An Open Letter
An open letter from our CEO, Kerri Cuff regarding the 2015 tax season
Dear Tax & Accounting Client:
Tax filing season 2014 is now “open for business”. The IRS will begin accepting corporate tax returns on January 9, 2015 and individual tax returns on January 20, 2015. The sooner you file, the sooner you will know the amount of your refund or the amount due on April 15th. We are accepting appointments now for tax consultations. If you have questions, now is the time to call or come in so that you are prepared to file as soon as possible.
In 2010 when Congress passed the “Affordable Care Act” (commonly known as “Obamacare”), the effects seemed far away to many of us. Now that tax season 2014 is here there will be several direct effects upon every American, with the requirement that all Americans of all ages obtain qualified health insurance for the entire year. The requirement to obtain health insurance applies to you individually as well as to anyone you claim as a dependent on your tax return.
Several new forms will be issued to taxpayers this year, primarily Forms 1095-A, B and C. In order tocomplete your 2014 tax return, we must have all copies of Form 1095. These forms provide us with the necessary information to report your health insurance coverage, calculate any credit and/or calculate any penalty that may apply.
Because much of the reporting for 2014 will be voluntary, you may not receive any Forms 1095. We therefore need to also obtain from you the following information in order to complete your return:
Health insurer(s) for 2014;
- Number of months of coverage;
- Members of your household covered by the above health insurance through 2014;
- Your county of residence all year;
- Signed health insurance information for tax records;
- Exemption letter with an Exemption Certificate Number if you were deemed eligible for an exemption Healthcare.gov.
Of equal importance for 2014 are the multiple possibilities of tax mistakes made primarily by your dependent children who may have worked and received wages in 2014. The simplest guidance we can give you to avoid this mistake is: Do not allow any dependent children to file their own tax returns, particularly college students, and do not file them yourself. This guidance is meant to protect you and your children inadvertently costing you literally thousands of dollars in potential health care tax credits (as well as possible education credits). The IRS recently released new Form 8962 to calculate the credit and in our continuing education classes, we have learned how difficult it is to calculate the credit and how easy it is to make a mistake and lose the credit. We are estimating this new form will require substantially more preparation time for this year’s return which means, as expected, that the cost of the form will increase your total tax return preparation fees. We regret the increase but this is one of the costs of compliance with these new requirements.
For those of you who have received an advance payment of the Health Care credit by purchasing insurance through the Federal Exchange, we also need to warn you in advance that if you received a greater credit than allowed, you will be forced to repay the excess with this year’s return.
Tax rates remained the same for 2014 for most individuals, ranging from 10% to 35% for ordinary income and 0 – 15% for capital
gain. Two additional taxes –
- a 0.9% Medicare tax on wages and self-employment income
- and the new 3.8% surtax on net investment income imposed by the 2013 Health Care and Education Reconciliation Act.
The following provisions were set to expire at the end of 2013. However, Congress has passed late legislation making these provisions retroactive to January 1, 2014 and expiring on December 31, 2014:
- State and Local Sales and Use Tax: Taxpayers are allowed to deduct the larger of sales and use taxes or state and local income taxes paid;
- Qualified Charitable Distributions: IRS owners or beneficiaries who are 70 ½ or older are permitted to make cash contributions from their IRA accounts of $100,000 or less to IRS recognized charities;
- Mortgage Insurance Premiums: PMI deductions as qualified residence interest are allowed itemized deductions;
- Residential Energy Credits: Tax credits for energy-saving home improvements are available for 2014;
- Teachers: The $250 deduction allowed to teachers for purchasing classroom supplies is exatended through 2014;
- Qualified Tuition Expenses: The deduction from adjusted gross income for qualified tuition and fees will be allowable on 2014 tax returns;
- Depreciation: The 50% bonus depreciation deduction and the $500,000 deduction limitation for Section 179 property purchased and placed in service in 2014 was extended.
Each taxpayer’s particular situation and goals are unique to that individual or family and you must make decisions after careful
considerations of all of the facts and circumstances. YOU decide which strategies or tips will be beneficial to you and your family. Remember to review last year’s tax return, take advantage of expiring tax provisions if possible, plan for next year, stay informed and make your goal to minimize your tax liability as much as is legally possible. Also know that any advice we can offer you is based upon our knowledge of your tax and financial situation – if we don’t know the whole story, we cannot give reliable advice.
We look forward to the opportunity to serve your tax and accounting needs in 2015.
Accounting, Taxes & Management Services LLC