LOOK AT TAXES

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15 Second Tax Tips

2014 Business Income Tax Return Due Date
The C Corporation and S Corporation filing date is Monday, March 16, 2014. Partnerships, Trusts and Estates are treated the same as personal returns and are due Wednesday April 15, 2015. Business extension due date is earlier than personal returns. This allows individuals filing an extension to receive their income notice (Form K-1) before their extension due date. Partnerships, Corporations, Trusts and Estates extension due date is Tuesday, September 15, 2015.

2014 Moving expenses standard mileage rate
If you move for employment, the move is a qualified move, and use your car to take yourself, members of your household, or your personal effects to your new home, in Tax Year 2014 you can use the standard mileage rate of 23.5 cents per mile -(Was 23 cents in 2012, 24 in 2013). Remember if you use the standard mileage rate you can deduction the parking fees and tolls you pay to move, but not the repairs, general maintenance, insurance, or depreciation.

2014 Personal Income Tax Return Due Date
Personal income tax return filing deadline normally is April 15 of each year. On years where April 15 is on the weekend or a holiday it is the next business day. The Income Tax Return Due Date for tax year 2014 is Wednesday, April 15, 2015. The personal extension due date is Thursday, October 15, 2015..

2014 Standard Mileage Rate - Business
The 2014 tax year standard mileage rate for business miles for driving a car, van or pickup truck is 56 cents per mile (51 cents in 2011 and 55.5 in 2012, 56.5 in 2013). The standard mileage rate can be used for vehicles for hire such as a taxicab.

2014 Standard Mileage Rate - Medical/Charitable
When you travel to/from a medical visit, keep track of the miles and deduct for tax year 2014 at the 23.5 cents per mile rate (Was 23 cents in 2012, 24 in 2013). You may also itemize mileage for operating a car for charitable purposes at 14 center per mile (was the same in 2012 and 2013).

ACA - Healthcare and the New Shared Responsiblity Payment
The first question to answer is do you have qualified employer or other insurance that exempts you from the penalty which is nicely called the Shared Responsibility Payment. If you have a full service healthcare policy from your employers, a private insurer, have Medicare or military Tricare or you have a policy purchased through the federal or state Marketplace online, you are safe. You can check the question, YES on your tax return and not worry about a penalty.

Be Sure to Keep Your Refund Coming Quickly
With electronic filing and direct deposit, income tax refunds are getting faster and faster. You or someone you know may have received their refund in as little as 8 days. But be warned this can change if something is different this year verse last year. If you moved, be sure your current address is on the return. Tax preparers sometimes use your W-2 to start a return and your current address may be different than the address on your W-2. You may have some refund review red flags and the IRS could delay, hold or take your refund. Stay current on federal and state tax accounts or the refund will be diverted to pay back taxes. Substitute W-2s, undocumented income or special deductions could require mailing proof of correct amounts. The IRS may wait for the paper back-up before releasing the refund. So don’t assume just because your friends and family get fast refunds, you will also. You may have a unique story that causes a refund delay.

Bitcoin - Money or Property?
In March 2014, the IRS announced that convertible virtual currencies, such as Bitcoin, would be treated as property and not as currency. A tax-payer who receives Bitcoin in payment for products or services must include as income the fair market value (FMV) on the date it is received. Additionally, the IRS will treat Bitcoin paid by an employer for service rendered as wages for employment tax purposes.

Can I use my pay stub to file my taxes?
Yes - maybe. The W2 is the required document for filing your return. Your employer is required to provide the W2 by January 31. If your employer does not provide the W2, you need to make every effort to contact the employer. If you do not receive it by February 14, you may call the IRS at 1-800-829-1040 for assistance. If the IRS is unable to obtain the W2, download from the IRS web site a Form 4852 and fill in using your last pay stub. This will be used as a substitute W2. Your tax professional will be able to assist you to prepare the form.

Change of Address and Moving Expense Adjustment
If you moved since you last filed your return, be sure to notify the IRS by sending a Form 8822, Change of Address, to the IRS Service Center where you filed your last return. If you moved because you are working at a new location and it was at least 50 miles, you may be able to deduct some moving expenses. Use this formula – distance from old home to new jobu minus distance from old home to old job is equal or greater than 50 mile – it is deductible. Deductible expenses include the cost of moving furniture and household items and your lodging on one trip to the new location. It does not include the mileage or travel expenses to the new location.

Changes for the Business Owner 1099-K Reporting Requirement
On March 1, 2012 the IRS announced that it decided to reverse its decision on requiring the 1099-K to be entered on your tax return. The 1099-K enter was to be used to reconcile your company gross sales receipts with that reported by your businesses credit card payment processors. This removes the concern about the time and expense it would have taken to reconcile income on the business tax returns. Card Processors will continue to issue the 1099-K and differences between tax return receipts and the 1099-K could still initiate an IRS audit.

