The Health Care Law and Taxes: Reporting Coverage, Exemptions and Payments
Under the Affordable Care Act, you will need to report minimum essential coverage, report or claim a coverage exemption, or make an individual shared responsibility payment when you file your 2014 federal income tax return. If you are not required to file a tax return and don’t want to, you do not need to file a return solely to report your coverage or to claim an exemption.
If you and your dependents all had minimum essential coverage for each month of the tax year, you will indicate this on your 2014 tax return by simply checking a box on Form 1040, 1040A or 1040EZ; no further action is required.
For any month you or your dependents did not have coverage or a coverage exemption, you will have to make a shared responsibility payment. The payment will be reported on Form 1040, line 61 in the Other Taxes section and on the corresponding lines on Form 1040A and 1040EZ.
See the Claiming and Reporting an Exemption and Individual Shared Responsibility Provision – Reporting and Calculating the Payment pages on IRS.gov for more information about figuring and reporting the payment.
Still Waiting for Tax Documents? As of Today, You Can Call IRS about that Missing W-2
Washington, DC (February 23, 2015)—If you have yet to receive your Form W-2 and your employer (or former employer) is not being responsive, IRS can help. As of today, February 23, 2015, you can reach out to IRS at 800.829.1040. IRS will then send a letter to the employer on your behalf. Letters from the IRS tend to get noticed, even if your similar entreaties have been ignored. It’s a good thing to have the IRS on your side! When calling, be sure to have the following information handy: your employer’s name, address and phone number; the dates that you worked for the employer; and an approximation of the wages you earned in 2014, and how much federal tax was withheld. IRS will not only contact your employer, but it will also send you a Form 4852 (a substitute Form W-2) to fill out in case you don’t receive the Form W-2 in time to make the tax deadline.
Other forms you should have received by now are your mortgage interest statement and any 1099 DIVs that are due to you. In the old days, when the necessary tax documents didn’t arrive there was no choice but to call your financial institution and spend what seemed like an eternity waiting on hold to speak to a customer service representative about retrieving the missing document. The Internet has changed all that by allowing banks and mortgage lenders to post this information online. After you’ve established an online user name and password, most banks and mortgage lenders make the tax information you need available to you on their websites. Even if you accidentally tossed out some important tax documents along with the junk mail, you can access the numbers you need for your tax return.
Penalties for late filing of tax returns can be harsh, and IRS does not accept “failure to receive documents” as an excuse for failure to file. If you find you just can’t get the documentation together in time, another option is filing an extension. This will delay your filing deadline until October 15, 2015. With the penalty for not filing a tax return or an extension a stiff five percent per month up to a maximum of 25 percent of the amount of tax due on the late-filed return, filing an extension is well worth the effort. Keep in mind that you’ll also need to file an extension for your state tax return.
Please note: taxpayers should not confuse the extra six months the extension provides for filing with a postponement on paying. You’ll still need to estimate the taxes you may owe and submit that amount prior to April 15, 2015 along with Form 4868. To avoid paying a penalty, you must pay at least 90 percent of what you estimate you owe, or 100 percent of your 2014 tax liability. If you don’t pay in full, you’ll wind up owing annual interest on the liability not covered.
Filing a tax return can be daunting and stressful without the advice and guidance of a tax expert. Enrolled agents, “America’s tax experts,” are the only federally licensed tax practitioners with unlimited rights of representation before the IRS.
IRS Tax Tip 2015-27
How to Determine if the Net Investment Income Tax Applies to You
If you have income from investments, you may be subject to the Net Investment Income Tax. You may owe this tax if you receive investment income and your income for the year is more than certain limits. Here are some key tips you should know about this tax:
• Net Investment Income Tax. The law requires a tax of 3.8 percent on the lesser of either your net investment income or the amount by which your modified adjusted gross income exceeds a threshold amount based on your filing status.
• Income threshold amounts. You may owe this tax if your modified adjusted gross income is more than the following amount for your filing status:
Single or Head of household
|Married filing jointly||$250,000|
|Married filing separately||$125,000|
|Qualifying widow(er) with a child||$250,000|
• Net investment income. This amount generally includes income such as:
o Capital gains,
o Rental and royalty income, and
o Non-qualified annuities.
This list is not all-inclusive. Net investment income normally does not include wages and most self-employment income. It does not include unemployment compensation, Social Security benefits or alimony. It also does not include any gain from the sale of your main home that you exclude from your income.
Refer to Form 8960, Net Investment Income Tax, to see if this tax applies to you. You can check the form’s instructions for the details on how to figure the tax.
• How to report. If you owe the tax, you must file Form 8960 with your federal tax return. If you had too little tax withheld or did not pay enoughestimated taxes, you may have to pay an estimated tax penalty.
IRS Tax Tip 2015-21
Ten Facts That You Should Know about Capital Gains and Losses
When you sell a capital asset the sale results in a capital gain or loss. A capital asset includes most property you own for personal use or own as an investment. Here are 10 facts that you should know about capital gains and losses:
1. Capital Assets. Capital assets include property such as your home or car, as well as investment property, such as stocks and bonds.
