1040 vs 1040 NR. by Steven L. Walker, Esq. August 20th, Hr CPE Program

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1 The Tax Professionals Editor: Dale Quelle, EA Bolsa Chica Rd. #A Westminster, CA Volume Issue 2 August 2013 August 20th, Hr CPE Program 1040 vs 1040 NR by Steven L. Walker, Esq Steven Walker is a tax attorney and Principal in the Law Office of Steven L. Walker, A Professional Law Corporation. His practice focuses on civil and criminal tax controversy involving both Federal and State Agencies and International Law. Mr. Walker will guide us through the taxation of Non US Citizens or Nonresident Aliens. He will provide us with updates on the various taxes associated with business income, personal services, sale of inventory, investment income, sale of real and personal CLICK HERE TO REGISTER property and passive income. He will also cover tax withholding requirements and the personal responsibility of a withholding agent who fails to do so. Mr. Walker brings to us a wealth of knowledge, and has been invited to Washington DC by the Taxation Section, State Bar of California to present a position paper regarding a significant tax issue facing businesses in California. We welcome Mr. Walker and look forward to his presentation and thank him for his time.

2 Volume Issue 2 Page 2 PRESIDENT S MESSAGE by Patricia Yeckel, EA It is a pleasure to congratulate our Orange County Chapter members who have now been elected and installed as CSEA Board members: Patricia Kappen EA as President, Devang Mehta EA as First Vice- President, John Kristianson EA as Director, and Vicki Mulak as Parliamentarian. We are very proud to have such a large group of such talented and successful members from our own chapter at the state level, and that has gone a long way toward getting much recognition for Orange County. The CSEA Annual Meeting was held in Pleasanton from July 8-14 and we had quite a few of our members there to vote for and support our new officers, especially Patti Kappen. The dinner and installation ceremony was a fun event and I enjoyed being there to see it. There were wonderful education programs throughout the week as well, plus other activities. My favorite was the Bocce Ball Tournament and Dinner at a world class, state-of-the-art bocce court venue. Most of us had never played Bocce Ball before and didn t even know what it was, and yet we had a fun time learning it and competing. In fact, I was on a team that was undefeated and would love to have played longer! I think the intent, however, was not to get too serious about our competitive abilities but to meet as many of the 48 other members from all over the state as possible and build some relationships! There was also a golf tournament and prizes were given for certain feats members achieved; there was an EA Family Feud activity which I heard was really fun. Beside the fun activities we had a Town Hall Meeting in which about 100 members enjoyed some thought-provoking discussions and ideas that will help us work together to grow CSEA as an organization. Again, an opportunity to meet many members and get to know each other more relationship building! I attended the Presidents Orientation meeting, which was very helpful, and provided an opportunity to meet and hear from the other 18 Chapter Presidents. There were many other CSEA Board meetings and committee meetings where all the business of the organization is conducted. I ve never seen so many people with so much energy, enthusiasm and tireless commitment. It s very energizing to attend these events and I hope many more of our Orange County members can attend upcoming CSEA events in September, January and May. At our July dinner meeting, we enjoyed meeting and hearing from Assemblywoman Diane Harkey. Awards were given out in recognition of all the officers and committee chairs from the OCEA year. Those recognized were myself, Joe Guccione, Bill Stewart, Marilyn Ratliff, Robin Miller, Hugh Cunningham, Patricia Patterson, David Shashoua, Victor Silver, Daniel Carlberg, John Kristianson, Patti Kappen, Devang Mehta, John Rumbold, Sharon Kay Gordon, Scott Grandfield, Dale Quelle, and Floyd Allen. I really appreciate all the work these people did over the past year, and I know that it s because of them that we had a successful year. Cont. on page 3 The Tax Professionals President Patricia Yeckel, EA Avenida Empresa #280 Rancho Santa Margarita, CA (949) , pyeckel@canyontax.com First Vice President Daniel Carlberg, EA 550 E Chapman Ave, #C Orange, CA (714) , djcarlberg@sbcglobal.net Second Vice President Robin Miller. EA PO Box 4424 Mission Viejo, CA (949) , taxesbyrobin@cox.net Secretary Joyce Cheng, EA 31 Woodleaf Irvine, CA 2614 (714) , dynasty53@gmail.com Treasurer Christine Davidson, EA