Year-end tax plans: big opportunity for CPAs in a sea of change.

• Author: Chironis, Gina

With the election over, the tax-related question is: Now what? For 90 percent of Americans, according to the AICPA, the answer is a tax increase in 2013 under current law, as CPA clients are Facing one of the broadest tax increases in American history.

"It is too early to know what tax law compromise will come from negotiations between President Obama and House Speaker Boehner," says Michael Trank, CPA/PFS with Irvine-based Wertz & Co. and member of the CalCPA Personal Financial Planning Committee. "What we know is without new legislation the Bush tax law sunsets and we are back to 2000 rates."

So, the more CPAs can prepare their clients for this possibility, the better. It's important for CPAs--if they haven't done so already to reach out to clients now to develop plans and analyze "what if" scenarios based on what Congress may do to tax rates, exemptions and overall tax policy Some of the changes we will be experiencing include:

* The new 3.8 percent Medicare surtax on net investment income.

* Additional 0.9 percent Medicare tax for high-income individuals.

* Possible expiration of the Bush tax cuts.

* Possible reinstatement of claw-back of itemized deductions.

* Possible increase in long-term capital gains rates.

* Possible increase in federal estate tax from 35 percent to 55 percent, coupled with a drop in the gilt and estate exemption amount from $5,120,000 to $1 million.

* Retroactive to Jan. I. 2012, Proposition 30 tax increases in California.

* Reduced Sec. 179 eligibility.

Recognize Income in 2012; Defer Expenses

How can CPAs help their clients to proactively take measures to reduce their tax burden in the coming year?

For individuals, options to consider before year-end include conversion of a Traditional IRA account to a Roth IRA; rollovers from 401(k), 403(b) or 457(b) to an in-plan Roth IRA; and, according to Jay Seidel), CPA at Maxwell & Co. in Irvine, "selling appreciated assets to take the capital gain in the current year"

For C corporations, it could make sense to distribute dividends before year end. One possible pitfall this approach. however is to be aware that 2012 tax estimates may need to be revised in the a significant increase in net income takes place, it's important to ensure that tax software doesn't automatically annualize the income over the entire year and calculate penalties.

Client Investment Income

This is a time, too, for CPAs to help clients look for ways to reduce taxable investment income in 2013 and...