Contributions to a 529 plan for my child and the gift tax
Tuition payments by parents are only exempt from the gift tax provided that they are paid directly to the educational institution. So for individuals with the means to do so, paying tuition directly to the school on behalf of a student is a relatively straightforward way to avoid having to worry about gift tax implications. The payments must be for tuition only. Contributions to a qualified tuition program (529 Plan) do not qualify for the gift tax educational exclusion. How to make the gift tax not apply to 529 Plan contributions.

Credit for Taxes Paid another State
State income tax returns are an area where double taxation can be partly or fully eliminated but not all states are equal in how they accomplish it. Generally if you have income from a state that is not your resident state, you can take a credit on your resident return for the duplicate tax based on the duplicate income that is taxed. The credit will be most likely be limited to the smaller of the taxes you owe in the nonresident state or the taxes calculated at the tax rate in your resident state. Most state part-year returns only tax the income in their state while you were a resident so there is no credit. Overpaying or underpaying on your state tax returns is very common when this credit is involved. Seek a tax professional who is familiar with the pitfalls and idiosyncrasies of state taxes paid other another state to be sure you are only paying the taxes you are required.

Deductions No Longer Available
As of 2014, homeowners can no longer deduct mortgage insurance premiums as interest. Also, the mortgage debt exclusion has expired, which allowed homeowners to exclude from taxable income the amount of any mortgage debt forgiveness granted to them by a bank.

Don't Forget Your Carryovers From Last Year
Many billions of tax benefits are lost every year because amounts you can carry over from the prior year are forgotten. Review your prior year return and look for capital losses, contributions that were limited or business section 179. To find out if you have other carryovers or to get clarifications, discuss your prior tax returns with our tax professional.

Earned Income Credit and Investments
Investment income can disqualify you from receiving the Earned Income Credit. This credit is critical to low income wage earners because it is refundable – you get it even if you have not taxable income. If you have savings and a low wage or other earned income that gets you by, the savings could disqualify you for the credit. Investment definition and limit are 1040 lines 8a (taxable interest), 8b (tax-exempt interest), 9a (ordinary dividends), and 10 (capital gain distributions) greater than $3,300 in Tax Year 2014. ($3,150 in 2011, $3,200 in 2012, $3,250 in 2013)

Excluding 529 Plan distribution from the Gift Tax
Contributions over $14,000 in one year to a 529 Plan are subject to the Gift Tax. However, you may elect to treat up to $70,000 as if you had made it over a 5 year period. Any amount over the $70,000 is factored into the gift tax. Parents can each make the contribution doubling the amount up to $140,000 with no gift tax consequences. Review IRS Pub 709 for more details.

First Time Home Buyers Credit - Before 1/1/2009
If you claimed the First-Time Homebuyer's credit before January 1, 2009 you must repay the credit for up to 15 years. You will not get a reminder from the IRS. You need to enter this in the Other Taxes section of the IRS 1040 each year either until fully paid, your home is disposed of and the balance paid or the use changed to rental and the balance is paid. Only file the Form 5405 if the home is disposed or use as main home changed.

Hard to believe, but some income is not taxable.
Some income or receipts you receive are not taxed on the federal tax return. Child support, life insurance payouts (if not at a price) and combat pay are ones many people know. Some you may not know are cash rebates from a dealer or manufacturer, workers’ compensation benefits, gifts (the recipient), most bequests/inheritances and employee achievement awards of tangible property (limitations apply). Be careful because some things you think are not income are taxable – bartering exchanges, scholarships and grants not used as required, court settlements that include punitive damages and employee cash awards.

Home Office Deduction Safe Harbor
If you have a business and a home office that is exclusively used for business, the easier Safe Harbor method may be for you. Just count the square foot of the exclusive space times $5 and voila you are done (to a maximum of $1,500). This can be used for self-employed or employer unreimbursed expenses. Look closer if you have high rental or home owner costs and check the long method for a higher deduction.

How to Prevent or Stop Backup Withholding
Backup withholding (a flat 28% rate ) is required to be deducted by investment or payer institutions when you have provided an invalid Tax Payer ID number (TIN) or have under reported interest or dividends. If you have been notified that the TIN you gave is incorrect, you usually can prevent or stop backup withholding by giving the institution your correct name and TIN. You must certify that the TIN you give is correct. If you have been notified by the IRS that you under reported interest or dividends, you must request and receive a determination from the IRS to prevent or stop backup withholding once it has begun.

HSA and MSA Distribution Penalty is 20%
Distributions from an HSA or Archer MSA used for qualified medical expenses are not taxable. However, if they are not used for medical expenses, not only is the distribution taxable but if distributed after 2010, the penalty is 20%. So make good choices and keep good track of medical expenses that are not reimbursed.