Via Luisa Mission Viejo, CA (949) , chris@ocnumberz.com Directors Devang Mehta, EA Golden Springs Dr #110 Diamond Bar, CA (909) , devang.ea@pmaadvisors.com Donna Miller, EA 2525 Cherry Ave., Ste 368 Signal Hill, CA (562) , dmillerea@aol.com Patricia Patterson, EA 6600 Warner Ave #255 Huntington Beach, CA (714) , tishp1126@gmail.com Marilyn Ratliff, EA th St #270 Tustin, CA (714) , marilyn@btiprofessional.com Victor Silver, EA 285 E Imperial Hwy, #201 Fullerton, CA (714) , vsilver1@aol.com CSEA Director; John Kristianson, EA MBA 5030 Katella Blvd, #228 Los Alamitos, CA (562) , taxxmann@earthlink.net Immediate Past President; Patti Kappen, EA Rancho Viejo Rd #215 San Juan Capistrano, CA (949) , patrecea@aol.com

3 Volume Issue 2 Page 3 Cont. from page 2 Thank you to everyone who donated to the CSEA PAC, which supports our statewide effort to promote sound tax policy among elected officials and promote the Enrolled Agent profession. We will continue to encourage donations when you register for the meetings online as well as at the registration table at the meetings. Thank you as well for your donations to the CSEA Education Foundation, which provides scholarships for our members and potential members to take both basic and advanced courses. Also at our July meeting I want to thank all of you who brought donated items as well as money for the Women s Transitional Living Center. I m sure the people who received our donations are extremely grateful and that we have a made a difference in people s lives. If you weren t able to make it to the meeting and are interested in donating, please contact Floyd Allen. We will be doing this again for our December meeting, so please put that on your calendar! Now it s time to focus on the upcoming new year, which started July 1. Our Education Committee is working on seminars for the year which we hope you ll all attend and earn your CE hours through our Chapter. Our first seminar is before our August dinner meeting August 20. Steven Walker, Esq. will teach us about Handling Clients with Foreign Assets, so we hope you will join us. If you are interested in serving on the Nominating Committee for this year to help in selecting next year s officers and directors, please contact me. This committee will talk to potential nominees, perform interviews and make decisions. Tax Teaser by Blake Quelle, EA PFP Beginning with the August 20 dinner meeting, the price is going to increase by $5.00. For members pre-registering early the cost will be $40 and $45 for non-members. For late registrants the cost will be $45 for members and $50 for non-members; for 2 hour CPE meetings the cost will also be $45 for members and $50 for non-members. We have kept our price the same for several years, but our costs have increased and we now find it necessary to change our pricing. Please contact me if you have any questions about this change. Thanks to our webmaster Scott Grandfield EA, our Chapter now has a Twitter account set up under the OCEAGENTS, to offer another method to communicate between members. If you are interested in using it but need help setting it up, you can bring your laptop to the next meeting and Scott has offered to help. Isn t that a tweet thing? I guess I will be forced to learn about this new social media site and learn the lingo. It s a good thing to grow and learn from our younger members, and I m happy our Chapter is keeping up with the times in this way! Thank you for the opportunity to serve as your President again for the upcoming year and please feel free to contact me with your feedback and your ideas. We hope to see all of you at our August dinner meeting, and bring your friends who are either EA s or are interested in becoming EA s. We will welcome you warmly! Please bring and wear your name badges so we know who you are. If you have joined the Chapter and don t yet have a badge, please contact Devang Mehta, our Director and Membership Chairman, who will order one for you. Mr. X is a foreign student studying for a degree in the United States. There is no income tax treaty between his country and the United States. During the 9 months of the school year, Mr. X is employed part-time by a corporation incorporated in his home country doing business in the United States. During summer vacation, Mr. X returns home where he is employed by the same company. Which of the following statements is true regarding U.S. taxes? Mr. X A. All income is taxable on a U.S. tax return. B. All income is excludable and filing a U.S. tax return is not required. C. Only income earned for services in the United States is taxable. D. All income is taxable on a U.S. tax return and credit is allowed for foreign taxes paid on his summer income. answer is C. Hint see IRC Section 871.

