Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Oct 30

    According to the article “Donald Trump’s tax plan would help the poorest Americans” on, the Republican presidential candidate’s tax plan is both “really, really good for Donald Trump” and at the same time “should put more money in the pockets of the poorest Americans.”

    Guess what happens when you take less from both ends of the spectrum…

    That’s right; the ones in the middle get SQUEEZED like a fresh orange at the Florida Welcome Center.

    Assuming, of course, that the plan is revenue neutral and most commentators say that, despite Trump’s claims otherwise, it just isn’t so. Most tax experts say that in order to reduce the revenue collected from the poorest and the richest American, severe tax cuts are required. The conservative Tax Foundation estimates that Trump’s plan would decrease revenues by nearly $12 trillion dollars over the next decade and increase the debt by over $10 trillion.

    So what do the lowest-income Americans pay? Well, if you looked strictly at the standard deduction and exemptions, a single person should start paying taxes when they earn more than $10,300 and double that for a couple. However, when you take into account the benefit many lower-income earners receive from the Earned Income Tax Credit (EITC) and the Child Tax Credit, the basic rule of thumb, according to the Tax Policy Center’s Elaine Maag, is that a family of four doesn’t start owing income taxes until their income is about twice the poverty level.

    Last month, The Tax Policy Center reported that 77.5 million households won’t pay any income tax in 2015 out of a total of 171.3 million.

    That’s 45.3 percent of American households!

    That figure is up roughly five percentage points from the Center’s 2013 estimate of 40.4 percent.

    Maag told CBS News that, under Trump’s plan, “most people could earn more money without owing taxes and not be worse off than under current law since they would still get their refundable EITC and CTC.”

    The downside to such a “generous” plan, according to the article, “is that it comes at a high cost to the U.S. Government.” REALLY? And where do you think the government gets “its” money?

    Americans are generous people, but can we afford for our government to be generous on our behalf? Generous to the American poor, generous to the foreign poor, generous to the rich, generous to our soldiers, generous to those who support us, generous to those who don’t, generous to… everyone?

  • Aug 7

    with Ashley Brown

    Really… Another Tax? Sorry, but yes, the same people that brought you Obamacare ushered in the 3.8% Medicare Surtax, which took effect January 1, 2013. For the first time ever there is a Medicare surtax on your “net investment income” and capital gains from the disposition of property.  It does not apply to income from a trade or business or from the sale of property used in a trade or business. The Medicare Surtax applies to the lesser of your net investment income or the amount of “modified” adjusted gross income (AGI with foreign income added back) above a specified threshold.

    After you calm down from grumbling about a new tax, you might ask… What is “net investment income” (NII)? Net investment income is the gross income from interest, dividends, annuities, royalties, and rents provided the income is not generated in the ordinary course of an active trade or business. It is also gross income from a trade or business that is considered a passive activity, gross income from a trade or business of trading in financial instruments or commodities, and net gain from the disposition of property, other than property held in an active trade or business.

    How does it work? As stated above, the tax applies to the lesser of the taxpayer’s net investment income or the amount of “modified” adjusted gross income above certain thresholds. Those adjusted gross income thresholds are:

    • $250,000 for married taxpayers filing jointly or surviving spouse
    • $125,000 for married taxpayers filing separately, and
    • $200,000 for single and head of household taxpayers

    Example: A single taxpayer has modified AGI of $250,000, including net investment income of $30,000. The Medicare Surtax applies to the lesser of the net investment income ($30,000) or the excess of AGI over the applicable threshold ($250,000 – $200,000 = $50,000). Thus, the Medicare Surtax applies to $30,000.

    How can you avoid or minimize this new tax? In a word… planning. Plan ahead, consult with us, when you’re expecting a large windfall, or when selling long held investment assets. There are usually options available in the planning stages. But once completed… there may not be any choice but to report the transaction as it occurred.

