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I had a 1099-C for about $135,000. My husband didn't have any withholding on Social Security. His employer couldn't withhold due to incompetence. I felt utter dread wash over me. Memories of owing the IRS before were constantly on my mind. I called a local CPA. Besides being clueless, he wanted to charge me for every question I had about insolvency. I looked on line and found little hope of the countless stories of permanently disabled people like myself getting their student loans forgiven only to be asked to pay taxes on it as if it were income.
Somewhere, somehow, I find an article by Gary Bode. I bookmarked it for when it's time to do the actual taxes. With his excellent help in how to do all of this out of a virtual office I get my part of the work done. My questions got answered, for free. I give a retainer, do what I said I did and wait. I hear from Gary. I go into shock! How can this be? Not only do I not owe on the 135,000....Gary itemizes and after paying what was almost nothing in taxes we get $950.00 back! No more hubby doing the taxes online! I will use Gary Bode as long as he will agree to work with me!
It was so easy, no worries, but professional and top notch. I know I have thanked you Gary but I am so grateful. Thank you ever so much again!

Carla Bray

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Even though Gary enjoys helping colleagues, we no longer provide free consults to other tax preparers. He's happy to consult on an hourly billing basis if our schedule allows.

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CPA discusses 2013 Medicare 3.8% Surtax Planning for IRS Tax Form 1041 | US Income Tax Return for Estates and Trusts | Medicare Surtax | Net Investment on Unearned Income tax

Form 1041 CPA Medicare Surtax

The new higher tax bracket for IRS Form 1041 kicks in at only $11,959 of Adjusted Gross Income. Here are a few planning tips. I offer a free phone consult for Estates and Trusts. (910) 399-2705.

The new 3.8% Medicare tax on “unearned” net investment income impacts 2013’s Form 1041, US Income Tax Return for Estates and Trusts. Why?

  • The Health Care and Education Reconciliation Act of 2010 kicked in on January 1st, 2013.
  • That means the 39.6% tax rate kicks in at only $11,959 of adjusted gross income for Estates and Trusts on Form 1041.
  • Capital Gains increases from 15% to 20% for Estate and Trusts when the adjusted gross income exceeds $11,959 on Form 1041.

I’ll present some tips for Form 1041 Fiduciaries and Grantors.

When does the 3.8% Medicare net investment unearned income tax factor into IRS Form 1041?

  • When the Estate or Trust’s undistributed net investment income exceeds $11,959.
  • Form 1041 has Adjusted Gross Income greater than $11,959 (2013).

What the 3.8% Medicare Surtax considers Net Investment Income

  • Interest.
  • Dividends.
  • Annuities.
  • Royalties.
  • Rents.
  • Gain secondary to sales of Estate or Trust assets.
  • Passive income.

Estate and Non-Grantor Trust Tips for IRS tax Form 1041

  • Consider distributing the Estate’s net investment income to beneficiaries in a lower tax bracket that doesn’t incur the 3.8% Medicare tax.
  • Changing the Fiduciary’s role to active instead of passive for an ongoing trade or business.

Grantor Trust Tax CPA tips for IRS tax Form 1041

Same as above. But the active role derives from the Grantor’s activities. If the Grantor passed away, a Trustee can take an active role in ongoing business issues.

I’m a Form 1041 CPA that stays sharp on Estate and Trust issues. Our virtual office allows us to serve regardless of the Estate or Trust’s location. (910) 399-2705.

Here’s an earlier IRS tax Form 1041 strategy post.

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1 comment to CPA discusses 2013 Medicare 3.8% Surtax Planning for IRS Tax Form 1041 | US Income Tax Return for Estates and Trusts | Medicare Surtax | Net Investment on Unearned Income tax

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