4 Volume Issue 2 Page 4 IRS Tax Tip Net Investment Income Tax FAQs Basics of the Net Investment Income Tax 1. What is the Net Investment Income Tax (NIIT)? The Net Investment Income Tax is imposed by section 1411 of the Internal Revenue Code (IRC). The NIIT applies at a rate of 3.8 percent to certain net investment income of individuals, estates and trusts that have income above the statutory threshold amounts. 2. When does the Net Investment Income Tax take effect? The Net Investment Income Tax goes into effect on Jan. 1, The NIIT will affect income tax returns of individuals, estates and trusts for their first tax year beginning on (or after) Jan. 1, It will not affect income tax returns for the 2012 taxable year that will be filed in Who Owes the Net Investment Income Tax 3. What individuals are subject to the Net Investment Income Tax? Individuals will owe the tax if they have Net Investment Income and also have modified adjusted gross income over the following thresholds: Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household $200,000 (with qualifying person) Qualifying widow(er) $250,000 with dependent child Taxpayers should be aware that these threshold amounts are not indexed for inflation. If you are an individual that is exempt from Medicare taxes, you still may be subject to the Net Investment Income Tax if you have Net Investment Income and also have modified adjusted gross income over the applicable thresholds. 4. What individuals are not subject to the Net Investment Income Tax? Nonresident Aliens (NRAs) are not subject to the Net Investment Income Tax. If an NRA is married to a U.S. citizen or resident and has made, or is planning to make, an election under IRC section 6013(g) to be treated as a resident alien for purposes of filing as Married Filing Jointly, the proposed regulations provide these couples special rules and a corresponding IRC section 6013(g) election for the NIIT. 5. What Estates and Trusts are subject to the Net Investment Income Tax? Estates and Trusts will be subject to the Net Investment Income Tax if they have undistributed Net Investment Income and also have adjusted gross income over the dollar amount at which the highest tax bracket for an estate or trust begins for such taxable year (for tax year 2012, this threshold amount is $11,650). There are special computational rules for certain unique types of trusts, such a Charitable Remainder Trusts and Electing Small Business Trusts, which can be found in the proposed regulations (see # 19 below). 6. What Trusts are not subject to the Net Investment Income Tax? The following trusts are not subject to the Net Investment Income Tax: Trusts that are exempt from income taxes imposed by Subtitle A of the Internal Revenue Code (e.g., charitable trusts and qualified retirement plan trusts exempt from tax under IRC section 501, and Charitable Remainder Trusts exempt from tax under IRC section 664). A trust in which all of the unexpired interests are devoted to one or more of the purposes described in IRC section 170(c)(2)(B). Trusts that are classified as grantor trusts under IRC sections Trusts that are not classified as trusts for federal income tax purposes (e.g., Real Estate Investment Trusts and Common Trust Funds). Cont. on page 5

5 Volume Issue 2 Page 5 Cont. from page 4 What is Included in Net Investment Income 7. What is included in Net Investment Income? In general, investment income includes, but is not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, income from businesses involved in trading of financial instruments or commodities, and businesses that are passive activities to the taxpayer (within the meaning of IRC section 469). To calculate your Net Investment Income, your investment income is reduced by certain expenses properly allocable to the income (see #12 below). 8. What are some common types of income that are not Net Investment Income? Wages, unemployment compensation; operating income from a nonpassive business, Social Security Benefits, alimony, tax-exempt interest, self-employment income, Alaska Permanent Fund Dividends (see Rev. Rul , CB 102) and distributions from certain Qualified Plans (those described in sections 401(a), 403(a), 403(b), 408, 408A, or 457(b)). 9. What kinds of gains are included in Net Investment Income? To the extent that gains are not otherwise offset by capital losses, the following gains are common examples of items taken into account in computing Net Investment Income: Gains from the sale of stocks, bonds, and mutual funds. Capital gain distributions from mutual funds. Gain from the sale of investment real estate (including gain from the sale of a second home that is not a primary residence). Gains from the sale of interests in partnerships and S corporations (to the extent you were a passive owner). 