Wednesday, January 7, 2015


A client recently forwarded an unsolicited spam email he received and asked me if the information it reported was true.  As it turned out only two of the statements contained some truth.

Here is the text of the email, with my comments on each statement in bold -

Subject: Tax, Tax, Tax, Tax.........

Remember this WHEN YOU DO YOUR TAXES IN APRIL ! ! ! ! ! !

In case you didn't notice. Here is what happened on January 1, 2014:

Top Medicare tax went from 1.45% to 2.35%, an increase of 62%.  This is true, but was effective January 1, 2013, for wages in excess of $200,000 for singles and $250,000 for married filers.

Top Income tax bracket went from 35% to 39.6%, an increase of 13%.  This is true, but was effective January 1, 2013.

Top Income payroll tax went from 37.4% to 52.2%, an increase of 52%. I have absolutely no idea what this means.  Payroll tax is made up of Social Security tax – which remains at 6.2%, Medicare tax – which, as mentioned above is 1.45% for most and 2.35% on wages in excess of $200,000 or $250,000, and Federal Unemployment Tax – which remains at .6%. 

Capital Gains tax went from 15% to 28% an increase of 87%.  Wrong again.  The top tax rate on “normal” long-term capital gains and capital gain distributions went from 15% to 23.8%, and was effective January 1, 2013.  There is a 25% tax rate on long-term capital gains resulting from “unrecaptured Section 1250 gain” (depreciation recapture) and a 28% tax rate on long-term capital gains from the sale of certain “collectibles”, but this is nothing new, and was in effect well before the Affordable Care Act was introduced.

Dividends tax went from 15% to 39.6%, an increase of 164%.  Nope.  This is untrue.  The top tax rate on “qualified” dividends went from 15% to 23.8% and the top rate on dividends that do not qualify went from 35% to 39.6%, and was effective January 1, 2013. 

Estate tax went from 0% to 55%, an increase of infinity.  This is totally untrue.  The top estate tax rate for 2013, 2014, and 2015 was and is 40%.

Remember this fact: These taxes were all passed with only Democrat votes.  No Republicans voted for these taxes.  See my comments to the next false statement.   

These taxes were all passed under the Affordable Care Act, aka OBAMACARE.  Not true.  The above increases were included in the Affordable Care Act AND the American Taxpayer Relief Act of 2012.  In the House 237 Republicans originally voted for the American Taxpayer Relief Act of 2012 and 170 Democrats voted against the legislation and in the Senate 40 Republicans voted for it and 3 Democrats voted against it.

None of the true tax increases that were referenced in the email should affect the 2014 tax liability of the client who forwarded the email to me – unless he won the lottery.

I am reminded of another email that circulated a year or so ago that also contained false information about the Affordable Care Act.  That email said that Obamacare created a national sales tax of 3.8% on the gross proceeds from the sale of one’s personal residence – which is totally untrue.  

What was true is that taxpayers will pay a 3.8% surtax on the lesser of (1) net investment income, or (2) Modified Adjusted Gross Income in excess of $250,000 on joint returns and $200,000 for single filers.  Net investment income is interest, dividends, net capital gains, annuities, royalties, rents, and pass-through income from passive S-corporations and partnerships less related investment expense deductions from Schedule A. 

The $250,000 and $500,000 Section 121 exclusion on the sale of a principal primary residence still applies.  So if the gain from the sale of your home is less than $250,000 or $500,000, as applicable, and you meet the Section 121 requirements, there is no federal income tax and no 3.8% “surtax” on the gain, and certainly no federal “sales tax” on the “sale price”.  If the net gain exceeds the $250,000 or $500,000 threshold the 3.8% surtax could apply to the excess only.

Hey, the Affordable Care Act, or Obamacare, is bad enough as written.  You don’t have to make up lies about it.   

The bottom line – totally ignore any unsolicited email you may receive that alleges to provide information on income taxes.  As I remind you every year at tax time - do not accept tax advice from anyone other than a professional tax preparer.  And do not believe anything about taxes that you are told or read that is not provided by an identifiable professional tax preparer.  


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