They say that knowledge is power, and that’s especially true with taxes. So here’s a quick quiz to test your tax knowledge in 2014. But look out — the questions (and the answers) might not be what you expect!:
We’ll start with an easy one. Last year’s “fiscal cliff” legislation raised the top marginal tax rate to 39.6%. What’s the top effective rate?
B. 43.4% (39.6% plus 3.8% Medicare tax)
C. >43.4% (depending on “PEP” and “Pease” phase outs)
Give up? It’s a trick question — all three answers can be correct, depending on your own circumstances!
Alright, let’s shift gears a bit. The tabloids love running stories about celebrities who run into tax trouble. After all, if they make so much money, shouldn’t they be able to afford their taxes? So here’s our next question — which of the following sets of celebrities ran into tax trouble in 2013?
A. Boxer Manny Pacquiao, rapper MC Hammer, and racecar driver Juan Pablo Montoya
B. Actor Stephen Baldwin, singer Lauryn Hill, and “Beanie Babies” creator Ty Warner
C. Actor Al Pacino, rapper Fat Joe, and “Real Housewife of New Jersey”
Well, which did you pick? The answer is another trick question— every single one ran into tax problems last year!
Okay, final question. We know that tax laws can be impenetrably dense and hard to understand. So maybe “context” will give you a hint. Which of these passages is taken from the 2013 fiscal cliff act, and which is taken from California’s workers’ comp regulations?
A. “Notwithstanding any other provision of law, any refund (or advance payment with respect to a refundable credit) made to any individual under this title shall not be taken into account as income, and shall not be taken into account as resources for a period of 12 months from receipt, for purposes of determining the eligibility of such individual (or any other individual) for benefits or assistance (or the amount or extent of benefits or assistance) under any Federal program or under any State or local program financed in whole or in part with Federal funds.”
B. “In the case of covered OPD services furnished on or after April 1, 2013, in a hospital described in clause (ii), if— (I) the payment rate that would otherwise apply under this subsection for stereotactic radiosurgery, complete course of treatment of cranial lesion(s) consisting of 1 session that is multisource Cobalt 60 based (identified as of January 1, 2013, by HCPCS code 77371 (and any succeeding code) and reimbursed as of such date under APC 0127 (and any succeeding classification group)); exceeds (II) the payment rate that would otherwise apply under this subsection for linear accelerator based stereotactic radiosurgery, complete course of therapy in one session (identified as of January 1, 2013, by HCPCS code G0173 (and any succeeding code) and reimbursed as of such date under APC 0067 (and any succeeding classification group)), the payment rate for the service described in subclause (I) shall be reduced to an amount equal to the payment rate for the service de scribed in subclause (II).”
Drum roll, please . . . the answer is, it’s another trick question — both examples of sterling prose appeared in the fiscal cliff law! (Quit complaining about the trick questions — it’s a tax quiz, after all!)
Don’t be upset if you didn’t get all three questions right. (Nobody else did, either!) Fortunately, there isn’t any real money at stake. But that won’t be true come April 15. So call us Chicago Tax Accountants now for the plan you need to come up with the right answers in 2014!