With Tax Day and Busy Season just out of sight, accountants everywhere can take a much needed break from the ever-present stresses of "crunch time." Well now there's another reason to rev up that exhausted brain of yours-- the American Tax Relief Act of 2012 (ATRA). This act was signed into law on January 2, 2013, and addresses a plethora of highly debated tax issues from the end of 2012. These issues were commonly referred to as the Fiscal Cliff (sound familiar now?). Because this act was signed on January 2nd instead of January 1st, these changes to the REG Exam will be eligible for testing in Q4 2013. There are other changes to the REG Exam that take effect in Q3 2013, but Roger CPA Review students already have the updated material in their Student Accounts. As CPA Exam experts, we at Roger CPA Review want to ensure that you are fully informed and prepared come Exam Day. So here's the scoop:

American Tax Relief Act of 2012 - 13Q3 Changes (July 1, 2013)
This act extended Bush era tax cuts,which means there will not be any changes related.  However, the following changes are still going to occur for 2013 which will be available for testing starting the July window:

  • For taxpayers making more than $200,000 ($250,000 for married couples), a new 0.9 percent Medicare Hospital Insurance tax will be imposed on wages or small-business income in excess of the threshold.
  • For people making more than $200,000  ($250,000 for married couples), an additional 3.8 percent Medicare surtax is imposed on dividend and capital gain income.

  • For people making more than $200,000 ($250,000 for married couples), the maximum tax rate, not counting the Medicare surtax, will increase to 20 percent from 15 percent the maximum tax rate on dividends and capital gains will be 23.8 percent.

  • For people making more than $400,000 ($450,000 for married couples), the maximum income tax rate on all income other than dividends and capital gains will increase from the current level of 35 percent to 39.6 percent.

  • The payroll tax holiday expired on December 31, 2012, so workers will see the Social Security tax go back to 6.2 percent (from 4.2) on wages and salaries up to $113,700.

  • The maximum estate & gift tax rate increases to 40 percent (from 35) on estates valued at more than $5 million (married couples can thus avoid estate taxes on up to $10 million of property transferred to their heirs).

  • The phaseout of itemized deductions for people with total income above $250,000 ($300,000 for married couples) returned effective January 1, 2013. These provisions reduce the taxpayers itemized deductions by 3 percent of the excess of their income over the threshold amounts.

  • Similarly, the phaseout of personal exemptions returned for 2013. This provision reduces the deductible amount of personal and dependency exemptions by 2 percent for every $2,500 by which the taxpayers income exceeds $250,000 ($300,000 for married taxpayers filing jointly)

The 13Q4 Changes (October 1, 2013)
From recent meetings with the AICPA, we have been informed that the content updates to the REG Exam in Q4 2013 will consist of the following:
  • Retroactive Changes
  • Modifications
  • Reinstatement of Provisions
  • Tax Rates

Stay tuned for additional information about the four areas listed above! Do you have any questions about the American Tax Relief Act of 2012? Leave your questions in the comments below!