On March 4, 2008, McClintock announced his candidacy for the U.S. House of Representatives in California’s 4th congressional district, which is hundreds of miles away from the district McClintock represented in the state Senate. The district’s nine-term incumbent, fellow Republican John Doolittle, did not seek re-election In typical GOTP fashion, why bother with rules (involving taking Calif. state pay for legislators who do not live in/near Sacramento)?: McClintock maintained that the payments were justified because his legal residence was in Thousand Oaks, in his State Senate district. He stated, “Every legislator’s [Sacramento area] residence is close to the Capitol. My residential costs up here are much greater than the average legislator because my family is here.” However, Ose’s campaign commercials argued McClintock does not own or rent in home in the 19th district, but uses his mother’s address. These attacks prompted a response from McClintock’s wife, Lori, who said McClintock stays with his mother in order to better care for her after she fell ill and after the death of her husband. Just when I thought his time under a rock was taking hold, he popped up on local news with his “take” on the sequester of all things. This guy is a radical with nothing other than his own pocket as his guiding light. It is pathetic that he is once again being given a voice.
Video: Will Higher Tax Rates Balance the Budget?
New Boehner budget offer: Lower tax rate for rich, cut Medicare
“The Republican letter released today does not meet the test of balance. In fact, it actually promises to lower rates for the wealthy and sticks the middle class with the bill. Their plan includes nothing new and provides no details on which deductions they would eliminate, which loopholes they will close or which Medicare savings they would achieve. Independent analysts who have looked at plans like this one have concluded that middle class taxes will have to go up to pay for lower rates for millionaires and billionaires. While the President is willing to compromise to get a significant, balanced deal and believes that compromise is readily available to Congress, he is not willing to compromise on the principles of fairness and balance that include asking the wealthiest to pay higher rates. President Obama believes – and the American people agree – that the economy works best when it is grown from the middle out, not from the top down. Until the Republicans in Congress are willing to get serious about asking the wealthiest to pay slightly higher tax rates, we won’t be able to achieve a significant, balanced approach to reduce our deficit our nation needs.”
Payroll Tax increases in 2013
All faculty and staff will notice an increase in the OASDI /EE taxes to a rate of 6.2% on earnings paid on or after January 1, 2013. The temporary rate reduction to 4.2% in effect during 2011 and 2012 for the employee portion of OASDI taxes expired at the end of 2012. The American Taxpayer Relief Act of 2012 did not extend this temporary tax cut for employees, so employees will pay the full rate of 6.2% for that portion of the Federal Insurance Contributions Act (FICA) tax. The maximum earnings subject to OASDI taxes are capped at $113,700 in 2013. In 2012, the cap was $110,100.
Unearned Income Medicare Contribution Tax
Even if the high-income portions of the 2001 and 2003 tax cuts are fully extended, the unearned income Medicare contribution tax’s arrival next year will raise the top rates on interest, dividends and capital gains 3.8 percentage points above this year’s levels. Or, if the high-income provisions are allowed to expire, it will push the top rates on interest, dividends and capital gains 3.8 percentage points above Clinton- era levels.”
Additional 0.9 percent Medicare tax on wages starts January 1st
For partners in a general partnership and shareholders in an S corporation, the tax applies to earned income that is paid as compensation to individuals holding an interest in the entity. Partnership income that passes through to a general partner is treated as self-employment income and is also subject to the tax, assuming the income exceeds the applicable thresholds. However, partnership income allocated to a limited partner is not treated as self-employment and would not be subject to the 0.9 percent tax. Furthermore, under current law, income that passes through to S corporation shareholders is not treated as earned income and would not be subject to the tax.
Proposed regs clarify the new 0.9% additional Medicare tax
Good news: The proposed regulations closely track FAQs the IRS issued last summer, so you don’t need to make many changes to your software to withhold this additional tax. And, since there’s no employer match, the regs follow the income tax withholding rules for adjusting over- or underwithholding of this tax. The regs also clarify the interplay between FICA and SECA. You may rely on these proposed regs until final regs are issued. (77 F.R. 72268, 12-5-12)
New Medicare Tax Goes Into Effect January 2013: Year
Deferred compensation is not generally subject to Medicare until it is vested and ascertainable. For defined benefit plans, this means that Medicare tax often is not paid until an employee terminates employment, when the total value of the plan benefit is ascertainable. For defined benefit deferred compensation plans that currently have vested and accrued benefits, the employee can electively pay FICA taxes presently for vested, accrued benefits on an estimated basis. If such early elections are made in 2012, the additional Medicare tax can be avoided for amounts accrued and vested this year. Early FICA inclusion will also exempt the future value of that amount from any additional FICA tax, including the additional .9 percent rate applicable to years after 2012.