10. Does this tax apply to gain on the sale of a personal residence? The Net Investment Income Tax will not apply to any amount of gain that is excluded from gross income for regular income tax purposes. The pre-existing statutory exclusion in IRC section 121 exempts the first $250,000 ($500,000 in the case of a married couple) of gain recognized on the sale of a principal residence from gross income for regular income tax purposes and, thus, from the NIIT. Examples of the Calculation of the Net Investment Income Tax Example 1: A, a single filer, earns $210,000 in wages and sells his principal residence that he has owned and resided in for the last 10 years for $420,000. A s cost basis in the home is $200,000. A s realized gain on the sale is $220,000. Under IRC section 121, A may exclude up to $250,000 of gain on the sale. Because this gain is excluded for regular income tax purposes, it is also excluded for purposes of determining Net Investment Income. In this example, the Net Investment Income Tax does not apply to the gain from the sale of A s home. Example 2: B and C, a married couple filing jointly, sell their principal residence that they have owned and resided in for the last 10 years for $1.3 million. B and C s cost basis in the home is $700,000. B and C s realized gain on the sale is $600,000. The recognized gain subject to regular income taxes is $100,000 ($600,000 realized gain less the $500,000 IRC section 121 exclusion). B and C have $125,000 of other Net Investment Income, which brings B and C s total Net Investment Income to $225,000. B and C s modified adjusted gross income is $300,000 and exceeds the threshold amount of $250,000 by $50,000. B and C are subject to NIIT on the lesser of $225,000 (B s Net Investment Income) or $50,000 (the amount B and C s modified adjusted gross income exceeds the $250,000 married filing jointly threshold). B and C owe Net Investment Income Tax of $1,900 ($50,000 X 3.8%). Example 3: D, a single filer, earns $45,000 in wages and sells her principal residence that she has owned and resided in for the last 10 years for $1 million. D s cost basis in the home is $600,000. D s realized gain on the sale is $400,000. The recognized gain subject to regular income taxes is $150,000 ($400,000 realized gain less the $250,000 IRC section 121 exclusion), which is also Net Investment Income. D s modified adjusted gross income is $195,000. Since D s modified adjusted gross income is below the threshold amount of $200,000, D does not owe any Net Investment Income Tax. Cont. on page 11

6 Volume Issue 2 Page 6 Sacramento Beat EA, CSEA Director Beat John Kristianson, I hope you had a chance to make it to points north for the annual meeting in Pleasanton. I had lived in the Bay Area, in a lifetime far away. I never quite made it over the hill to Pleasanton. And its name is very descriptive. It was a great place for our annual meeting. The Big Valley and East Bay Chapters did an excellent job at putting this event on. So I have three specific requests for everyone reading this newsletter. First, do you Twitter? If you do (or even if you don t), down load the Twitter app. It is the app with a white bird on a blue background. And once you have it installed on your mobile device, type in OCEAgents. When you see the OCEA logo, then select that to follow. Now you will see what the other members are up to. So there are several important notes coming out of this meeting. First and foremost, Patricia Kappen was sworn in as the CSEA President for Devang Mehta is the First Vice President for this time frame. That is a two-fer for Orange County. Everyone in our chapter should be extremely proud. The last time the state society was lead by an Orange County person was with Rich Quarterman. The other big news from the annual meeting was that the Avenue M presentation on how help CSEA attract and keep more members was approved by the Board of Directors. We will be putting that study on our web site. If you have a chance, you should take a look at it. There are some great nuggets in the study to help us grow our society in the 21st century (and beyond). But a study is just words on a piece of paper. What makes it real is for you and I to internalize the message and work to get it out to other EAs. And that message would be the benefit of CSEA (and NAEA) membership. If you are a member, you understand the benefits of membership. So what do we need to do here? First and foremost, who do you know that is a member but does not come to the dinner meetings or education events. If that would happen to be you, what are you going to do to change that? The dinner meetings are a great networking event. They can help you get ideas to grow your business. And the