Dirty Dozen Tax Scams for 2013

The Internal Revenue Service has issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

“This tax season, the IRS has stepped up its efforts to protect taxpayers from a wide range of schemes, including moving aggressively to combat identity theft and refund fraud,” said IRS Acting Commissioner Steven T. Miller.

The following are the Dirty Dozen tax scams for 2013:

1. Identity Theft

Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information such as your name, Social Security number (SSN) or other id

Combating identity theft and refund fraud is a top priority for the IRS, and we are taking special steps to assist victims. For the 2013 tax season, the IRS has put in place a number of additional steps to prevent identity theft and detect refund fraud before it occurs. We have dramatically enhanced our systems, and we are committed to continuing to improve our prevention, detection and assistance efforts.entifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.

The IRS has a comprehensive and aggressive identity theft strategy employing a three-pronged effort focusing on fraud prevention, early detection and victim assistance. We are continually reviewing our processes and policies to ensure that we are doing everything possible to minimize identity theft incidents, to help those victimized by it and to investigate those who are committing the crimes.

The IRS continues to increase its efforts against refund fraud, which includes identity theft. During 2012, the IRS prevented the issuance of $20 billion of fraudulent refunds, including those related to identity theft, compared with $14 billion in 2011.

This January, the IRS also conducted a coordinated and highly successful identity theft enforcement sweep. The coast-to-coast effort against identity theft suspects led to 734 enforcement actions in January, including 298 indictments, informations, complaints and arrests. The effort comes on top of a growing identity theft effort that led to 2,400 other enforcement actions against identity thieves during fiscal year 2012. The Criminal Investigation unit has devoted more than 500,000 staff-hours to fighting this issue.

We know identity theft is a frustrating and complex process for victims.  The IRS has 3,000 people working on identity theft related cases – more than double the number in late 2011. And we have trained 35,000 employees who work with taxpayers to help with identity theft situations.

The IRS has a special section on IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490. More information can be found on the special identity protection page.

2. Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information.  This includes any type of electronic communication, such as text messages and social media channels.  The IRS has information that can help you protect yourself from email scams.

3. Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But, some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.

It is important to choose carefully when hiring an individual or firm to prepare your return.

This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs).

The IRS also has created a new web page to assist taxpayers. For tips about choosing a preparer, red flags, details on preparer qualifications and information on how and when to make a complaint, visit www.irs.gov/chooseataxpro.

Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

4. Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities, using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting and disclosure requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, 38,000 individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore will become increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS continues working on a wide range of international tax issues and follows ongoing efforts with DOJ to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The IRS has collected $5.5 billion so far from people who participated in offshore voluntary disclosure programs since 2009.

5. “Free Money” from the IRS & Tax Scams Involving Social Security

Flyers and advertisements for free money from the IRS, suggesting that the taxpayer can file a tax return with little or no documentation, have been appearing in community churches around the country. These schemes promise refunds to people who have little or no income and normally don’t have a tax filing requirement – and are also often spread by word of mouth as unsuspecting and well-intended people tell their friends and relatives.

Scammers prey on low income individuals and the elderly and members of church congregations with bogus promises of free money. They build false hopes and charge people good money for bad advice including encouraging taxpayers to make fictitious claims for refunds or rebates based on false statements of entitlement to tax credits. For example, some promoters claim they can obtain for their victims, often senior citizens, a tax refund or nonexistent stimulus payment based on the American Opportunity Tax Credit, even if the victim was not enrolled in or paying for college. Con artists also falsely claim that refunds are available even if the victim went to school decades ago. In the end, the victims discover their claims are rejected. Meanwhile, the promoters are long gone. The IRS warns all taxpayers to remain vigilant.

There are also a number of tax scams involving Social Security. For example, scammers have been known to lure the unsuspecting with promises of non-existent Social Security refunds or rebates. In another situation, a taxpayer may really be due a credit or refund but uses inflated information to complete the return.

