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Expert tips for navigating tax-season changes

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Posted: Tuesday, March 18, 2014 10:00 pm | Updated: 1:40 am, Fri May 16, 2014.

(BPT) - With the deadline for filing taxes fast approaching, there are myriad changes for the American taxpayer to consider. Between The American Taxpayer Relief Act of 2012 (the “fiscal cliff” agreement), the Affordable Care Act and the Supreme Court’s Windsor decision, it’s easy for even the savviest taxpayer to get confused.

Rob Fishbein, vice president in the Tax Department for Prudential, offers some tips and caveats to keep in mind when filing your tax return this year.

1. Same-sex spouses: Now that federal law must recognize same-sex marriages sanctioned by state law, same-sex spouses are required to file a federal return reflecting their married status, either as married filing jointly or married but filing separately.

2. Expect higher taxes on income, dividends and capital gains. Thanks to The American Taxpayer Relief Act (ATRA), tax rates increased for most people starting in 2013. The temporary reduction in the Social Security tax was allowed to expire at the end of 2012, which meant an increase of $2,000 in tax for $100,000 of wages. Also, for high-income taxpayers, the rate on ordinary income (wages, interest, rental income, etc.) increased, as did the rate on capital gains and dividends.

3. Beware the surtaxes. Surtaxes as a result of the Affordable Care Act include a 0.9 percent levy on salary and self-employment income above $200,000 for an unmarried individual and $250,000 for a married couple. The ACA also introduced a 3.8 percent tax on investment income for individuals earning more than $200,000 and married couples earning more than $250,000. Over time, more moderate-income taxpayers – particularly two-income families – will become subject to these taxes, which are not indexed for inflation.

4. Be careful choosing your personal exemptions and itemized deductions. ATRA allowed the return of limitations on personal exemptions and itemized deductions that had been eliminated in 2010. They make the tax system more complicated, less transparent and more expensive (increasing the tax burden of a married couple with no children by around 4 percent.)

5. Beware the IRA charitable contributions trap. Individuals age 70 1/2 or older can make up to $100,000 of charitable contributions using IRA required minimum distributions. But keep in mind your IRA provider will still send you a Form 1099-R, showing it as a taxable distribution. So be sure to include the 1099 information on your return and note it as a qualified charitable contribution.

6. File soon and use tax preparation software. Because of the government shutdown, the IRS tax-filing season started 10 days later than usual, which might mean a longer time to process your return. Consider using tax preparation software (which reduces errors) and filing electronically as soon as possible to speed up any refund due to you. If you owe money, file early and electronically and choose a payment date on or before April 15. You may pay by check, debit or credit card, or via an electronic funds transfer. Credit card payments are subject to an additional fee.

Neither Prudential Financial, its affiliates, nor its financial professionals, render tax or legal advice. Please consult with attorney, accountant, and/or tax advisor for advice concerning you particular circumstances.

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