax return, there are special rules. Please consult us if you have any questions.

Because investment income is generally not subject to withholding, taxpayers should be aware that the NIIT might affect tax liability for the 2013 tax year. In addition, it's possible that even lower income taxpayers not meeting the threshold amounts could be subject to the tax if they receive a windfall such as a one-time sale of assets that bumps their MAGI up high enough.

Give us a call if you are expecting a windfall this year. We'll help you come up with a strategy such as an installment sale, minimizing AGI, or figuring out the best timing for sale, that will help you to avoid or minimize taxes when you file your 2013 return next year.

Sale of a Home

The Net Investment Income Tax does not apply to any amount of gain excluded from gross income for regular income tax purposes ($250,000 for single filers and $500,000 for a married couple) on the sale of a principal residence.


In other words, only the taxable part of any gain on the sale of a home has the potential to be subject to NIIT, providing the taxpayer's income is over the MAGI threshold amount.

Estates and Trusts

Estates and Trusts are subject to the Net Investment Income Tax if they have undistributed net investment income and also have adjusted gross income over the dollar amount at which the highest tax bracket for an estate or trust begins for such taxable year. In 2013, this threshold amount is $11,950.

Special rules apply for certain unique types of trusts such a Charitable Remainder Trusts and Electing Small Business Trusts, and some trusts, including "Grantor Trusts" and Real Estate Investment Trusts (REIT) are not subject to NIIT at all.

It should be noted that non-qualified dividends generated by investments in a REIT are considered taxable income and taxed at ordinary tax rates. As such, they may be subject to the Net Investment Income Tax.

If you need guidance on the topic of Net Investment Income Tax and estates and trusts, don't hesitate to call us.

Reporting and Paying the Net Investment Income Tax

Individual taxpayers should report (and pay) the tax on Form 1040. Estates and Trusts report (and pay) the tax on Form 1041.

Individuals, estates, and trusts that expect to pay estimated taxes in 2013 should adjust their income tax withholding or estimated payments to account for the tax increase in order to avoid underpayment penalties. For employed individuals, NIIT is not withheld from wages; however, you may request that additional income tax be withheld. Call us if you need assistance with this.

Wondering how the new tax affects you?  Give us a call at 301-657-8080. It's never too early to start tax planning!



    Financial Services at Sullivan & Company, CPAs

Kathy Grow leads our Financial Services Division and is here to help you navigate your financial future. As an Investment Advisor Representative, she is able to provide an independent opinion on the investments you already own or are considering buying.


We can structure a portfolio based on your risk tolerance or we can help you decide how to invest in your company 401(k) plan. We work with each client to identify their concerns and to provide solutions according to their situation.

Kathy is also experienced in company retirement plans. If you own a business that does not have a plan; we can discuss your options and set up a plan that fits your company.


If your business already has a plan; we offer a free evaluation of the plan to ensure that it is up to date and working well for you and your employees.

Our goal is to provide personal, unbiased and independent advice to help you make well-informed decisions about your financial life and investments.

Contact Kathy Grow or Jordana Para to set up a free initial consultation (301) 657-8080.

And as always if you have any questions about accounting or investments and how they effect you or your business, please give us a call at (240) 316-3564. We can help guide you in the right direction.



Remember you can call our offices if you have any questions about these or any other accounting, tax, financial planning or insurance related issues, at 301-657-8080. 


Regards, Paul Sullivan, CPA

President, Sullivan & Company





Sullivan & Company, CPAs | 4709 Montgomery Lane | Bethesda, MD 20814 | email: | Like Us on Facebook

Direct: 240-316-3531 | Main no.: 301-657-8080 Ext 102 | Fax: 301-657-9055