Beware: Intentional mistakes of this kind can result in a $5,000 penalty.

6. Impersonation of Charitable Organizations

Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims. As in the case of a recent disaster, Hurricane Sandy, the IRS cautions both victims of natural disasters and people wishing to make charitable donations to avoid scam artists by following these tips:

• To help disaster victims, donate to recognized charities.
• Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
• Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits  a contribution from you. Scam artists may use this information to steal your identity and money.
• Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Call the IRS toll-free disaster assistance telephone number (1-866-562-5227) if you are a disaster victim with specific questions about tax relief or disaster related tax issues.

7. False/Inflated Income and Expenses

Including income that was never earned, either as wages or as self-employment income in order to maximize refundable credits, is another popular scam. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions.  This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit although they were not eligible. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

8. False Form 1099 Refund Claims

In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

9. Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are false and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law.

10. Falsely Claiming Zero Wages

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

11. Disguised Corporate Ownership

Third parties are improperly used to request employer identification numbers and form corporations that obscure the true ownership of the business.

These entities can be used to underreport income, claim fictitious deductions, avoid filing tax returns, participate in listed transactions and facilitate money laundering, and financial crimes. The IRS is working with state authorities to identify these entities and bring the owners into compliance with the law.

12. Misuse of Trusts

For years, unscrupulous promoters have urged taxpayers to transfer assets into trusts. While there are legitimate uses of trusts in tax and estate planning, some highly questionable transactions promise reduction of income subject to tax, deductions for personal expenses and reduced estate or gift taxes. Such trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel have seen an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

This information has been provided by the IRS as information for taxpayers. If you have any questions regarding these issues, please contact our office. We may be reached at (239) 433-5554. You may also visit us on the web at www.markham-norton.com.

A recent article in The Wall Street Journal on March 14, 2013 entitled “Payroll Audits Put Small Employers of Edge” prompted us to remind you that misclassifying employees as independent contractors is risky and can be costly.

Many employers look at using independent contractors as a way to save money.  The employer is not responsible for paying the Social Security, Medicare, unemployment taxes and workers’ compensation insurance on independent contractors.  “Some employers also are turning to contractors to avoid hitting the 50-employee threshold that would require them to pay for employees’ health insurance, starting next year, under the federal health-care law, or pay a penalty.”

In addition, it eliminates paying other benefits such as paid time off and provides the flexibility of utilizing the worker only when there is sufficient work.  It can be seen as a great cost savings measure.  “A Michigan State University study estimates that contractors can save employers as much as 40% on labor costs.”

However, the IRS has cracked down on the misclassification of workers over the past three years.  Audits have increased dramatically because the IRS increased its budget for this purpose.  “Since September 2011, the government has collected $9.5 million in back wages for more than 11,400 workers who were misclassified as independent contractors by their employers, the Labor Department says.”

How do you know if you are correctly classifying a worker?

The classification guidelines are not black and white, which is the source of much confusion.  The determination is based on three Common Law Rules:

1. Behavioral.  Does the company control or have the right to control what the worker does and how the worker does his or her job?
2.  Financial.  Are the business aspects of the worker’s job controlled by the payer?  (This includes things like how the worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
3. Type of Relationship.  Are there written contracts or employee-type benefits (i.e., pension plan, insurance, vacation pay, etc.)?  Will the relationship continue and is the work performed a key aspect of the business?

You must weigh all these factors.  Unfortunately, there is no “magic” or set number of factors that “makes” the worker an employee or independent contractor.  Many times employers do not know that they have misclassified workers until they get audited.

Confused?

If you are still unclear as to the classification of a worker after considering the three Common Laws, the IRS has created Form SS-8 (Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding) which can be filed by either the business or worker.  The IRS will review the facts and circumstances and then make an official determination of the worker’s status.