Education events are a wonderful vehicle to increase your working knowledge of your profession as well as meeting other like minded professionals. My personal goal in each education event is to take away one or two things that I can use in my business every day. Progress not perfection. Secondly, if you are 1) a dues paying member AND 2) you do attend the monthly meetings and / or education events, who do you know that is an Enrolled Agent and is not involved at the Chapter Level? Why not invite them to a dinner meeting and introduce them to other members at the meeting? They might like what they see and you might have a ride to the meeting on an on-going basis. You may have to pay for gas, but at least you won t be driving. The second thing I need to ask you to do is to go to this URL; Click on the donate tab. On that tab, you will see the I Give logo. Click on that and it will install a flower on your web browser. When you buy things at web sites like Expedia or Staples, the I give logo will ask you if you would like to donate to the CSEA Education Foundation. Now this does not cost you anything. But Staples or Expedia has generously agreed to donate a portion of what you buy to the CSEA Education Foundation. No cost to you and a big benefit to the Education Foundation. We have over 4000 CSEA Members here in California. If each person used this tool, we could generate thousands of dollars to the Foundation. That is potential scholarship monies for you (or you employees) as well as a potential future pipeline of new Enrolled Agents in California. Sounds great doesn t it? So two simple steps to help us secure our future as Enrolled Agents. And we might just have some fun while we do it. The last thing I need to request. If you are not aware, there are two bills in Congress, HR 2313 and S1134. These two bills will codify the Enrolled Agent status. I need to request that you write (or call ) your two senators, Ms. Diane Feinstein and Ms. Barbara Boxer, as well as your representative. You need to ask them to support this important legislation that will help to protect our designation. Sure you can hope that others will take the steps. But only you, taking these steps will ensure that the EA Designation is codified into Federal Law. Here is the URL: naea.org/node/657 There will not be a Sacramento Beat in the next newsletter. I am off to England to partake in an archaeological dig at Hadrian s Wall in Northern England. Unfortunately (really?) I will be gone for three weeks. I will miss the August meeting, but will be there in spirit. Have a great August and I will see you in September. Keep an eye on the web site for news and education events. That is it for now. Cheerio (they really don t say that in England, do they?)

7 Volume Issue 2 Page 7 IRS SPECIAL ENROLLMENT EXAM COURSE SESSIONS BEGINNING JULY 29, 2013 The Orange County Chapter of the California Society of Enrolled Agents is offering a review class to prepare YOU for the IRS Special Enrollment Exam. Please note, this is a fast paced review course and it is highly recommended that attendees have some experience in preparing both individual and business income tax returns. Part 1: Part 2: Part 3: Course Fees: Individual Taxation Monday and Tuesday - July 29th and July 30th Partnerships, C Corporations, S Corporations, Fiduciaries and other topics Friday, Saturday and Monday - August 23rd, August 24th and August 26th Practice before the IRS, Power of Attorney, Ethics and other topics Friday - October 4th Early Registration: May 31, $749 for all three parts First Registration Deadline: July 1, $799 for all three parts Final Registration Deadline: July 15, $899 for all three parts Prices include all classroom materials. Last date to register on line, July 15th. After July 15th, contact Ms. Joyce Cheng, EA at to register. Registration for taking Parts 1, 2 or 3 separately available - call for pricing Location: Time: Instructor: National University, Costa Mesa Campus, 3390 Harbor Blvd, Costa Mesa, CA :00 am to 5:00 pm Lisa Ihm, EA Registration Form Enclose your check made payable to: Orange County Chapter, CSEA. OR charge to your credit card. Visa MasterCard Amer. Express 3-digit security code Credit card number Your name Address City Exp. Date Signature Phone/days State Zip Mail to: Joyce Cheng, 6 Hutton Center, Suite 880, Santa Ana, CA Fax to: It is OCEA s policy not to issue refunds once a registrant has registered for an event or class. However, a written refund request can be submitted to OCEA s treasurer by the next board meeting for consideration by the board in the following three cases: (1) Cancellation at least 72 hours before the event, or (2) a medical emergency preventing the registrant from attending the event, or (3) a death in the family.

