Tax Season Is Upon Us!
Once again the new year is upon us and tax season will be soon. This year many Americans will be affected by tax law changes.We are once again making our tax organizers available to anyone who requests one. It is our attempt to be as thorough as possible in the preparation of your return. If you received an organizer last year, we will send this year’s organizer the same way as last year’s. There are some big changes you’ll want to be aware of for 2014
Affordable Care Act
All Americans will be affected in some manner by the 2010 Affordable Care Act (some people call it Obamacare) and it resulted in 5 new forms for tax year 2014. If you received a Form 1095 from any issuer or agency, please provide along with your other tax preparation documents. If you did not receive a Form 1095, we must ask you a number of additional questions about your insurance coverage so that we can help you avoid any penalties for failure to have health insurance
Health Care Deductions
Previous years’ deductions for health care costs did not “kick in” did not “count” until those costs exceeded 7.5% of your adjusted gross income. This year is different in that . . . .
Last year’s tax bill reduced your deduction for medical costs, including health insurance for 2014. We will see very few deductions available for medical costs now unless you have substantial bills. The amount of your medical expenses in most cases must now be more than 10% of your income before we can deduct anything, so weigh carefully whether to go to the trouble of summarizing these costs. If you are self-employed, we still need to know how much you paid for health insurance. We highly recommend looking into a HSA (Health Savings Account) if you have a high deductible health insurance policy that is HSA compatible. This is a great tool for making health care costs a pre-tax item.
The IRS is now looking even more closely for offshore accounts. If you have an account, retirement account, or business interest with a value over $10,000 in a foreign country, or a foreign business ownership (not through a mutual fund), please let us know as some special rules will apply to you. There are substantial penalties for failure to disclose these items.
Children/Student Tax Returns
Your dependent children or college students should be discouraged from filing their own returns this year. Allowing a child to file their own return, particularly a student, can cost the child and parent literally thousands of dollars in Health Care penalties and/or credits.
Roth IRA Conversions
You may have heard about converting your retirement accounts to Roth IRAs. While there are a number of advantages to conversions, there are an equal number of disadvantages that carry some major tax consequences. Please do not convert your accounts in 2014 without coming in to see us for an appointment to discuss both the positives and negatives. Remember: the filing deadline is not the deadline for moving money. All conversions for 2014 must be completed by December 31, 2014.
Gifts and Estate Taxes
Effective 1/1/2013, the amount you may give to one person in one year without any return filing requirements was increased to $14,000. Very, very few Americans need to worry about Federal estate taxes because of changes in the estate tax limit at the Federal level.
There is still time to setup an appointment for year-end tax planning. We recommend a meeting if you have had any major changes during 2014 or are expecting major financial changes in 2014 or 2015, such as retirement, inheritances, selling property, etc.