Tips on Year End Charitable Giving

The IRS has just released its annual “Tips for Year-End Giving”.

The notice includes guidelines for deductible contributions, the special rules for contributions of clothing and household goods, some useful reminders and other information.

There’s also a section on “Special Tax-Free Charitable Distributions for Certain IRA Owners”. We covered this in last week’s Blog, which you can find at

The IRS also has a searchable online database that lists most eligible charitable organizations. Churches, synagogues and other religious organizations are not listed in the database but are eligible charitable organizations.   

You can find the notice at

Tax Planning for IRA Charitable Gifts

This might be last call for a popular tax savings strategy, the so-called “IRA charitable rollover”, (technically a Qualified Charitable Distribution, or “QCD”).

This provision allows those who are 70½ or older to give away as much as $100,000 a year from their individual retirement accounts directly to eligible charities, without having to include any of the transfer as part of their gross income. The transfer must be made directly from the IRA to the charity.

The IRA charitable rollover offers several significant tax advantages.

The rollover is excluded from taxable income, but counts towards an individual’s annual required minimum distribution.

And since the amount is not included in adjusted gross income (AGI), the distribution doesn’t increase so-called “back door” taxes, including the phase out of itemized deductions and personal exemptions.

The IRA charitable rollover expires at the end of this year. Whether it is extended remains to be seen.

Sen. Max Baucus, Chairman of the Senate Finance Committee, recently said recently there will be no broad “extenders bill” this year – and that each tax break will be considered on a case-by-case basis as part of overall tax reform.

A Busy Week in Washington

Congressional leaders are working on a budget deal aimed at avoiding a January 15 government shutdown. The deal might be voted on as soon as Wednesday, as the House is scheduled to leave town this Friday.

The deal could include raising airline passenger fees, overhauling federal pension programs and selling off spectrum to address the soaring demand for bandwidth.

The revenue would be in exchange for suspending some automatic spending cuts under the sequestration agreement.

The budget deal does not appear to address expiring tax provisions, including the research tax credit, bonus deprecation and the Section 179 expense deduction.

An extension of the exclusion for IRA distributions made for charitable purposes is still in limbo as well.

More on that tomorrow.

Reminders on Year-End Tax Planning

This year the maximum federal tax rate on long term gains is 23.8%. That includes the 20% capital gains tax plus the new 3.8% Medicare tax on net investment income.

The Medicare tax generally applies to married taxpayers with adjusted gross income exceeding $250,000. The tax imposed is based on the lesser of net investment income or the amount of modified adjusted gross income exceeding $250,000.

The Bush tax rates are gone – and the higher 35% and 39.6% tax rates are back.The “back door” taxes are with us again, including the phase out of itemized deductions and personal exemption allowances for higher income taxpayers.

Add it all up, and year end tax planning is more complicated than in years past. That’s especially true for investors and business owners with “flow through” companies (where the income is taxed on the owner’s individual return).

There’s still time to review your 2013 tax situation to minimize your taxes and avoid surprises next April.

But time’s running short.

Year-end Tax Planning for Business

Is this last call for some popular business tax incentives?

The 2012 Taxpayer Relief Act extended the 50% Bonus Depreciation deduction to qualifying property acquired and placed in service before January 1, 2014.

The 2012 Act also extended the “Sec. 179 Expense Deduction” through 2013. The maximum deduction this year is $500,000, and is set to drop to $25,000 next year.

There’s been no legislative action to extend either tax provision. And there’s no fiscal cliff deadline looming between now and year end.

Bonus Depreciation and the Sec. 179 Expense Deduction can have a significant impact on lowering your 2013 tax bill. That’s especially true this year with the higher tax rates that are now in effect.

You can call us at 630-665-4440 or e-mail me at to discuss your year-end tax planning situation.

Health Insurance Navigators Working Overtime

The Navigators were working overtime yesterday as millions of Americans started shopping for health insurance on insurance exchanges.

Health Insurance Navigators have been set up to help consumers, including individuals and small employers compare the health insurance options under the new law.

And the Department of Health and Human Services has published a comprehensive manual to help the Navigators do their job.

“The Health Insurance Marketplace Navigator Standard Operating Procedures Manual” offers helpful tips on how to protect consumer’s “personally identifiable information” and confidential tax return information.

Like this tip: “Do not leave documents that contain PII or tax return information on printers and fax machines” (Sec. 2.4.3)

Section 2.2 offers Customer Service Best Practices.