Because this is an area of much confusion, many employers do not want to run the risk of penalties from misclassification and choose to hire employees.  We encourage you to measure the workers you have classified as independent contractors against the guidelines.  If you discover that you have misclassified a worker, there is some good news.  In January, 2013 the IRS extended an amnesty program which waives or reduces some of the penalties of misclassification.

Don’t run the risk of IRS penalties.  Please contact us at 239-433-5554 if you would like additional guidance or have questions about the classification of workers.

Important Facts about Mortgage Debt Forgiveness

If your lender cancelled or forgave your mortgage debt, you generally have to pay tax on that amount. But there are exceptions to this rule for some homeowners who had mortgage debt forgiven in 2012.

Here are 10 key facts from the IRS about mortgage debt forgiveness:

1. Cancelled debt normally results in taxable income. However, you may be able to exclude the cancelled debt from your income if the debt was a mortgage on your main home.

2. To qualify, you must have used the debt to buy, build or substantially improve your principal residence. The residence must also secure the mortgage.

3. The maximum qualified debt that you can exclude under this exception is $2 million. The limit is $1 million for a married person who files a separate tax return.

4. You may be able to exclude from income the amount of mortgage debt reduced through mortgage restructuring. You may also be able to exclude mortgage debt cancelled in a foreclosure.

5. You may also qualify for the exclusion on a refinanced mortgage. This applies only if you used proceeds from the refinancing to buy, build or substantially improve your main home. The exclusion is limited to the amount of the old mortgage principal just before the refinancing.

6. Proceeds of refinanced mortgage debt used for other purposes do not qualify for the exclusion. For example, debt used to pay off credit card debt does not qualify.

7. If you qualify, report the excluded debt on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness. Submit the completed form with your federal income tax return.

8. Other types of cancelled debt do not qualify for this special exclusion. This includes debt cancelled on second homes, rental and business property, credit cards or car loans. In some cases, other tax relief provisions may apply, such as debts discharged in certain bankruptcy proceedings. Form 982 provides more details about these provisions.

9. If your lender reduced or cancelled at least $600 of your mortgage debt, they normally send you a statement in January of the next year. Form 1099-C, Cancellation of Debt, shows the amount of cancelled debt and the fair market value of any foreclosed property.

10. Check your Form 1099-C for the cancelled debt amount shown in Box 2, and the value of your home shown in Box 7. Notify the lender immediately of any incorrect information so they can correct the form.

Use the Interactive Tax Assistant tool on IRS.gov to check if your cancelled debt is taxable. Also, see Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments.

Additional IRS Resources:

• Interactive Tax Assistant tool
• Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments
• Mortgage Forgiveness Debt Relief Act and Debt Cancellation
• Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness

IRS YouTube Videos:

Mortgage Debt Forgiveness – English

This information has been provided by the IRS for informational purposes only. If you have any questions regarding mortgage debt,  please contact the office of Markham Norton Mosteller Wright & Company at (239) 433-5554. We welcome the opportunity to discuss your situation. You may also visit our website at www.markham-norton.com

 7 Tax Facts about Medical & Dental Expenses

If you paid for medical or dental expenses in 2012, you may be able to get a tax deduction for costs not covered by insurance. The IRS wants you to know these seven facts about claiming the medical and dental expense deduction.

1. You must itemize.  You can only claim medical and dental expenses for costs not covered by insurance if you itemize deductions on your tax return. You cannot claim medical and dental expenses if you take the standard deduction.

2. Deduction is limited.  You can deduct medical and dental expenses that are more than 7.5 percent of your adjusted gross income.

3. Expenses paid in 2012.  You can include medical and dental costs that you paid in 2012, even if you received the services in a previous year. Keep good records to show the amount that you paid.

4. Qualifying expenses.  You may include most medical or dental costs that you paid for yourself, your spouse and your dependents. Some exceptions and special rules apply. Visit IRS.gov for more details.

5. Costs to include.  You can normally claim the costs of diagnosing, treating, easing or preventing disease. The costs of prescription drugs and insulin qualify. The cost of medical, dental and some long-term care insurance also qualify.

