TAX LAW UPDATE:ITS IMPACT & PLANNING FOR

2012 AND THE FUTURE

The Guru Tax & Financial Services, Inc.Satya B. MitraPh.D., E.A., CFP®

508-797-0005

U. S. INCOME TAX HISTORY In 1913 tax revenue was 3% of GDP Currently it is 15-20% of GDP Noteworthy changes from FDR to

Reagan to Clinton to George W. Bush

WHERE DO YOUR TAXES GO?

CURRENT MAJOR FACTORS TO IMPACT TAX LAWS High U.S. debt: $16T Huge budget deficit, 2011: $1.3T Stubborn unemployment Cost of social security / health care 78 million retiring baby boomers Growing political discontent &

disagreement Presidential election result

INCOME TAX RATES

Income tax brackets (married filing jointly)

36% / 39.6% brackets return

CAPITAL GAINS RATES

Long-term capital gains rates are scheduled to increase from 0 to 10% for the 10 and 15% brackets.

DIVIDEND RATES

Dividend rates could increase from 15% to 36% or 39.6% depending on a taxpayer’s marginal tax rate

MEDICARE EXCISE TAX

EXTRA 3.8% TAX LIABILITY ON UNEARNED INCOME FOR AGI OVER $200,000 (SINGLE) AND $250,000 (MFJ) Capital gain Dividends Interest Royalty Net rental incomeLong-Term Capital Gain Every $10,000

Capital Gain Tax at 20% $2,000

Medicare Excise Tax at 3.8%

$380

Total Tax Due: $2,380

CHANGE IN MEDICARE TAX FOR HIGH EARNING EMPLOYEES Additional 2.35% on earnings

over $250,000.00

AMT PATCH EXPIRING:A HUGE IMPACT 4 MILLION IN 2011 EXPECTED 31 MILLION IN 2012 AMT IN 2013?

GIVE YOUR GIFT IN 2012:GIFTING IN 2013 COULD BE COSTLY. LIMIT CHANGES FROM $5.12M TO $1M!!!

ESTATE PLANNING AND HIGHEST ESTATE TAX RATES Jump from 35% to 55% in 2013 Exemption amount in 2012 is

$5.12M Expected to go down to $1M in 2013

DIRECT DONATION OF IRA DISTRIBUTION TO CHARITY NOT AVAILABLE IN 2012

DEDUCTIONS EXPIRED FOR YEAR 2012 Mortgage insurance premium Classroom expenses ($250) for

teachers General sales tax vs. State income

tax deduction Non business energy efficiency

credit

OTHER SIGNIFICANT TAX LAWS EXPIRING AFTER YEAR 2012 Social security 2% tax cut $1,000 child tax credit 7.5% medical expense deduction Full use of deductions and exemptions $2,500 American opportunity tax

credit Enhanced depreciation Exemption from mortgage debt

forgiveness

DECLARTION OF FOREIGN BANK ACCOUNT AND FOREIGN ASSETS Offshore Voluntary Disclosure

Program (OVDP) Possible serious penalties and tax

liability

ELECTION IMPACT

President Obama Renew the cuts for those making

under $250,000 Have wealthy pay their fair share

Mitt Romney Maintain lower income tax rates Make Bush tax cuts permanent for

savings and investments

PLANNING STRATEGY (PART 1)• Income acceleration & income deferral• Deductions acceleration & deductions

deferral• Keep AMT in equation before

exercising stock options• Sell assets with gain in 2012• Consider yearly dividend earnings

from investments• High net worth tax payers consider

$5M lifetime gifting to reduce estate tax

PLANNING STRATEGY (PART 2) Business owners plan on setting up

right retirement plan, hiring veterans, purchasing vehicles over 6,000 pounds

Hire your children under 18 in your business

Invest in municipal bonds, growth oriented mutual funds, annuity, life insurance

Consider Roth IRA conversion Contribute appreciated stocks to charity

AUDITS

IRS, DET and state audits have significantly increased

Keep good records Proofs of all deductions for at least

3 years

FUTURE OF TAX LAW, THE ELECTION, LEGISLATION BY CONGRESS AFTER ELECTION, THE EXTENSION OR REPEAL OF BUSH TAX LAWS…

ALL ABSOLUTELY UNCERTAIN.

STAY TUNED.

THE MESSAGE TO YOUR CLIENT IS “PLAN”

PayLessActNow

T H A N K S FOR YOUR ATTENTION