A Quar ter ly Publication Vol . 5 Issue 1 / Januar y 2013the WealthWATCHSM the WealthWATCHSM 1

INSIDE THIS ISSUE

The Tax Landscape page 1

Letter From The President page 2

Economic Commentary page 3

The 2012 Tax Landscapeby Sanford Trado, CPA

2012 will be a pivotal year regarding the impact that potential changes in tax rules will have on all taxpayers. If Congress does not act regarding expiring and “sunsetting” tax laws, all income levels can expect a tax increase. The uncertainty regarding what Congress will do can make year-end tax planning a bit challenging and uncertain, as well as increase volatility in the stock market.

Our best guess is that Congress will not be able to come to any permanent solution but will put in place temporary fixes to expiring tax cuts and spending cuts. That being said, you need to be aware of the impact if the Bush tax cuts are allowed to expire. The following are some of the provisions of the tax law that are expected to “sunset.”

Everyone will experience higher taxes. The tax brackets we have enjoyed for the past nine years are going to change. Because the 10% bracket will revert to 15%, there will be no more 10% bracket.

The top four brackets will increase from:

- 25% to 28% -28% to 31% -33% to 36% -36% to 39%

In addition to the changes on ordinary income, anticipate changes in the tax rates on capital gains and qualified dividend income. The existence of current low rates of 0% and 15% are sure to change to a minimum of 15% and 20%, but quite possibly significantly higher for high income earners.

The United States government imposes a Medicare tax of 2.9% on wages received by an employee and on business or farming income earned by self-employed individuals. Starting in the year 2013, Medicare taxes will be increased to 3.8% and expanded to cover both wage income and investment income for higher-income individuals. For single taxpayers with earned income (which includes wages and income from self employment) above $200,000, there is a surcharge of .9% on top of the 2.9% current Medicare Tax, for total of 3.8% Medicare Tax. The threshold for married taxpayers is $250,000.

The second part of the tax is not an increase but a new tax. The 3.8% Medicare Tax will be imposed on all investment income for individuals with adjusted gross incomes (AGI) above $200,000 and for married taxpayers whose AGI is above $250,000. This new tax is effective for

Sanford Trado

continued on page 2

tax years beginning after December 31, 2012.

Although the tax code provides a deduction for some medical costs, only a fration of taxpayers are able to overcome the steep hurdle to claim it. That’s because you must itemize your deductions, and you can write off only those out-of-pocket medical and dental expenses that exceed 7.5% of your adjusted gross income. That hurdle is going up to 10% on Jan. 1, 2013, an increase of 33%. For taxpayers 65 and older, it stays at 7.5% through 2016, but in 2017 the 10% hurdle applies to all taxpayers.

Taxpayers’ ability to continue building funds for higher education will be restricted when the contributions to the Coverdell Education Savings Accounts revert back to $500 per beneficiary vs. the current $2,000. In addition, there will be a lower phase-out range for “married filing jointly” and certain restricted definitions on qualifying education expenses.

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Old fashioned service with a smile still thrives at Lineweaver Financial Group -Pat S.

by Jim Lineweaver, CFP®, President and FounderLE T TER FROM THE PRESIDENT

Can you guess what company is behind the following statistics?• Monthly active users now total nearly 850 million

• 250 million photos are uploaded every day. 20% of all page views on the web are on this site.

• 425 million mobile users

• 100 billion connections

• Zynga games’ revenue is currently 12% of this company’s total income

• 2.7 billion “likes” per day

• 57% of users are female

Have you figured it out yet? If not, how about another clue? It was the most hyped-up Initial Public Offering since Google. It’s a little hard to keep you guessing when all you have to do is look down the page, and I’m sure many of you have probably figured out by now...it’s Facebook. The stock was originally set to come out around $30 a share, but it immediately jumped up to 34 and subsequently fell all the way down to 18. It was one of the most hyped-up IPOs in the last 10 years. What went wrong? Was it the news that GM pulled millions of dollars out of their Facebook advertising budget the week before the public offering? Was it the fact that nobody really understood how Facebook makes money? One thing is for sure, Mark Zuckerberg and many employees of Facebook became billionaires and millionaires overnight! Now we all aren’t as fortunate as Mark; but there are some lessons to be learned from this IPO.

