Marple & Marple, CPA s 2012 Holiday Greetings!

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1 Marple & Marple, CPA s 2012 Holiday Greetings! 100 N. Fruitland Street Suite C Kennewick, WA Phone: (509) Fax: (509) Bob Marple Steve Marple Bob Marple Jr. Kent Toyoda Rosalie Willers Kyle Edberg Teresa Kesler Carol Guthrie Ginette Houchin Tim McCall We would like to wish all of our clients and families the very best for this holiday season! Yearend Tax Law Confusion This yearend is shaping up to be a lot like 2010, for tax planning purposes. Tax laws in 2010 were changed just 2 weeks prior to the end of the year. We have already heard some tax professionals indicate changes will again be made at the very end of the year. Recently, on a national continuing education seminar for CPA s, one speaker indicated we might even see an extension of the April 15 th filing deadline. Congress is to blame for this silliness! It is time to put the interests of our country ahead of partisan politics! We need simplification and resolution of current tax issues, prior to the very end of each year. Major issues unresolved for the 2012 tax year include IRA gifting, AMT (alternative minimum tax) exemption extensions, and sales tax deductions among other items. There are also a number of other issues complicating yearend planning including the expiration of the Bush tax cuts and implementation of two new taxes related to healthcare. Of particular interest, with regard to the expiration of the Bush tax cuts, are planned changes to income tax rates and estate tax law. Current changes from 2012 to 2013 include: Individual income tax rates go from 10% - 35% to 15% % Long-term capital gain rates go from 0% - 15% to 10% - 20% Tax rates on qualified dividends go from 0% and 15% to 15% % Estate and gift taxes go from a 5.12M exemption and 35% to a 1.0M exemption and a top rate of 55% No phase-out of itemized deductions and personal exemptions to phaseouts Beginning in 2013 there will be a new 3.8% tax levied on unearned income for higher income taxpayers (a complicated set of rules apply to those with AGI s above $200,000 for single taxpayers and $250,000 for married taxpayers.see the marriage penalty?) Note the 3.8% Medicare tax will also apply to estates and trusts

2 Beginning in 2013 there will be an additional.9% Medicare tax on wages or self-employment income of higher income individuals (on wages and self-employment income >$200,000 for single taxpayers and >$250,000 for married taxpayers see the marriage penalty again?) Payroll tax holiday will end in 2013 with the employee payroll tax rate restored to 6.2% Medical expenses will only be deductible in 2013 if they exceed 10% of AGI Another example of Congress and silliness is how often some of our tax laws expire and are then reenacted (all requiring lots of effort and wasted time). Take the research and experimentation tax credit which originally expired on December 31 st, This credit has expired eight times and been reenacted thirteen times. Yearend Tax Planning With all of the confusion surrounding how tax law will change, yearend tax planning can still be of value. You may wish to consider some of the following strategies: Selling investments and property with significant capital gain may be considered because of the potential change in capital gains rates The payment of dividends, to take advantage of low tax rates on qualified dividend income, may make economic sense Consider prepayment on installment contracts Wage bonuses, for higher income individuals, may want to be paid in 2012 Uncertainty regarding estate and gift tax laws is creating confusion. We would recommend you at least review the provisions of your wills or trusts and consider the possible impact of changes to the lifetime exclusion and estate tax rates on your individual estate planning For higher income individuals with a business entity, it may make sense to reconsider the current business entity being used, in view of new taxes Consider yearend purchases for needed equipment and the related tax impact (there are significant scheduled reductions in certain depreciation methods) Consider use of a retirement plan If a business is planning to sell property, it may wish to close the sale in 2012 If income is substantially down for 2012, consider a Roth conversion in 2012 Businesses with many employees (around 45 or more, less if expecting to hire many employees in the upcoming months) should be studying the impact of required health care coverage effective 1/1/2014. Some Photos by Bob Jr. Manhattan & Freedom Tower Auroras at Priest Lake