Itemize Deductions or Not, It’s the Little Things that Count
Once you have the big itemized deductions of home interest and real estate taxes, medical expenses and high profile contributions the real boost above the standard deductions is the other smaller ones. Until you reach the standard deduction level, you have not gained anything. The smaller deductions give you 100% benefit over the standard deduction limit. Search for them, know what expenses are in your budget, get the records and make them count.

Letters from the IRS
Don’t Panic and don’t delay responding. The letter will normally address a specific issue, request for information or adjustments to your return. If you don’t agree with any changes, you can write to the address or call the phone number on the letter. Specific instructions are given on the letter to send information, pay additional tax or maybe even that you have a refund. It is very important to respond in 30 days if you owe or you can end up with penalties and interest

Medicare Premiums Qualify for Self-employed Health Insurance Deduction
If you paid Medicare part A, B, C and/or D premiums and were self-employed you may be eligible to take the 1040 page 1 adjustment for self-employed health insurance. This deduction traditionally was understood to be for the self-employed person who purchased their own medical insurances. Sole proprietors, partners in a partnership, and 2-percent shareholders in an S corporation are employees for this purpose. You must have a profit to take the deduction and during any months you were covered by another employer’s policy, including your spouses, you are not eligible. Refer to the IRS Letter and/or consult your tax professional to see if you qualify.

My W-2 for 2013 has in box 12 an amount with code 'DD'
Employers are required, starting for the 2012 tax year, to report on your wage statement IRS W-2, in box 12 with a code 'DD' the cost of employer-sponsored health coverage. This is not a taxable amount and is for your information only.

Non-custodial parent - be aware of how to claim child exemption
Over the years how you document releasing claim for a child's exemption by the custodial parent to the non-custodial parent has changed. You must file with the return either a Form 8332 (or substantially similar information if agreement in effect from after1984 and before 2009). This allows the non-custodial parent to claim the exemption and the child tax credit. The custodial parent retains the EITC and child care credit.

Paying What You Owe in Installments
A monthly installment agreement can be requested from the IRS if you cannot pay the taxes you owe. You must first file all required returns and be current with estimated tax payments. If you owe $50,000 or less in combined tax, penalties and interest, you can request an installment agreement using the Online Payment Agreement application at www.irs.gov. Once approved, a one-time user fee will be charged of $120 or $52 for agreements where payments are deducted directly from your bank account. For eligible individuals with lower incomes, the fee can be reduced to $43.

Quarterly Estimated Payments – Is it for You?
If you want to play it safe or love getting a large refund (and lend your money to the government), paying large quarterly estimated taxes may be the way be for you. However, millions of tax payers use quarterly estimated payments because they are self-employed, retired living on investments or have seasonal income. They avoid the Underpayment of Estimate Tax penalty by matching their taxable income to the required quarterly payment schedule. The US Tax system is a ‘pay as you go’ system requiring withholding or estimated payments or you will pay a penalty.

Requirements to file State Income Tax return when Outside the United States
Don’t assume because you are leaving the United States to temporarily live outside the United States that you don’t have to file a resident state tax return. All US states that tax income, tax the income from all sources inside and outside the state. Most states require you to file a tax return if you were a resident of that state before you moved to another country, retain your US citizenship, and you intend to return to the United States in the future. You may be able to exclude your foreign income, but many states do not follow the federal Foreign Income Exclusion. If you are leaving for an extended stay outside the US, check your state tax return filing requirements.

Take This Education Credit After Your Undergraduate Degree
There is a long list of education deductions, credits and income exclusions that some taxpayers are not taking because they don’t think they qualify. The Life Time Learning Credit is one missed by many taxpayers because it is overshadowed by the Student Loan Interest Deduction, American Opportunity credit and others. The lifetime learning credit is helpful for graduate students, students who are only taking one course and those who are not pursuing a degree. You must have qualified expenses from a qualified institution and follow a set of limitations and requirements. Check into this valuable credit if you are going to a college or university and cannot take the other deductions or credits.

Teachers and Eligible Educators Deduction
Eligible educators may qualify for a tax adjustment if they spend their own money on school expenses. You qualify if you are a K-12 grade teacher, counselor, principal or aide working at least 900 hours in a public or private school. You do not need to itemize expenses to take the adjustment. You do need to keep receipts for all expense which items such as books, supplies, classroom decorations, teaching aids and mileage for school trips.

Unable to pay your taxes? - Installment Agreement changes
The IRS Fresh Start provisions which started in 2012 provide improves options for Installment Agreements (Form 9465-FS). The maximum threshold for not requiring to supply a financial statement has been raised from $25,000 to $50,000. Also the maximum term has been raised to 6 years from prior maximum of 5 years.

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