• When it comes to investing, try not to let your emotions get caught up in your investment decisions.

• “Following the herd” mentality doesn’t mean the herd is heading in the right direction.

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The 2012 Tax Landscape

• Make sure you do your homework before you invest.

• Once you do decide to invest, make sure someone is minding the store while you are working, traveling, taking care of the kids/grandkids, etc.

• Seek the advice of a qualified financial advisor.

• If all else fails, just go to work for the next Facebook for about 10 years and retire after they go public!

Here at Lineweaver Financial Group, we pride ourselves on helping you sort through all the financial clutter that is in the world today by helping you get on the track to a successful financial future. We have assembled some of the finest tax, legal, insurance, and financial professionals in the Greater Cleveland area to coordinate all your financial affairs.

I’m glad many of you are taking advantage of these services, because it is really easy to get caught up in your busy lives and lose track of these details until it’s too late. This is the primary reason why I built the WealthWatch Center in Valley View--to make it easy for you to get everything done at one time, all in one place.

As Lineweaver Financial Group continues to grow, I would like to express my gratitude to you, our valued clients, and also to my staff, who respond to my ever-increasing demands to remain a top-quality organization in this ever-changing world.

I wish you good health, happiness, and prosperity in 2013. And as always, if you ever need anything, we are just a phone call away. Have a great 2013 and don’t forget to capture your memories along the way!

Source: http://www.jeffbullas.com

CLIENT THOUGHTS

If you have children you have enjoyed the benefit of receiving a deduction and tax credit. Certain income thresholds that are claiming children under 17 years of age previously have qualified for a $1,000 per child credit. This will drop to $500 per child, along with restrictive rules regarding refundable child credit.

Some of the more favorable tax laws that will expire at the end of 2012 will impact small businesses and all taxpayers. For the past two years, all employees and self-employed individuals saw their Social Security payroll rate go from 6.2% down to 4.2%--this will expire at the end of 2012. Therefore, an individual making $75K in income will see their taxes go up by $1,500, while someone making $50K per year will see a $1,000 increase. For small businesses, the immediate deductions for investing in machinery and equipment will be significantly limited. Currently, a business could take an immediate deduction up to $139K for capital purchases; this will be limited to $25K after 2012.

These are just a few of the laws that will expire at the end of 2012. If Congress does not act there will be a negative tax effect on all taxpayers’ 2012 and 2013 taxes. Do you know how tax law changes will affect you? Be prepared.

Securities offered through Sigma Financial Corporation. Member FINRA/SIPC. Testimonials may not be representative of the experience of other clients, and are not indicative of future performance.

Reality Check

The election of President Obama for a second term also brought one of the worst trading sessions for the NYSE and NASDAQ for 2012. On Election Day, Nov. 6th, the DJIA closed at 13,245.68. By Thursday, Nov. 8th, the Dow closed at 12,811.32, a loss of 2.3%. The S&P 500 and NASDAQ 100 also lost over 2.5% during the same period.

Doused in rosy expectations for much of 2012 the markets awoke to the reality of slowing consumption and business investment. Further stoking worries: renewed, growing cynicism that the US will return to recession as automatic spending cuts and tax resets will kick-in if Congress and the Obama Administration continue their impasse.

Internationally, the European Union continues to sludge through a recession. So poor is the region’s outlook that S&P has now downgraded UK’s creditworthiness to “negative outlook” with “a one-in-three chance of an overall downgrade within one to two years (S&P).” One positive: Greece won additional backing from the European Union and IMF thus easing a certain bankruptcy to start 2013. China appears to be recovering as their PMI reflected an uptick of activity. Japan’s parliamentary elections concluded with the conservative Liberal Democratic Party returning to power due to nationwide dissatisfaction with economic conditions and continued tensions with China.

