In this segment of our “Multiyear Tax Planning” series we’ll start preparing you for the “medicine” you’ll be required to take as the tax increases passed with the new health care law become effective.

In 2013 expect an extra 0.9% levy on wages for couples with “adjusted gross incomes” [AGI] above $250,000 ($200,000 for singles) and a new 3.8% tax on investment income on those same people. No longer will everyone pay FICA and Medicare taxes at the same rate. In short, those taxpayers who benefit least from these programs will be expected to pay more to support them.

Formerly considered payroll taxes, FICA and Medicare taxes will now be investment income taxes, too. Did you hear someone say we needed tax simplification? Not lately. Definitions are a long time coming, of course, but you get the gist of where all this is headed.

In addition, many professionals must prepare for the possibility they’ll need to pay FICA and Medicare taxes on the net income of their S corporation or partnership income, which, until this time, was considered only taxable for income tax purposes. The House already passed this additional dip into the pockets of doctors, lawyers, accountants, engineers and consultants, and the Senate is working on a similar, perhaps even more tightly defined, provision.

The core of this particular bill is to provide what the President wants to protect those people making under the wealth threshold (over $250,000); but the pack mule his plan is riding on may have more than it can carry right now, and Congress may not let it survive this year. Predictably, the proposal is linked to a myriad of other extenders offering incentives and relief for Americans in need, so it’s way too early to predict what will be in the final recipe from our elected cooks in Washington.

What can you do?  Hold tight!  Next week, we’ll be posting some tips to help you navigate the tricky waters ahead.  In the meantime, if you need a CPA or have questions about the new and future changes, call us at 904-396-5400.

Filed under: Tax by Mark Patrick