2. Gains and Losses. A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.
3. Net Investment Income Tax. You must include all capital gains in your income and you may be subject to the Net Investment Income Tax. This tax applies to certain net investment income of individuals, estates and trusts that have income above statutory threshold amounts. The rate of this tax is 3.8 percent. For details visit IRS.gov.
4. Deductible Losses. You can deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.
5. Long and Short Term. Capital gains and losses are either long-term or short-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long-term. If you held it one year or less, the gain or loss is short-term.
6. Net Capital Gain. If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain.
7. Tax Rate. The capital gains tax rate usually depends on your income. The maximum net capital gain tax rate is 20 percent. However, for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gains.
8. Limit on Losses. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.
9. Carryover Losses. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they happened in that next year.
10. Forms to File. You often will need to file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses with your tax return.
IRS Makes it Easier for Small Businesses to Apply Repair Regulations to 2014 and Future Years
WASHINGTON —The Internal Revenue Service today made it easier for small business owners to comply with the final tangible property regulations.
Requested by many small businesses and tax professionals, the simplified procedure is available beginning with the 2014 return taxpayers are filling out this tax season. The new procedure allows small businesses to change a method of accounting under the final tangible property regulations on a prospective basis for the first taxable year beginning on or after Jan. 1, 2014.
Also, the IRS is waiving the requirement to complete and file a Form 3115 for small business taxpayers that choose to use this simplified procedure for 2014.
“We are pleased to be able to offer this relief to small business owners and their tax preparers in time for them to take advantage of it on their 2014 return,” said IRS Commissioner John Koskinen. “We carefully reviewed the comments we received and especially appreciate the valuable feedback provided by the professional tax community on this issue.”
The new simplified procedure is generally available to small businesses, including sole proprietors, with assets totaling less than $10 million or average annual gross receipts totaling $10 million or less. Details are in Revenue Procedure 2015-20, posted today on IRS.gov.
The revenue procedure also requests comment on whether the $500 safe-harbor threshold should be raised for businesses that choose to deduct, rather than capitalize, certain capital expenses.
Children may help reduce the amount of taxes owed for the year. If you’re a parent, here are several tax benefits you should look for when you file your federal tax return:
• Dependents. In most cases, you can claim your child as a dependent. You can deduct $3,950 for each dependent you are entitled to claim. You must reduce this amount if your income is above certain limits.
• Child Tax Credit. You may be able to claim the Child Tax Credit for each of your qualifying children under the age of 17. The maximum credit is $1,000 per child. If you get less than the full amount of the credit, you may be eligible for the Additional Child Tax Credit.
• Child and Dependent Care Credit. You may be able to claim this credit if you paid for the care of one or more qualifying persons. Dependent children under age 13 are among those who qualify. You must have paid for care so that you could work or could look for work.
• Earned Income Tax Credit. You may qualify for EITC if you worked but earned less than $52,427 last year. You can get up to $6,143 in EITC. You may qualify with or without children.
• Adoption Credit. You may be able to claim a tax credit for certain costs you paid to adopt a child.
• Education tax credits. An education credit can help you with the cost of higher education. There are two credits that are available. The American Opportunity Tax Credit and the Lifetime Learning Credit may reduce the amount of tax you owe. If the credit reduces your tax to less than zero, you may get a refund. Even if you don’t owe any taxes, you still may qualify.
• Student loan interest. You may be able to deduct interest you paid on a qualified student loan. You can claim this benefit even if you do not itemize your deductions.
• Self-employed health insurance deduction. If you were self-employed and paid for health insurance, you may be able to deduct premiums you paid during the year. This may include the cost to cover your children under age 27, even if they are not your dependent.
Contact us for more information and to find out if you qualify for any of these credits – (803)470-4938.
“When making a donation, taxpayers should take a few extra minutes to ensure their hard-earned money goes to legitimate and currently eligible charities,” said IRS Commissioner John Koskinen. “IRS.gov has the tools taxpayers need to check out the status of charitable organizations.”
Impersonation of Charitable Organizations is another long-standing type of abuse or fraud involves scams that occur in the wake of significant natural disasters.
Choose your return preparer carefully. Visit us on the web and learn about Enrolled Agents – America’s Tax Experts, http://cfittstaxsolutions.com
WASHINGTON — The Internal Revenue Service today warned taxpayers to watch out for fake emails or websites looking to steal personal information. These “phishing” schemes continue to be on the annual IRS list of “Dirty Dozen” tax scams for the 2015 filing season.
“The IRS won’t send you an email about a bill or refund out of the blue. Don’t click on one claiming to be from the IRS that takes you by surprise,” said IRS Commissioner John Koskinen. “I urge taxpayers to be wary of clicking on strange emails and websites. They may be scams to steal your personal information.”
Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or find people to help with their taxes.
Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.
Stop and Think before Clicking
Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.
If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to firstname.lastname@example.org.
It is important to keep in mind the IRS generally does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.