8 Volume Issue 2 Page 8 CLASSIFIEDS ANNUITIES ARE COMPLICATED INVEST- MENTS, Fisher Investments may be able to help take the confusion out of your annuity. Call Tony Vicari, VP Regional Development, at (714) or at t.vicari@fi.com 08/13 OFFICE AVAILABLE FOR RENT: Full-time or Timeshare. Furnished professional office (12 x14 ) with window. Corner of Irvine Blvd & B Street in Tustin. Contact Jeff Immel, EA at 949/ or immelfinancial@cox. net 12/12 LOOKING TO PURCHASE A TAX PRACTICE - Small to medium size preferably in South Orange County or North San Diego County. I have been practicing in San Clemente serving individuals, corporations, trusts and non-profit organizations for over 13 years. Please contact Edward Daoud, EA, Ph.D. at 949/ (mobile), 949/ (office) or eaadvisor@cox.net 06/13 TAX PRACTICE WANTED: Looking to purchase a small to medium tax book of business. Currently practice in Tustin serving individual, corporate, partnership and trust clients. Please contact John Rumbold, EA, CFP at or jrumbold@rfta.biz 05/13 TAX PREPARATION PART TIME IN SEAL BEACH. Seeking experienced tax preparer to work in Seal Beach location serving long term clients of financial advisory firm. Candidate should be a planningoriented tax preparer who will be an excellent fit with the company s philosophy, methodology and clientcentered processes. This person will be successful by positively and warmly communicating with clients competence and tax minimization strategies in coordination with the senior financial advisor. This person should be an Enrolled Agent. Reply in confidence to: Applications@ErmanRetirementAdvisory.com 02/13 Classifieds available for OCEA Members & associates to advertise items for sale or rent, want ads & employment opportunities. Ads run for 2 consecutive months free of charge (longer based on space available. Let us know when your ad is no longer needed). to 4quelle@ msn.com. Include your name & phone number or . John Rydell (562) jrrydell@aol.com Barnett & Rubin A Professional Corporation Jeffery Corporate Center, 5450 Trabuco Canyon Rd Irvine CA Phone: (949) Facsimlie: rick@barnettrubin.com website: DISCHARGE TAXES State Bar Certified Personal & Small Business Bankuptcy Speialists Business Formations Business Litigation AV Rated A PLUS APPRAISALS Real Estate Appraisals Homes and 2-4 units for divorces, estates, refi s and sales Forensic Real Estate Appraisals 1987 to current period for SFR s and 2-4 units LA and OC Fast turnaround $350 and up. State certified Expert witness for court Nov 2007 Richard L. Barnett Attorney At Law 24 YEARS EXPERIENCE PRACTICING LAW IN ORANGE COUNTY EA SEEKING YEAR-ROUND POSITION. Experienced in audit representation and tax preparation. Accounting and computer degrees. Knowledgeable and personable. For resume call Hugh Cunningham, EA at (714) or hughtax@gmail.com 08/12 ARE YOU LICENSED AS A SECURITIES BROKER and are you interested in changing Broker-Dealers? Call Bill Williams, EA to discuss this opportunity at (714) /12 Order today for less than $12 a month! Spidell s California Taxletter Get the monthly newsletter with vital California tax information to: Keep current on FTB changes so you prepare correct returns Know when the FTB will be mailing notices to your clients Be prepared when the state starts new audit or collection programs Dowload a sample issue Order online: cont on page 8

9 Volume Issue 2 Page 9 Registration Fee After July 31st $80 Member $85 Non-Member Registration on Day of Event $90 Member $95 Non-Member Continuing Professional Education Program Handling Clients with Foreign Assets 3 Hours CPE When: Tuesday, Aug 20, :00 pm to 4:00 pm Location: Phoenix Club 1340 S Sanderson Ave, Anaheim, CA Presenter: Steven L. Walker This program provides practical solutions on how to deal with clients with foreign assets. The program covers foreign bank and financial accounts, foreign corporations, foreign partnerships, Canadian retirement accounts, foreign trusts, foreign gifts and inheritances, foreign mutual funds, foreign retirement accounts, and tax treaty benefits. This is a must attend program for return preparers dealing with clients with foreign issues. Learning objectives: 1. Become familiar with important international reporting forms 2. Learn how to help a client with delinquent FBARs 3. Best practices for dealing with clients with foreign assets Lunch Is Not Provided All material will be provided on the day of the class. Register On-Line at EAOC.org For Additional information, contact: Patti Kappen at patti@sanjuanfinancial.com, or Devang Mehta at devang.ea@pmaadvisors.com, MAIL-IN REGISTRATION FORM Enclose your check made payable to: Orange County Chapter, CSEA. OR charge to your credit card. Visa MasterCard Amer. Express 3-digit security code Credit card number Exp. Date Your name Signature Address Phone/days City State Zip Mail to: Patti Kappen, EA, Rancho Viejo Road, Suite 215, San Juan Capistrano, CA It is OCEA s policy not to issue refunds once a registrant has registered for an event or class. However, a written refund request can be submitted to OCEA s treasurer by the next board meeting for consideration by the board in the following three cases: (1) Cancellation at least 72 hours before the event, or (2) a medical emergency preventing the registrant from attending the event,or (3) a death in the family.