3 U.S. Government Debt Reaches Unprecedented Levels - by Bob Jr. I wrote an article for our 2009 newsletter entitled U.S. Government Spending A Crisis Coming detailing the debt levels our reckless government had incurred. At that time, our current U.S. federal deficit was $11,900,000,000,000 (that is an awful lot of zeros!) and climbing. Keep in mind that our country s total cumulative deficit from 1789 to 1980 was $320,000,000,000. It is projected that the current administration will incur $5,332,720,000,000 in increases to our deficit for the four years This may not end well and threatens our way of life. Currently, foreigners have financed about 5 trillion of our total deficit. If they decide the interest rates they receive are too low for the risk they are taking, watch out. Our current federal deficit is $13,365,810,000,000 (with an estimate for the 2012 deficit) and the current U.S. federal debt is $16,200,000,000,000. This debt will be significantly higher when you read this as it is increasing approximately $100,000 every 8 seconds! You may wish to check out the U.S. debt clock for some interesting, mind numbing, financial statistics: Included below are a few comments from my 2009 article. According to a recent article in the Economist, Americans on average, believe that 50 cents of every dollar our government spends is wasted. Again, this is not a partisan belief. Democrats currently believe 41 cents of every government dollar spent is wasted while Republicans believe 54 cents of every dollar spent is wasted and Independents believe 55 cents is wasted (Economist October 16 th, 2009). I recently heard a fine minister say if you point your finger at someone, you are pointing 3 at yourself. It is time for our politicians to quit blaming each other for their inability to get things done including their inability to curb our federal spending. Let them know how you feel, and if they will stop talking long enough to listen to their constituents, maybe something will get done. Snowbirds Abbortsford Air Show Hoover Dam

4 Windows 8 and Office 2013 Our firm is a partner in the Microsoft Partners Network and through this partnership and our action pack subscription, we have early release access to new versions of Microsoft software. We have been working with the commercial version release of Windows 8 for several months now. Our IT professional, Tim McCall, and Bob Jr. have both been using this new product and find it to be well written and very user friendly. We have also worked with the software on a tablet PC and find the touch tile features easy to work with and pretty cool. In addition to our work with Windows 8 we are also evaluating the beta of Office 13 and find many nice features in this soon to be released update to the Microsoft Office suite. Tax Insights How much are you paying in total taxes? There has been much discussion upon tax rates and who pays what rate. Do you think you know about how much you pay in total taxes? We came across an interesting website that, given your income and some other basic information, can provide you with a rough idea. It might surprise you. Total Tax Insights is a public service of the AICPA. You may wish to visit this informative website to get an idea of your total taxes. Information is provided in both amount and graph form. Sample Taxpayer Information I Provided below are estimates for total taxes paid by a married couple with $55,000 in wage income, $500 in capital gains, $250 in dividends, two children, owning a home appraised at $170,000 with a mortgage and other average living expenses.

5 Sample Taxpayer Information II Provided below are estimates for total taxes paid by a married couple with $110,000 in wage income, $1,000 in capital gains, $500 in dividends, two children, owning a home appraised at $250,000 with a mortgage and other average living expenses. Sample Taxpayer Information III Provided below are estimates for total taxes paid by a married couple with $320,000 in wage income, $5,000 in capital gains, $2,500 in dividends, two children, owning a home appraised at $500,000 with a mortgage and other average living expenses.

6 Marple & Marple Blog Our firm has created a new blog and is planning to publish content on a regular basis beginning in You may view our new firm blog page by going to our web page and choosing the Marple & Marple Blog link by the brief case on our home page or going to Our first blog posting is a story about our firm founder, Robert E. Marple, and is entitled, An Inspiring CPA s Career. Bob Jr. has also updated his blog and is also planning to publish new content beginning in You may view Bob Jr. s blog by going to Kyle Edberg CPA Joins Our Firm Kyle Edberg has joined our firm. Kyle is a graduate of Whitworth University and also holds a masters degree in taxation from Golden Gate University. Kyle has practiced in public accounting for nearly 20 years and is a member of American Institute of Certified Public Accountants and Washington Society of Certified Public Accountants. Kyle has a wide range of accounting experience including tax return preparation and tax planning. He has specific experience with real estate development, construction contractors, services industries, manufacturing, agriculture, wineries, and commercial fishing. Kyle and his wife, Melissa reside in Kennewick and are active members in the Central United Protestant Church. Personal interests include photography, golf, northwest wines, technology, Mariners, and classic cars (especially his 1967 Mercury Cougar). Quotes & Other Sayings Integrity is not a conditional word. It doesn t blow in the wind or change with the weather. There are two kinds of worries those you can do something about and those you can t. Don t spend any time on the latter. Duke Ellington Learn to listen. Opportunity could be knocking at your door very softly. Frank Tyger Without adversity, without change, life is boring. The paradox of comfort is we stop trying. John Amatt Don t let yesterday use up too much of today. Cherokee proverb Instead of waiting for your ship to come in, grab two oars and row out to it.