Like this one:

Listen: “By not listening you can become very frustrating to consumers.” (Sec. 2.2.3)

I didn’t see any reference to “Seek First to Understand, Then to Be Understood” – Steven Covey’s Habit #5 from “The 7 Habits of Highly Effective People”. But, to be fair, I didn’t read all 217 pages of the Manual.

You can find the Manual at

You might pick up some helpful tips for your organization’s employee manual.

Grand Opening for the Health Insurance Marketplace

The federal government shut down at midnight, but the health insurance exchanges opened for business today.

Some websites are reporting glitches today, but I got through around 6:15 this morning without a hitch at

Enter your zip code, and if you live in Illinois you’ll see 6 companies that are participating in the Illinois marketplace.

They ask for your name, address and phone number. I used a fake name and a local retailer’s address and phone number. You have to summit an e-mail address for the application to go through. I used .

They also ask for your age, weight and height. I “applied” for insurance as a lean & mean 26 year old in good health.

The lowest cost option was a United Health One policy with a $10,000 annual deductible and a $50.07 monthly premium. Office visits are not covered. Prescription drugs have limited coverage and discount cards are available. You need to closely read the terms of coverage and policy exclusions.

The highest cost option was Humana Enhanced HAS/1500 with a $1,500 annual deductible and a $210.40 monthly premium. Office visits are covered as are prescription drugs, with varying levels of copays for both. Again you need to read the fine print.

I didn’t check out the Live Chat 24/7 and I didn’t add anything to my Shopping Cart. For what it’s worth, the websites say they’re secure. We report – you decide.

Happy shopping!

Update on the 3.8% Medicare Tax

Is the 3.8% Medicare Tax “America’s Nightmare”?

I’m not sure about that – but Form 8960 might be, at least according to Forbes.

Form 8960 is used to compute the new 3.8% Medicare Tax on net investment income that was enacted as part of Obamacare.

Google Form 8960 and you get “About 1,520,000 results (0.24 seconds)”. 

Topping the list is a Forbes article that notes “America’s long national nightmare is finally over: the IRS has released the draft form — Form 8960”.

The draft form is long overdue, since the law was passed back in 2010, and the tax is in effect as of January 1, 2013.  

Unfortunately, the form was released without instructions. So no one is really sure how the tax is applied in some circumstances involving pass thru entities, rental real estate, and gains and losses from certain property dispositions.

Although some areas need further IRS clarification, we’re already geared up to assess your Medicare Tax exposure, so give us a call.

You can find the Forbes article at

Disaster Planning and Business Continuity

Time was running out for children’s magician Marty Hahne.

Earlier this summer, the USDA advised Hahne that under federal regulations, he needed a written disaster plan for his rabbit. The plan had to be completed by July 29 – or else.

The USDA wanted to know how Hahne would protect his rabbit during a disaster, and what he would do after the disaster, to make sure the rabbit gets cared for properly.

Sanity finally won out after an online story by the Washington Post. On Tuesday Secretary Tom Vilsack ordered his department to immediately review the order and make sure that “common sense be applied.”

I was getting nervous since we have a pet rabbit at home, Dusty. I’m not a magician, and Dusty doesn’t work much, but you never know what the bureaucrats will do next.

You can find Hahne at .

And you can learn more about disaster planning for your business at .

And for business continuity plans check out .

Security Breach and Notification Law

Last month, Senator Pat Toomey introduced the Data Security and Breach Notification Act of 2013 (S.1193).

The bill would require businesses and government agencies to “take reasonable measures to protect and secure data in electronic form containing personal information.” The Federal Trade Commission would enforce the legislation, and could fine organizations that violated the law up to $500,000 per incident.

The draft legislation is also aimed at creating a single national standard for reporting data breaches. If enacted, the law would supercede existing state laws on the books.

Currently over 40 states have security breach notification laws. The laws generally include detailed customer identification and notification requirements in the event of a breach of personal information, for example, social security numbers.

Some insurance companies now offer “cyber security” policies that cover financial losses in the event of a security breach. Some policies also offer “Privacy Notification Expense” coverage for the expense of preparing and sending the notifications and “Crisis Management Expense” coverage for professional fees, including legal, forensic and public relations.

You can find out what the law is in your state at

Your insurance agent can help you determine what coverage you may already have under your general liability policy – and help assess what type of additional coverage you should consider.