Playing Poker with uncle sam HOW TO WIN WITH TAX PLANNING By Kathy Dean-Bradley, CPA was invited to a friendly game of Texas Hold’em poker by some friends. I didn’t know much about poker, but I am friendly and I figured I could add value to the group with my fast math skills to help count chips. Plus, my husband had just been captivated by the World Series of Poker tournament on TV, where the winner took home over $8.5 million. Now, that kind of prize is something to get your attention! my first night at poker was not that successful, but i was immediately drawn to the game. there was fun conversation; good food and drinks; math; chance; and yes, strategy. it was the strategy i could relate to – it is what i do as a tax accountant. taxes are like poker. they are complex, dynamic, and always changing, and the outcomes can be uncertain. most of all, if you know this and if you understand strategy and odds, you can use that to reduce your risk and win. Yes, win. near the end of my first night playing poker when my stack of chips was low, my host said: “Kathy, tell me how you played that hand.” i told him that i had a pair of queens, so i was feeling pretty confident and bet $50 in chips. “no, no, no. You have this all wrong,” he said. he wanted me to tell him: 1. how many people were at the table 2. the value of the pot, and what my bet was in relation to the pot 3. how many outs i had 4. how big my stack of chips was 5. how the others were playing their hands after that, i got it. it’s not as simple as what i have now; it’s also what i could have in the future. it’s about what i can win and what i can lose and bet accordingly. just like taxes! 30 hbma billing • march.aPril.2013 here is how this can help you navigate the tax code and strategize to reduce your tax exposure. 2013 presents big changes. the major one is that under the Patient Protection and affordable care act (PPaca), healthcare insurance as we know it changes and income and other taxes go up. focus on the tax effects: there is an additional 3.8 percent medicare tax on net investment income if your modified adjusted gross income (magi) exceeds the threshold of $250,000 for married filing joint (mfj); $200,000 single; or $125,000 married filing separately (mfs). the tax is on the lesser of net investment income or the amount of magi exceeding those thresholds. net investment income includes interest, dividends, annuities, royalties, rents (excluding those in an active trade or business), and gains on the sale of capital assets not used in a trade or business. investment income is reduced by allowable expenses. on top of that, there is an additional burden for earned income. Wages and net self-employment income exceeding $200,000 single; $125,000 mfs; or $250,000 mfj is subject to an additional 0.9 percent hospital insurance tax, assessed on the tax return. now the game is on and the name of the game is to keep your income below the thresholds. if you keep your income below the thresholds, you win. if not, you lose. there are a number of strategies to consider. the first one is timing. Know what you have and how you can time your income and losses. if you own your business and have control over bonuses and recognizing earned income, then spread it over two years (december and january). time your losses and deductions in years when your income is above the threshold. for example, purchase fixed assets eligible for immediate expensing. time your capital gains on stocks or the sale of investment real estate in years when your income is below the threshold. if you are selling your business, consider an installment I
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