With a new year comes another new tax filing season! As we prepare for the upcoming tax season, we hope this past year has been filled with many blessings and finds you in good health.
Below are items that may apply to your income tax situation for 2014. Take note of information on the 2014 health care reforms and a new mandatory reporting of health insurance coverage. Also take note of some of the last-minute changes from Congress in December that extended tax provisions which were previously set to expire at the end of 2013.
If you missed our annual tax letter in your inbox or mailbox, see the links at the bottom of the page.
HEALTH CARE REFORM
Taxpayers who don’t have health care coverage in 2014 may be subject to a penalty. As previously mentioned, the completed ACA checklist is required in order for us to complete the appropriate tax reporting compliance forms and disclosures. You may also be receiving some new forms this year from your employer and insurance company. These forms are labeled 1095-A, B and C. If you receive any of these forms, it is imperative they be provided to us with your tax documentation. If your tax and health insurance situation requires the additional forms and compliance reporting, we will need to increase our preparation fee. The ACA rules and forms are extremely complex, and we have spent hundreds of hours over the past year becoming educated with this new law and how it affects taxpayers.
If you have a bank 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.
We strongly encourage you to have us prepare the tax returns of your dependent children. If you qualify for a subsidy, the Affordable Care Act forms require reporting of all household income. Additionally, analysis of the education credits requires information from both parent and child tax reporting to maximize these credits.
CAPITAL GAIN TAX RATES/NET INVESTMENT TAX
For taxpayers in the 15% tax bracket or below, the capital gain rates will remain at 0%. For taxpayers above the 15% bracket but below $450k taxable income, the long term capital gain tax rate is set at 15%. For taxpayers with taxable income above $450k, the capital gain tax rate will be 20%. In addition, the 3.8% net investment income tax applies to single taxpayers with adjusted gross income of $200,000 and joint filers earning $250,000. This tax may impact the effective after-tax return on the sale of your investments, but proper planning may serve to minimize tax liability.
HOME OWNER ENERGY CREDITS
This provision has been extended, so if you have purchased insulation, storm windows or doors, a high-efficiency furnace, a water heater or made similar energy improvements in 2014, you may qualify for a 10-30% federal income tax credit. However, the lifetime credit is limited to $500 and other limits are imposed based on the type of improvement. Supporting documents must be provided.
OTHER NOTEWORTHY ITEMS
- The American Opportunity College Tuition tax credit is extended through 2017.
- The child tax credit of $1,000 for children under age 17 has been extended through 2017.
- The “above the line” deduction of qualified college tuition and related college expenses is extended through 2014.
- The $250 deduction for certain expenses of school teachers is extended through 2014.
- Tax free IRA distributions to qualified charitable organizations is extended through 2014.
- The mileage rates for 2014 are 56 cents per mile for business mileage, 24 cents for medical mileage and 14 cents charitable miles. Please document and complete the applicable section of our questionnaire if you had deductible business miles, medical miles or charitable miles.
MICHIGAN TAX UPDATE AND REMINDERS
- For 2014, the Michigan tax law changes implemented in 2012 relating to taxation of retirement benefits, social security benefits and interest/dividends continue to be in effect. Individuals born prior to 1946 will not be affected by the changes. Individuals born between 1946 and 1952 will be somewhat affected. Individuals born after 1952 may see significant increases to income that is subject to state income tax.
- Contributions to public universities/colleges, food banks and homeless shelters, libraries, radio stations etc. are no longer eligible for any Michigan related tax credits. However, they remain deductible as an itemized deduction on the federal return.
As always, we strive to provide you with timely, complete and accurate service while keeping your tax liability to the lowest legal amount. We encourage you to forward your income tax information as soon as you have everything organized. Remember: if we receive your tax information after March 31, it is very likely that we will need to file an extension for you.
1040 CLIENT FORM LINKS:
You can find the following forms on the 1040 Client Forms page on our website:
- 2014 Year-End 1040 Tax Letter
- 2014 Year-End 1040 Questionnaire
- ACA Checklist (MANDATORY)
- Business Income Worksheet (Schedule C)
- Rental Income Worksheet (Schedule E)