10 Volume Issue 2 Page 10 Continuing Professional Education Program Coming Up Next SAVE THE DATE!!! Don t miss these exciting and informative OCEA seminars. Mark your calendars now. IRS Offer in Compromise Update September 18, Hour CPE Presented by Dan Breece and Christine Footit AFFORDABLE CARE ACT October 22, Hours CPE Presented by Bianna Whitlock, EA S CORP AND PARTNERSHIP November 1 & 2, Hours CPE ea. (16 hrs CPE total) Presented by Vicki Mulak, EA C CORP December 17, Hours CPE Presented by Vicki Mulak, EA Register On-Line at EAOC.org For Additional information, contact: Joyce E. Cheng, Law Offices of A. Lavar Taylor, 6 Hutton Center, Ste 880, Santa Ana, CA Phone: x117

11 Volume Issue 2 Page 11 Cont. from page Does Net Investment Income include interest, dividends and capital gains of my children that I report on my Form 1040 using Form 8814? The amounts of Net Investment Income that are included on your Form 1040 by reason of Form 8814 are included in calculating your Net Investment Income. However, the calculation of your Net Investment Income does not include (a) amounts excluded from your Form 1040 due to the threshold amounts on Form 8814 and (b) amounts attributable to Alaska Permanent Fund Dividends. 12. What investment expenses are deductible in computing NII? In order to arrive at Net Investment Income, Gross Investment Income (items described in items 7-11 above) is reduced by deductions that are properly allocable to items of Gross Investment Income. Examples of properly allocable deductions include investment interest expense, investment advisory and brokerage fees, expenses related to rental and royalty income, and state and local income taxes properly allocable to items included in Net Investment Income. 13. Will I have to pay both the 3.8% Net Investment Income Tax and the additional.9% Medicare tax? You may be subject to both taxes, but not on the same type of income. The 0.9% Additional Medicare Tax applies to individuals wages, compensation and self-employment income over certain thresholds, but it does not apply to income items included in Net Investment Income. See more information on the Additional Medicare Tax. How the Net Investment Income Tax is Reported and Paid 14. If I am subject to the Net Investment Income Tax, how will I report and pay the tax? For individuals, the tax will be reported on, and paid with, the Form For Estates and Trusts, the tax will be reported on, and paid with, the Form Is the Net Investment Income Tax subject to the estimated tax provisions? The Net Investment Income Tax is subject to the estimated tax provisions. Individuals, estates, and trusts that expect to be subject to the tax in 2013 or thereafter should adjust their income tax withholding or estimated payments to account for the tax increase in order to avoid underpayment penalties. 16. Does the tax have to be withheld from wages? No, but you may request that additional income tax be withheld from your wages. 17. How does a Single taxpayer with income less than the statutory threshold calculate the Net Investment Income Tax? Taxpayer, a single filer, has wages of $180,000 and $15,000 of dividends and capital gains. Taxpayer s modified adjusted gross income is $195,000, which is less than the $200,000 statutory threshold. Taxpayer is not subject to the Net Investment Income Tax. 18. How does a Single taxpayer with income greater than the statutory threshold calculate the Net Investment Income Tax? Taxpayer, a single filer, has $180,000 of wages. Taxpayer also received $90,000 from a passive partnership interest, which is considered Net Investment Income. Taxpayer s modified adjusted gross income is $270,000. Taxpayer s modified adjusted gross income exceeds the threshold of $200,000 for single taxpayers by $70,000. Taxpayer s Net Investment Income is $90,000. The Net Investment Income Tax is based on the lesser of $70,000 (the amount that Taxpayer s modified adjusted gross income exceeds the $200,000 threshold) or $90,000 (Taxpayer s Net Investment Income). Taxpayer owes NIIT of $2,660 ($70,000 x 3.8%). Additional Information 19. Other than these FAQs, where can I find additional information about the Net Investment Income Tax? Find it in the full text of the proposed regulations, request for comments, and information on the public hearing. 20. The proposed regulations are proposed to be effective for tax years beginning after Dec. 31, 2013, but Net Investment Income Tax goes into effect on Jan. 1, May I rely on the regulations for guidance on the Net Investment Income Tax during 2013? Taxpayers may rely on the proposed regulations for purposes of compliance with section 1411 until the effec- Cont. on page 12

