Oscar Swag Taxes

Even some of the 2014 Oscar losers are winners because they each walk away with a gift bag (or swag) worth an estimated $80,000 this year. Despite being dubbed a “gift,” the swag is actually compensation and the recipient must report taxable income. As such, the IRS in 2006, ruled that the value of the swag as must be reported as income to recipient on a Form 1099.

So congratulations non-winners, you didn’t get an Oscar last night and you get to pay taxes because you received following swag:

  • $16,000 toward a hair transplant
  • $15,000 walking tour around Japan
  • $9,000 trip to Las Vegas
  • $6,850 two-day Rocky Mountaineer train excursion
  • $5,000 toward laser hair removal and cosmetic surgery
  • $5,000 certificate to purchase art and get it installed at home
  • $2,700 “O-Shot” procedure
  • $2,560 home spa system
  • $500 lifetime membership to a meditation gym
  • $280 of organic maple
  • $120 for pink and camo mace pepper guns
  • $23 in reusable 3-in-1 dry-cleaning bags
  • $15 organic pet shampoo from
  • $6.49 device that prevents hair clogs in your shower drain

Author: Marnette Myers


Tax Implications for Olympic Medal Winners

Congratulations to all United States athletes on winning your Olympic medals…..now pay up! The 2014 Sochi Winter Olympics have arrived and United States fans aren’t the only ones cheering on the American athletes at the games; so is Uncle Sam. That’s because United States participant athletes winning the gold, silver and bronze medals, receive a bonus cash prize from the United States Olympic Committee. The cash prize awarded by the Committee for winning a gold medal in the 2014 Winter Olympics is $25,000, silver is $15,000 and bronze is $10,000. The only drawback is that all of the medal prize money is considered by the IRS to be taxable earned income to the recipient.

This means that high income athletes in the top 39.6% federal tax bracket would have to pay a $9,900 tax bill to the IRS for a winning gold medal.  A silver medal winner in the same tax bracket would have to pay $5,940 and a bronze medal winner would owe $3,960. The IRS isn’t exactly providing the welcome home the athletes were hoping for.

So go ahead Olympic winners and step up on the podium: smile, wave to the crowd, sign along to the national anthem and enjoy your once in a lifetime moment-but save the tears for that eventual tax bill.

 

Author:  R. Matthew Frank


New Tax Information for 2013 and 2014

Increased Social Security Payroll Tax Withholding Rates

The Social Security earnings cap was increased to $113,700 for 2013 and will be $117,000 for 2014.

Increased Income Tax Rates for High Earners

The American Taxpayer Relief Act of 2012 added a 39.6% tax bracket in 2013 for taxpayers with taxable income over; $400,000 for single filers, $425,000 for heads of household, $225,500 for married individuals filing separately, and $450,000 for joint filers.  For 2014 the 39.6% tax bracket applies to taxable income in excess of $406,750 for single filers, $432,200 for heads of household, $457,600 for joint filers and $228,800 for married individuals filing separately.

Additional Medicare Tax on Wages & Self-Employment Income

Beginning in 2013, an additional 0.9% Medicare tax on Salary and Self-Employment Income is assessed on taxpayers’ income over $200,000 for single filers, $250,000 for joint filers and $125,000 for married individuals filing separately.  If you receive W2 income, withholding of the additional 0.9% will begin after your wages reach $200,000.

Additional Tax on Investment Income

There is an additional 3.8% Medicare tax on net investment income for taxpayers with Modified AGI in excess of $200,000 for Single Filers, $250,000 for Married Filing Jointly and $125,000 for Married Filing Separately.  The 3.8% will apply to the lesser of net investment income or the amount of Modified AGI in excess of the applicable threshold.  Net investment income includes interest, dividends, royalties, rents, capital gains, annuities, and income from a business in which a taxpayer does not materially participate.

Capital Gains & Dividends Rates Increasing for High Earners

The top rate for capital gains and dividends increased effective January 1, 2013, from 15% to 20%.  The top rate will apply to the extent that a taxpayer’s income exceeds the thresholds set for the 39.6% tax bracket.  All other taxpayers will continue to enjoy the 0% or 15% rates.

Higher Threshold for Itemized Medical Expense Deductions

Beginning in 2013, the threshold for deducting medical expenses has been raised from 7.5% to 10%, however, the threshold remains 7.5% until 2017 for taxpayers over the age of 65 by December 31, 2013.

Limitation on Itemized Deductions & Personal Exemption Phaseout

Beginning in 2013, itemized deductions for high-earners is reduced by 3% of the amount by which the taxpayer’s income exceeds the income limit; however, the amount of itemized deductions cannot be reduced by more than 80%.  The personal exemption is reduced by 2% for each $2,500, or portion thereof by which the taxpayer’s adjusted gross income exceeds income limits.  The income limits for the phaseouts of itemized deductions and personal exemptions are: $300,000 for joint, $275,000 for heads of household, $250,000 for single, and $125,000 for married filing separately.

Federal Estate & Gift Tax

The federal estate tax exclusion for decedents dying in 2013 is $5,250,000 and $5,340,000 for 2014. The annual gift tax exclusion is $14,000 for 2013 and 2014.

Reminder: Tax Filing Deadlines

The due date to file your 2013 federal tax return is Tuesday April 15, 2014.


EFT Required for Businesses

Effective January 1, 2011, employers must use electronic funds transfer (EFT) to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax).

For more information on any of these issues or other specific tax questions, please contact the Frank & Company, p.c. Tax Services Department at (703) 821-0702 or send an email.


Reduced Social Security Payroll Tax Withholding Rates

For 2011, the payroll withholding rate for social security taxes has been reduced from 6.2% to 4.2%. Employees will see their take home pay increase by the 2% reduction in social security taxes for 2011. Employees with wages in excess of $106,800 will see an additional $2,136 in take home pay for the 2011 year. Self-employed individuals will see the 2% reduction of social security tax when filing their 2011 tax returns.
For more information on any of these issues or other specific tax questions, please contact the Frank & Company, p.c. Tax Services Department at (703) 821-0702 or send an email.


IRS Raises Filing Threshold for Form 990–N

Effective for tax years beginning on or after January 1, 2010, the IRS has raised the filing threshold for the Form 990–N (e–postcard return) from $25,000 to $50,000. In Revenue Procedure 2011–15, the IRS stated that small non-profit organizations with gross receipts that are normally less than $50,000 must file the Form 990–N. However, this does not change a non-profit organization’s requirement to file Form 990–T for unrelated business income reporting.

For more information on any of these issues or other specific tax questions, please contact the Frank & Company Tax Services Department at (703) 821-0702 or send an email.


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