6. Travel is included.  You may be able to claim the cost of travel to obtain medical care. That includes the cost of public transportation or an ambulance as well as tolls and parking fees. If you use your car for medical travel, you can deduct the actual costs, including gas and oil. Instead of deducting the actual costs, you can deduct the standard mileage rate for medical travel, which is 23 cents per mile for 2012.

7. No double benefit.  Funds from Health Savings Accounts or Flexible Spending Arrangements used to pay for medical or dental costs are usually tax-free. Therefore, you cannot deduct expenses paid with funds from those plans.

Additional IRS Resources:

You’ll find more information in IRS Publication 502, Medical and Dental Expenses. Also see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. They are available at IRS.gov

• Publication 502, Medical and Dental Expenses
• Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans

IRS YouTube Videos:

• Medical and Dental Expenses – English | Spanish 

This information has been provided by the IRS as a guide for taxpayers. If you have any questions, please contact our office at (239) 433-5554. 

The Tax Benefits of being Parents

Your children may help you qualify for valuable tax benefits, such as certain credits and deductions. If you are a parent, here are eight benefits you shouldn’t miss when filing taxes this year.

1. Dependents. In most cases, you can claim a child as a dependent even if your child was born anytime in 2012.   For more information, see IRS Publication 501, Exemptions, Standard Deduction and Filing Information.
2. Child Tax Credit. You may be able to claim the Child Tax Credit for each of your children that were under age 17 at the end of 2012. If you do not benefit from the full amount of the credit, you may be eligible for the Additional Child Tax Credit. For more information, see the instructions for Schedule 8812, Child Tax Credit, and Publication 972, Child Tax Credit.
3. Child and Dependent Care Credit. You may be able to claim this credit if you paid someone to care for your child or children under age 13, so that you could work or look for work. See IRS Publication 503, Child and Dependent Care Expenses.
4. Earned Income Tax Credit. If you worked but earned less than $50,270 last year, you may qualify for EITC. If you have qualifying children, you may get up to $5,891 dollars extra back when you file a return and claim it. Use the EITC Assistant to find out if you qualify. See Publication 596, Earned Income Tax Credit.
5. Adoption Credit. You may be able to take a tax credit for certain expenses you incurred to adopt a child. For details about this credit, see the instructions for IRS Form 8839, Qualified Adoption Expenses.
6. Higher education credits. If you paid higher education costs for yourself or another student who is an immediate family member, you may qualify for either the American Opportunity Credit or the Lifetime Learning Credit. Both credits may reduce the amount of tax you owe. If the American Opportunity Credit is more than the tax you owe, you could be eligible for a refund of up to $1,000. See IRS Publication 970, Tax Benefits for Education.
7. Student loan interest. You may be able to deduct interest you paid on a qualified student loan, even if you do not itemize your deductions. For more information, see IRS Publication 970, Tax Benefits for Education.
8. Self-employed health insurance deduction - If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid to cover your child. It applies to children under age 27 at the end of the year, even if not your dependent.

This information has been provided by the IRS as a guidance. Please consult a professional tax advisor to discuss the specifics. If you have any questions about the deductions available to parents, please contact our office at (239) 433-5554. We welcome the opportunity to discuss your specific situation. You may also visit us at markham-norton.com

Five Good Reasons to E-file Your Tax Return

If you haven’t tried IRS e-file before, now is the time. Most taxpayers – more than 80 percent – file electronically. The IRS has processed more than 1 billion individual tax returns safely and securely since the nationwide debut of electronic filing in 1990. Fewer people file a paper tax return every year. Here are five good reasons from the IRS to e-file your tax return:

1.  Accurate and complete. E-file is the best way to file an accurate and complete tax return. Tax returns that are incomplete or include errors take longer to process.
2. Safe and secure. Tax preparers and software companies who e-file must meet strict guidelines and provide the best in encryption technology. You receive an acknowledgement within 48 hours that the IRS received your tax return. If the IRS does not accept your tax return, you will receive notification and can quickly correct your return and resubmit it.
3. Faster refunds. An e-filed tax return usually means a faster refund compared to a paper return. The IRS issues most refunds in less than 21 days. If you choose direct deposit, your refund goes directly into your bank account. Combining e-file with direct deposit is the fastest way to get your refund. About three out of four taxpayers who file receive a tax refund. Last year the average refund was about $2,700.
4. Payment options. If you owe tax, you can e-file early and set an automatic payment date anytime on or before the April 15 due date. You can pay by check or money order, by debit or credit card, or by transferring funds electronically from your bank account.
5. It’s easy. You can e-file on your own through IRS Free File, the free tax preparation and e-filing service available exclusively at IRS.gov. You can also use commercial tax preparation software or ask your tax preparer to e-file your return. And, if you qualify, IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly partners will e-file your return for free.

This information has been provided by the IRS. If you have questions, please contact our office at (239) 433-5554. We welcome the opportunity to speak with you. 

Junior Achievement of Southwest Florida to induct Gail Markham and Bob Simpson into 2013 Business Hall of Fame

Junior Achievement of Southwest Florida will induct Gail Markham of Markham Norton Mosteller Wright & Company P.A. and Bob Simpson of LeeSar into the 2013 Business of Hall of Fame, Lee County, at a dinner and awards ceremony on April 10 at the Hyatt Regency Coconut Point Resort & Spa.

The prestigious award recognizes outstanding entrepreneurs who serve as role models for youth through their professional accomplishments and commitment to the community. Markham and Simpson will join a distinguished group of individuals who have been inducted into the Business Hall of Fame since it was founded in 1987. For more information including sponsorship opportunities and individual tickets, visit www.jaswfl.org.

Gail Markham serves as valuation, litigation and mediation services partner for the certified public accounting firm which she founded in 1979. Today the firm provides comprehensive business advice as well as a wide range of accounting services with offices in Fort Myers, Naples and Fort Lauderdale.

Markham has received many awards during her business career including the Uncommon Friends Foundation Business Ethics Award, Florida Accountant Advocate of the Year and Lee County Career Woman of the Year. Her business has been recognized as one of the best places to work by both the Collier County Economic Development Council and Florida Trend magazine. Markham was also instrumental in establishing the PACE Center for Girls in Lee County, a center for at-risk girls. She is currently board president of PACE Center for Girls and is active in its capital campaign for campus expansion.

Since March 1, 2002, Bob Simpson has served as president and CEO of LeeSar’s Supply Chain Management Division and Cooperative Services of Florida, the Group Purchasing Organization for Lee Memorial Health System and Sarasota Memorial Healthcare System. He came to LeeSar with more than 35 years of leadership experience, serving several major health care organizations throughout the Northeastern U.S. He also holds a bachelor’s degree in healthcare administration from Stonehill College in Easton, Mass., and has advanced training in negotiation from Wharton School of Management and Harvard University. He is a graduate of the Georgetown University Leadership Training Program and a Champion of the Six Sigma process. In 1995, he was the International President of the Association for Healthcare Resource and Materials Management, and in 1997 received the association’s George R. Gossett Leadership Award. He is also the founder and president of Project Perfect World, which takes medical teams around the world to provide free surgery for needy children. He is a noted speaker and writer as well.

Junior Achievement is the world’s largest organization dedicated to inspiring and preparing young people to succeed in a global economy. Through a dedicated volunteer network, Junior Achievement of Southwest Florida Inc. provides in-school and after-school programs for students in Collier, Lee and Charlotte counties that focus on three key content areas: work readiness, entrepreneurship and financial literacy. Today, 129 individual area operations reach more than 4 million students in the U.S., with an additional 5.7 million students served by operations in 122 other countries worldwide. For more information about Junior Achievement of Southwest Florida visit www.JASWFL.org or contact Anne Frazier at 239-225-2590.