With political inaction and striving to jolt the economy through low cost borrowing and investing, the Fed Chairman Bernanke announced that the Federal Reserve will continue to purchase mortgage backed securities and an additional $45 billion in Treasuries. Further, interest rate changes will not be enacted until unemployment reaches 6.5% or inflation hits 2.5% thus removing a significant deal of monetary policy uncertainty.

Not all is gloom as home and auto sales continue earlier growth trends. And unemployment also continues to slowly recede, currently holding at 7.7% for November (Bureau of Labor). So here we are again with government discord, portions of the economy showing strength, Europe in recession and all enveloped in uncertainty. Justified or not, the fiscal cliff resolution will set the tone for the next two years domestically. Globally, central banks will continue to wield monetary policy to drive international economies from stagnation. Such is the reality of today’s marketplace.

Tune in to WKYC Channel 3 at 11:30 am every other Sunday to see Jim Lineweaver on the Golden Opportunities show with Armond Budish. Jim and Armond discuss current financial topics in an easy to understand format.

Upcoming shows and topics:

MONEY WATCH

GOLDEN OPPORTUNITIES

ECONOMIC COMMENTARY by Stephen Yarmesch, AIF ®Riverview Research, LLC

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DJIA: : 13,104.144Q: -2.48%

10 Year Treasury Note Yield: 1.76% 12/30/2011: 1.87% 9/28/2012: 1.64%

30 Year Mortgage Rate: 3.41%12/30/2011: 3.97% 9/28/2012: 3.41%

Source: Yahoo FinancePast market performance is no guarantee of future investment performance or success.It is not possible to invest directly in an index. Close of Market 12/31/2012

Sunday, January 6, 2013 Market Volatility as the New Norm

Sunday, January 20, 2013 Pension Buyouts

Sunday, February 3, 2013 Deductible Medical Expenses Decreasing by

33% in 2013

CELL PHONE E TIQUE T TE TIPSIn today’s world we are surrounded by electronics. It seems that everyone has a cell phone and now with the “smart phone” craze sweeping the nation, our phones have become more that just a telephone. They are now serving the same function as a computer, and they fit in your pocket! Since we use our phones for so many purposes, it is easy to forget that they are still phones – and that not everyone is happy about cell phone use in public. Here are some great tips on cell phone etiquette:

• Keep your volume down in public when talking on your phone.

• Make sure your phone ringer is off when in a public setting.

• When in a public situation, ask if the call can wait, or step off to the side to take your call.

• Prioritize: when you are with a friend and your phone rings, give that person precedence over the phone call.

• Make sure you respect cell-free zones, both marked and unmarked, such as weddings, performances, and funerals.

• If you have a bad connection, acknowledge it and call them back laterSource: Horsesmouth.com

EMPLOYEE SPOTLIGHTMark and Charlene Niederhelman

TRIVIA

9035 Sweet Valley Drive Valley View, Ohio 44125 1-888-313-4009

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Do you know the answer?

What do conch shells; ivory, clay, live animals and grain all have in common?

Before money was made of bills and coins these items were used as currency!

Source: www.happyworker.com

In November ’12 Mark & Charlene Niederhelman, LFG staff members and husband and wife team, traveled with their ongoing St. Basil parish’s mission trip to a remote village in Honduras. Over their “vacation” they were part of a team of dedicated individuals that built a water filtration plant and a church to change the lives of the villagers of La Viaspa.

If you would like to receive our newsletter through email, please email Kate at Kate@lineweaver.net

Mark’s thoughts that he has shared with many since their return are “First, we Americans have too much stuff. We interacted with many people that have very few possessions and were very happy. Second, while this country might have some flaws, be thankful you were born in America!”

This Spotlight section also features Lineweaver Financial Group clients. Please consider sharing yourself with us. If you have an interesting hobby or have been on an exciting adventure, call Kate or email her at Kate@Lineweaver.net to share your story. We would love to hear from you!

Mark and Char with their mission co-workers and new found Honduran friends outside the church they built