HANYS Benefit Services: Questions and Answers on the Additional Medicare Tax
If a former employee receives group-term life insurance coverage in excess of $50,000 and the resulting income is in excess of $200,000, how does an employer report Additional Medicare Tax on this? The imputed cost of coverage in excess of $50,000 is subject to social security and Medicare taxes, and to the extent that in combination with other wages it exceeds $200,000, it is also subject to Additional Medicare Tax. When group-term life insurance over $50,000 is provided to an employee (including retirees) after his or her termination, the employee share of social security and Medicare taxes and Additional Medicare Tax on that period of coverage is paid by the former employee with his or her tax return, and is not collected by the employer. An employer should report this income as wages on Form 941, Employer’s Quarterly Federal Tax Return (or the employer’s applicable employment tax return), and make a current period adjustment to reflect any uncollected employee social security, Medicare, or Additional Medicare Tax on group-term life insurance. However, unlike the uncollected portion of the regular (1.45 percent) Medicare tax, an employer may not report the uncollected Additional Medicare Tax in box 12 of Form W-2 with code N.
“Increasing the Social Security Payroll Tax Base: Options and Effects o” by Thomas L. Hungerford
The Social Security Trustees project that the assets in the two Social Security trust funds will be exhausted in 2033, and after that, Social Security payroll tax revenue will cover about three- quarters of promised benefits. To help close Social Security’s long-term financing gap, some analysts have proposed increasing the Social Security tax base by raising the maximum taxable limit so that 90% of aggregate covered earnings are taxable (the percentage in 1982). CBO estimated that the maximum taxable limit would have had to been $186,000 in 2008, almost double the actual limit, so that 90% of covered earnings are taxable. They estimated that this policy could have increased payroll tax revenues by $503.4 billion over the 2010-2019 period. The Urban Institute reports that the Social Security Administration estimates the 2012 maximum taxable limit would have had to been $214,500 so that 90% of covered earnings were taxable. Since 1982, the ratio of taxable earnings to covered earnings has fallen from 90%, reaching 82.7% in 2007. 82.7% in 2007.
The Moment You Have All Been Waiting For: Payroll Tax Guidance for 2013
Additional Medicare Tax Withholding. In addition to withholding Medicare tax at 1.45%, employers must withhold a 0.9% Additional Medicare Tax from wages paid to an employee in excess of $200,000 in a calendar year. Employers are required to begin withholding Additional Medicare Tax in the pay period in which it pays wages in excess of $200,000 to an employee and must continue to withhold it each pay period until the end of the calendar year. Additional Medicare Tax is only imposed on the employee. There is no employer share of Additional Medicare Tax. All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold.
The American Taxpayer Relief Act of 2012
The Act did not affect the 3.8% Medicare tax which went into effect January 1, 2013. Thus, for single taxpayers with taxable income in excess of $200,000 and for joint filers with taxable income in excess of $250,000, the 3.8% Medicare tax applies to interest, dividends and other investment income as well as income from trades or businesses in which the taxpayer is a passive investor. For example, if a single taxpayer had $150,000 of W-2 income and $125,000 of net investment income, the tax would be assessed against $75,000 which is the excess of the $275,000 AGI over the $200,000 threshold amount for single taxpayers, and would result in an additional $2,850 tax liability.
Capital Gains and Dividend Income Tax Rates Scheduled to Increase in 2013: Added Impact of New Medicare Contribution Tax : Federal Taxation Developments Blog
The significant increase in capital gains rates and taxes on dividend income have already resulted in taxpayers attempting to realize gains or accelerated the receipt of dividends from closely held corporations before the end of this year. If the rates do increase, i.e., Congress does not resolve the fiscal tax cliff in a manner that reduces or eliminates the anticipated tax rate hikes, then the new tax rates will certainly have a widespread and dramatic effect on future tax planning for all taxpayers, including closely held businesses and investors. For example, many owners of appreciated real property may prefer to engage in tax-free exchanges instead of having a preference for cash sales. From a merger and acquisition standpoint, privately owned companies looking to sell out may want to either postpone the sale of its business or consider being acquire in a tax-free reorganization or perhaps engage in a joint venture which could be partially taxed to the extent cash is received. With higher rates also brings along a greater tax benefit from depreciation and other tax deductions, including tax credits. The change in rate structure may also affect the preferred entity form for many businesses particularly if the much talked about reduction in the corporate income tax rate occurs. There could be a wide disparity then in the rate of tax a regular or C corporation pays instead of a flow through entity used by individuals in operating a closely held business or professional service organization causing the entity owners to reassess the best tax form for doing business.