Sandie Peterson selected as HR Professional of the Year

HRMA of Southwest Florida, an affiliate of the Society for Human Resource Management, has named Sandie Peterson, SPHR, with Markham Norton Mosteller Wright & Company P.A., Human Resources Professional of the Year.

Peterson, who for more than a decade has served as human resources manager and consultant with MNMW, was recognized for her professionalism, leadership, stewardship and innovation. She has contributed tirelessly to furthering the goals of her firm as well as HRMA. Peterson has held multiple volunteer positions with HRMA including chapter president, and has been instrumental in updating chapter processes and procedures necessary to ensure the organization’s success.

A graduate of the University of Missouri with a Bachelor of Arts degree in psychology, Peterson holds the designation of senior professional in human resources (SPHR). She specializes in assisting client companies with comprehensive human resources requirements with a goal to prevent lawsuits by maintaining employment law compliance and implementing appropriate policies and procedures. Peterson specializes in federal and state employment laws, employment policy and procedures, HR 101, sexual harassment, team building and supervisor training.

Markham Norton Mosteller Wright & Company P.A. is a certified public accounting and consulting firm with offices in Fort Myers, Naples and Fort Lauderdale. They offer a wide range of services including individual and business tax planning and preparation, business consulting, technology management and support, audits and reviews, litigation, mediation, forensic accounting and elder services. For more information, visit www.markham-norton.com.

Congress passes one-year SGR fix as part of fiscal cliff legislation

On Tuesday, Congress passed The American Taxpayer Relief Act of 2012, to avert the “fiscal cliff.” President Obama signed the legislation on Wednesday. In addition to various tax and spending measures, the legislation includes provisions of direct importance to medical group practices. The legislation:

• Prevents the Medicare physician payment SGR cut for one year. It eliminates the 27 percent Medicare physician payment cut, which took effect today and replaces it with a “zero percent update” to the Medicare physician fee schedule conversion factor for 2013. As has occurred with prior temporary extensions of this kind, this is not a fee schedule rate freeze. It means any conversion factor adjustments and RVU changes contained in the final fee schedule rule for 2013 may result in payment rate changes, but the massive SGR cut is nullified for a year.

• Turns off the January 2, 2013 sequester for two months. This prevents various defense and other automatic cuts from occurring, including an across the board, two percent cut for all Medicare providers. It’s expected Congress will revisit issues related to the sequester in the near future.

• Extends the Medicare 1.0 work RVU GPCI floor through December 31, 2013.

• Increases the Medicare Part B equipment utilization assumption for advanced imaging services to 90 percent effective for fee schedules established for 2014 and subsequent years, thus reducing future payments.

• Extends the Medicare therapy cap exception process through December 31, 2013.

• Increases the Medicare therapy service multiple procedure payment reduction from 25 to 50 percent effective April 1, 2013.

This information has been provided as a summary of the provisions included in the American Taxpayer Relief Act. Please contact our office at (239) 433-5554 if you have questions regarding this information and how it will impact your specific situation.

American Taxpayer Relief Act

On Tuesday, Congress preserved most of the Bush-era tax cuts and extended many other lapsed tax provisions. The newly created American Taxpayer Relief Act permanently extends provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRAA).

The act’s non tax features include one-year extensions of emergency unemployment insurance and agricultural programs and yet another “doc fix” postponement of automatic cuts in Medicare payments to physicians. In addition, it delays until March a broad range of automatic federal spending cuts known as sequestration that otherwise would have begun this month.

Among the tax items not addressed by the act was the temporary lower 4.2% rate for employees’ portion of the Social Security payroll tax, which was not extended and has reverted to 6.2%.

