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Archive for the ‘Schedule D’ Category

PostHeaderIcon Tax Planning for 2013 – The Long Term Capital Gains Rate

The year 2012 and leading into the year 2013 could be potentially the most challenging year I’ve known to do tax planning.  We have several provisions expiring, we have an election year and we have a fractured Congress.  Word on the street is that very little in the tax arena will be addressed until after the election so we’re looking at November and December to get changes or renewals done before the end of the year.   Based on the current tempo of government, I’d bet we’re hung out to dry but I’ll be looking at some of the rules and how they’ll change if nothing is done.

First we will be looking at the long term capital gain rate.  Right now, the tax rate on long term capital gains is 15% and it’s zero if you fall into the ten or fifteen percent  tax bracket.  If there is no action and the current provision expires, the long term capital gains rate will go up to 20% and it will be 10% if you’re in the fifteen percent tax bracket (the ten percent bracket will also go away).

What does this mean?  You really want to look at your capital gains transactions at the end of the year.  You might want to accelerate the gain on a stock you own to get the better rate and you also might want to defer any losses until 2013 since they’ll be more valuable.  If you’re out of basis in your S-Corporation stock and you want to pull some money out and take the tax hit, you might want to do it sooner rather then later to get the better rate as well.  You also might want to put off a like kind exchange and pay the tax on a transaction knowing this might be as low of a tax rate as you’re going to get.

As always, talk to a tax professional but if you’re sitting on some gains, you want to be extra careful and do a little bit more planning this year than in any other year I can think of.

PostHeaderIcon Reporting Capital Gains (and Losses) in 2012

This is a twist on my New Forms series because while Schedule D (the form where you report capital gains) has changed, they’ve also modified Form 1099-B as well as added a new form.  First off, just by looking at the new Schedule D, you notice the form has changed quite a bit and there’s several references to a Form 8949.  No longer do you report the detail of the your capital gains and losses on Schedule D but you do it on Form 8949 and this information then flows into the more streamlined Schedule D.

And then this all ties into the revised Form 1099-B.  Now brokerage firms are required to report cost basis.  This is just one more way the IRS is cracking down on things.  Before, this information wasn’t reported to the IRS and it was left up to you to compute.  Since the IRS isn’t very trusting these days, cost basis is now being reported to the IRS so they can make sure you’re reporting the full extent of your gain.  On a good note, since everything is right there on the Form 1099-B, it’ll make filling out the form a little easier because you just drop the appropriate numbers into the right boxes.