Networth: Tax time questions on forms, Medicare surcharges

With tax season getting under way, today I'll answer reader questions about property taxes, the new Medicare surcharge starting in 2013 and how to get those old-fashioned paper tax forms.

Q. Tony G. asks, "Has anything been published regarding the process to order forms for both IRS and (state) Franchise Tax? If not, where can I find the information?"

A. The Internal Revenue Service stopped mailing tax packages to taxpayers a couple years ago. You can download forms and publications from their respective websites at irs.gov. If you want them mailed to you, you must request them.

To request federal forms and publications, call (800) 829-3676. Phone orders should be received within 10 working days. Call your state tax department for their forms.

Q: Vern G. writes, "I read in your column about a surcharge on unearned income in 2013. My wife is 70 1/2 & I am 80. We have a million-plus in 403(b), SEP-IRA and 401(a) accounts that we are required to take distributions from. Is this money earned or unearned or both?

"How do our pensions and Social Security fit in? Most of my income is interest from tax-free municipal bonds. Will that money be taxed? What about taxable interest from savings bonds? The government may consider my entire income unearned even though I have worked and saved for 62 years to accumulate what I have."

A: Vern is talking about a new 3.8 percent Medicare surtax that high-income households will face on certain types of unearned (i.e., investment) income starting next year.

Mark Luscombe, a principal analyst with CCH, says the 3.8 percent tax will be imposed on "net investment income," which for this purpose does not include interest on tax-exempt bonds, veterans' benefits or the excluded gain on the sale of a principal residence.

It also does not include any distribution -- required or not -- from qualified employee benefit plans, which are defined broadly enough so that there would be no Medicare contribution tax on distributions from any of the plans mentioned by the reader.

He adds that the Medicare contribution tax will be imposed only on the lesser of an individual's net investment income for the year or modified adjusted gross income in excess of $250,000 for married taxpayers filing jointly, so if this taxpayer's modified adjusted gross income does not exceed $250,000, there will be no Medicare contribution tax.

The new Medicare tax will be imposed on gross income from interest, dividends, annuities, royalties and rents, unless such income is derived in the ordinary course of any active trade or business. It also includes net gain attributable to the disposition of property other than property held in an active trade or business, Luscombe says.

(E-mail Kathleen Pender at kpender(at)sfchronicle.com. For more stories visit scrippsnews.com)