Here are the act’s key provisions related to taxes:

Individual tax rates             

• Individual marginal Bush-era tax rates are retained (10%, 15%, 25%, 28%, 33%, and 35%).
• A new top rate of 39.6% is imposed on taxable income over $400,000 for single filers, $425,000 for head-of-household filers, and $450,000 for married taxpayers filing jointly ($225,000 for each married spouse filing separately).
• The personal exemptions and itemized deductions phase-out is reinstated at a higher threshold of $250,000 for single taxpayers, $275,000 for heads of household, and $300,000 for married taxpayers filing jointly.

Capital gains and dividends

• A 20% rate applies to capital gains and dividends for individuals above the top income tax bracket threshold.
• The 15% rate is retained for taxpayers in the middle brackets.
• The zero rate is retained for taxpayers in the 10% and 15% brackets.

Alternative minimum tax (AMT) 

• The exemption amount for the AMT on individuals is permanently indexed for inflation. For 2012, the exemption amounts are $78,750 for married taxpayers filing jointly and $50,600 for single filers.
• Relief from AMT for nonrefundable credits is retained.

Estate and gift tax

• The estate and gift tax exclusion amount is retained at $5 million indexed for inflation ($5.12 million in 2012), but the top tax rate increases from 35% to 40% effective Jan. 1, 2013. The estate tax “portability” election, under which, if an election is made, the surviving spouse’s exemption amount is increased by the deceased spouse’s unused exemption amount, was made permanent by the act.

Individual credits and provisions

• The American opportunity tax credit for qualified tuition and other expenses of higher education was extended through 2018.
• Other credits and items from the American Recovery and Reinvestment Act of 2009 that were extended for the same five -year period include enhanced provisions of the child tax credit and the earned income tax credit.
• The bill permanently extends a rule excluding from taxable income refunds from certain federal and federally assisted programs.
• The act also extended through 2013 a number of temporary individual tax provisions, most of which expired at the end of 2011:
  • Deduction for certain expenses of elementary and secondary school teachers
  • Exclusion from gross income of discharge of qualified principal residence indebtedness
  • Parity for exclusion from income for employer-provided mass transit and parking benefits
  • Mortgage insurance premiums treated as qualified residence interest
  • Deduction of state and local general sales taxes
  • Special rule for contributions of capital gain real property made for conservation purposes
  • Above-the-line deduction for qualified tuition and related expenses
  • Tax-free distributions from individual retirement plans for charitable purposes

Permanent extensions

Various temporary tax provisions enacted as part of EGTRRA were made permanent. These include:

• Marriage penalty relief (i.e., the increased size of the 15% rate bracket and increased standard deduction for married taxpayers filing jointly
• The liberalized child and dependent care credit rules (allowing the credit to be calculated based on up to $3,000 of expenses for one dependent or up to $6,000 for more than one)
• The exclusion for National Health Services Corps and Armed Forces Health Professions Scholarships
• The exclusion for employer-provided educational assistance
• The enhanced rules for student loan deductions introduced by EGTRRA
• The higher contribution amount and other EGTRRA changes to Coverdell education savings accounts
• The employer-provided child care credit
• Special treatment of tax-exempt bonds for education facilities
• Repeal of the collapsible corporation rules
• Special rates for accumulated earnings tax and personal holding company tax
• Modified tax treatment for electing Alaska Native Settlement Trusts

Business tax extenders

The act extended and modified many business tax credits and other provisions. A partial list as follows:

• The increased expensing amounts are extended through 2013. The availability of an additional 50% first-year bonus depreciation was also extended for one year by the act. It now generally applies to property placed in service before Jan. 1, 2014 (Jan. 1, 2015, for certain property with longer production periods).
• Extended through 2013 and modified the credit for increasing research and development activities, which expired at the end of 2011. The credit is modified to allow partial inclusion in qualified research expenses and gross receipts those of an acquired trade or business or major portion of one.
• Indian employment tax credit
• Employer wage credit for employees who are active duty members of the uniformed services
• Work opportunity tax credit
• Qualified zone academy bonds
• Fifteen-year straight-line cost recovery for qualified leasehold improvements, qualified restaurant buildings and improvements, and qualified retail improvements
• Accelerated depreciation for business property on an Indian reservation
• Enhanced charitable deduction for contributions of food inventory
• Modification of tax treatment of certain payments to controlling exempt organizations
• Temporary exclusion of 100% of gain on certain small business stock
• Basis adjustment to stock of S corporations making charitable contributions of property
• Reduction in S corporation recognition period for built-in gains tax