12 Volume Issue 2 Page 12 Welcome New Members Gary Clisby Patricia H. Ginsburg S. Matthew Golding Denise Hunter Danko Iordanov News from your Continuing Education Chair by John Rumbold, EA The IRS has now implemented a facility to view your reported continuing education hours under your PTIN account. To view your hours, go to for Tax Pros on the IRS website. Then click on Register for or renew your PTIN under Registration & Testing. Enter your user ID and password in the Returning User block and sign in. Click on the Select button to the right of View My Continuing Education Credits. Click the expand link to view the detail of your reported hours. You will see the provider name, program title with date, program number and credits earned. If you have any questions about your hours reported you must contact the provider. For our various events, that would be the California Society of Enrolled Agents. Cont. from page 12 tive date of the final regulations. To the extent the proposed regulations provide taxpayers with the ability to make an election, taxpayers may make the election provided that the election is made in the manner described in the proposed regulation. Any election made in reliance on the proposed regulations will be in effect for the year of the election, and will remain in effect for subsequent taxable years. However, if final regulations provide for the same or a similar election, taxpayers who opt not to make an election in reliance on the proposed regulations will not be precluded from making that election pursuant to the final regulations. upcoming OCEA programs & events Date program / event CPE Subject Location Aug 20, 2013 Education 3 Clients with Foreign Assets: FBAR/Form 8938 Phoenix Club Aug 20, 2013 Meeting vs NR Phoenix Club Sept 17, 2013 Meeting 1 Patient Protection &Affordable Care Act Phoenix Club Dinner Menu For This Month s Meeting Chicken Marsala with Grilled Pear and Blue Cheese Grilled Atlantic Salmon Filet with Dilled Cucumbers Chef s House Mix Greens Salad with choice of three dressings Classic Caesar Salad with Parmesan, Croutons, Baby Tomatoes and Traditional dressing Classic Rice Pilaf Farmers Market Steamed Vegetable Mix Black Forest Cake Authentic Warm Apple Strudel with Vanilla Sauce The Vision of OCEA is to serve, to represent the best interests of Enrolled Agents in Orange County, and to emphasize and enlighten the general public that an Enrolled Agent is the premier tax professional. The Mission of OCEA is to encourage professionalism, personal growth, and educational growth, while providing member benefits and enhancing the role of Enrolled Agents among the local governmental agencies, other professionals, and the general public. OCEA is 410 Members strong and proud to be the largest Chapter of CSEA. HARBOR BLVD KATELLA AVE CHAPMAN AVE BALL RD STATE COLLEGE BLVD Ball Rd to Phoenix Club Dr Right on Sanderson Ave. MAIN ST Meetings are held at the Phoenix Club 1340 S Sanderson Ave, Anaheim, CA Agenda August 20th, :15 Board Meeting 5:30 Social Time 6:00 Dinner Hour 7:00 1 Hr CPE Program $40/$45 New Prices starting in August $40 for Member pre-registration before midnight on the Thursday prior to the dinner meeting; $45 for late or on-site registration and for non-members for meetings with 1 hour of CPE credit. Meetings with 2 hours of CPE credit are $45 and $50 respectively. To make a reservation go online to our web site and select the sign up button next to the event you would like to attend and follow the prompts. If you incur any difficulties signing up, contact Robin Miller at (949) , with a message including your name as it s registered at IRS and your phone number and your PTIN.