    Now might be a good time to change the source of some of your income to help reduce the risk of paying this additional tax. One might consider investing in tax-exempt bonds. The reasoning behind investing in tax-exempt bonds is the interest income would not be included in the AGI or net investment income. Some might consider investing in tax-deferred annuities. Others might consider investing in rental real estate. Even though rental real estate is considered a passive activity, rental real estate usually generates a net loss after depreciation, so there would be no net investment income to tax. If you believe that you might be affected by the new Medicare Surtax, make an appointment with us to discuss how you might be able to reduce or avoid paying all-together the additional 3.8% tax.

  • Jan 11

    Washington managed to drive us off the fiscal cliff like Thelma and Louise, smiling and holding hands, pointing the finger of blame at everyone but themselves, and then threw a rope late on January 1 to pull us back.

    The uncertainty which has impeded long-term tax planning has come to an end. The act permanently extends the Bush-era tax cuts except for the wealthiest Americans. It also permanently resolves the AMT issue by indexing it to inflation. This provision prevents nearly 30 million middle class Americans from being hit with higher tax bills this year.

    Some of the highlights include:

    • All of the individual marginal rates are retained and a new top rate of 39.6% is imposed on taxable income above $400,000 for single filers and $450,000 for married taxpayers filing a joint return.
    • Taxes on capital gains and dividend income have been raised to 20% for single and married households with incomes above the $400,000 and $450,000 thresholds, respectively. The zero rate remains in place for taxpayers in the 10% and 15% brackets.
    • The estate and gift tax exclusion amount remains at $5 million indexed for inflation ($5.12 million in 2012) but the top rate increases from 35% to 40% effective January 1, 2013.
    • The American Opportunity Tax Credit and the enhanced provisions of the child tax credit were both extended through 2018.
  • Sep 2

    Deficit pressures leave little room for further extension of tax cuts


    In the not so distant future… The year: 2012. The forecast: $2.5 trillion in U.S. debt. Higher taxes for…


    The Congressional Budget Office’s forecast of a $2.5 trillion deficit in 2012 has already prompted calls for limiting the tax breaks for mortgage interest, charitable contributions, municipal bonds and retirement contributions. 

    The deficit is an issue and you should probably make up your mind that something is going to happen and that you’re likely to pay higher taxes. 

    Unless Congress acts, tax rates on income, capital gains and dividends will rise in 2013. Top earners will also face additional taxes on investment income and wages as a part of the health care reform. 

    President Obama has proposed letting income tax rates return to a high of 39.6 percent from the current 35 percent for couples making more than $250,000 per year. Capital gains and dividends would be taxed at a top rate of 20 percent, up from the current 15 percent. An additional 3.8 percent tax is already scheduled to be imposed in 2013 on the net investment income of a couple with over $250,000 in income. Married couples with earnings of more than $250,000 will also see an additional 0.9 percent tax on the excess over that amount. 

    The biggest tax breaks for individuals include those for mortgage interest, charitable contributions, state and local taxes, incentives for retirement savings and the exclusion for employer-provided health care. Eliminating any of these could be politically toxic but I wouldn’t be surprised by efforts to reduce their benefits targeted primarily at the “wealthy.” [WARNING: Washington’s definition of wealthy and yours may not be the same.] 

    Phasing out the mortgage interest deduction would increase federal revenue by $214.6 billion over the next decade, according to estimates from the Joint Committee on Taxation in a March report by the CBO. Curbing deductions for charitable giving would raise an estimated $219 billion over the next 10 years, the CBO study said. 

    Other revenue-raising options being tossed about include taxing interest earned on municipal bonds and reducing the cap on all contributions to 401(k) retirements to $14,850 annually and to $4,500 for IRAs, according to the CBO report. That compares with current maximums of $22,000 and $6,000, respectively.

     “Over the last decade this country has failed to live within our budget.”  — Senator Max Baucus

     “The government cannot close its enormous fiscal gap simply by taxing the rich.”  — Representative Paul Ryan

     Debt started the problem; more debt is not going to fix it. Our future prosperity isn’t going to come out of Washington. It will come out of the hopes, dreams, and individual freedoms of the American people. If left alone, we have a tendency to prosper. Your hopes will be crushed if you’re waiting for Obama or anyone else to fix your life and give you money.