Energy tax extenders

The act also extends through 2013, and in some cases modifies, a number of energy credits and provisions that expired at the end of 2011:

• Credit for energy-efficient existing homes
• Credit for alternative fuel vehicle refueling property
• Credit for two- or three-wheeled plug-in electric vehicle
• Cellulosic biofuel producer credit
• Incentives for biodiesel and renewable diesel
• Credits with respect to facilities producing energy from certain renewable resources
• Credit for energy-efficient new homes
• Credit for energy-efficient appliances
• Special allowance for cellulosic biofuel plant property
• Special rule for sales or dispositions to implement Federal Energy
• Alternative fuels excise tax credits

Foreign provisions

• The IRS’s authority to apply a withholding tax to gains on the disposition of U.S. real property interests by partnerships, trusts, or estates that are passed through to partners or beneficiaries that are foreign persons is made permanent, and the amount is increased to 20%.

New taxes

In addition to the various provisions discussed above, some new taxes also took effect Jan. 1 as a result of 2010’s health care reform legislation. The new provisions include:

• Additional hospital insurance tax on high-income taxpayers. The employee portion of the hospital insurance tax part of FICA, normally 1.45% of covered wages, is increased by 0.9% on wages that exceed a threshold amount. The additional tax is imposed on the combined wages of both the taxpayer and the taxpayer’s spouse, in the case of a joint return.
  • The threshold amount is $250,000 in the case of a joint return or surviving spouse, $125,000 in the case of a married individual filing a separate return, and $200,000 in any other case.
  • For self-employed taxpayers, the same additional hospital insurance tax applies to the hospital insurance portion of SECA tax on self-employment income in excess of the threshold amount.

• Medicare tax on investment income. Starting Jan. 1, a tax equal to 3.8% of the lesser of the individual’s net investment income for the year or the amount the individual’s modified adjusted gross income (AGI) exceeds a threshold amount.
  • For estates and trusts, the tax equals 3.8% of the lesser of undistributed net investment income or AGI over the dollar amount at which the highest trust and estate tax bracket begins.
  • For married individuals filing a joint return and surviving spouses, the threshold amount is $250,000; for married taxpayers filing separately, it is $125,000; and for other individuals it is $200,000.
  • Net investment income means investment income reduced by deductions properly allocable to that income. Investment income includes income from interest, dividends, annuities, royalties, and rents, and net gain from disposition of property, other than such income derived in the ordinary course of a trade or business. However, income from a trade or business that is a passive activity and from a trade or business of trading in financial instruments or commodities is included in investment income.

• Medical care itemized deduction threshold. The threshold for the itemized deduction for unreimbursed medical expenses has increased from 7.5% of AGI to 10% of AGI for regular income tax purposes. This is effective for all individuals, except, in the years 2013–2016, if either the taxpayer or the taxpayer’s spouse has turned 65 before the end of the tax year, the increased threshold does not apply and the threshold remains at 7.5% of AGI.

• Flexible spending arrangement. Effective for cafeteria plan years beginning after Dec. 31, 2012, the maximum amount of salary reduction contributions that an employee may elect to have made to a flexible spending arrangement for any plan year is $2,500.

This information has been provided as a summary of the provisions included in the American Taxpayer Relief Act which has yet to be signed by the President. Please contact our office at (239) 433-5554 if you have questions regarding this information and how it will impact your specific situation.