TAX PLANNING SEASON
TRS CPA Group, P.A., PA P.O. Box 766, Salisbury, MD 21803 Phone: 410.749.1919 Fax: 410.548.5039 trscpa.com
Dear Clients and Friends,
Tax planning season is once again upon us and, as seems to be the case these days, we may not know the final regulations for 2014 until 2014 is over. Part of our service to you is keeping you up to date with current tax legislation and helping you make timely decisions to take advantage of legislation or avoid ramifications if necessary. After reading this letter please call if you have questions or if you would like to get together to discuss your tax-cutting options at year-end. And if you have friends or associates who would be interested in tax planning, please pass this letter along to them.
TAX EXTENDERS STILL ON THE TABLE
Congress may act to extend several tax measures that expired during 2013 including the following:
• Increased Section 179 limits of $500,000 for up to $2,000,000 of eligible assets placed in service (2014 current Section 179 is $25,000 deduction for up to $500,000 of eligible assets placed in service) • 50% bonus depreciation on new, eligible assets • State and local sales tax deduction • Deduction for mortgage insurance premiums • Residential energy property credit • Teachers’ classroom expense deduction • Mortgage debt forgiveness exclusion • Charitable donations from IRAs for those over age 70½
It is unclear how lawmakers will proceed before year-end and it is very possible that they will push action on the extenders to the new Congress that meets in January. We will keep you up to date whenever Congress acts. Additionally, if you would like to look at the potential tax effect on your situation if any of the extenders pass, we would be more than happy to assist with a projection. We can help you understand your tax situation and determine the best steps to address your tax challenges and any other financial concerns.
ACA INDIVIDUAL MANDATE
The 2014 tax year marks the initial year of the Affordable Care Act Individual Mandate. If you did not have qualifying coverage for yourself or any dependents for any portion of 2014, and do not qualify for an exemption, you will be subject to a penalty when you file your return for 2014. The penalty is the greater of 1% of your household income above your tax return filing threshold or $95 per adult and $47.50 per child for any month without coverage, limited to a maximum of $285.
In order to properly avoid penalties on your return and complete the related required forms, we will need to know whether you obtained coverage or fall within an exemption. If you receive forms that relate to ACA, including Form 1095, we must have a copy of the Form to complete your return. The IRS has cautioned that it will offset a taxpayer’s refund if he or she fails to make a shared responsibility payment if required. However, the Affordable Care Act prevents the IRS from using its lien and levy authority to collect an unpaid shared responsibility payment. Additionally, if you received coverage through the Healthcare Marketplace and were eligible for a premium assistance tax credit, the advance payments of the credit must be reconciled on new Form 8962. If the actual premium tax credit is larger than the sum of the advance payments made during the year, you may be entitled to an additional credit. If the actual premium tax credit is smaller, you may owe the difference.
ACA BUSINESS PROVISIONS
We recommend that our clients continue to engage in current and long-term planning to address the requirements of the Affordable Care Act. Under the law, companies with 50 or more full-time (FT) or full-time-equivalent (FTE) employees may be subject to potential assessments if they don’t provide health insurance to their workers in 2016. If you haven’t begun addressing this provision and how it applies to you, it’s certainly time to do so. (Those with fewer than 50 FT or FTE employees are not required to provide health insurance coverage.) Small employers who offer Healthcare Reimbursement Arrangements should be aware of new rules that came into play in 2014 that may pose challenges. Among other requirements, a plan must provide minimum essential health benefits without annual or lifetime dollar limits – and the penalties can be steep for companies that don’t comply.
SEIZE RETIREMENT PLAN OPPORTUNITIES
There’s still time to make contributions to retirement accounts. We urge you to take full advantage of your retirement contribution options for the possible tax benefits now and the income security later. In 2014, you can contribute up to a total of $5,500 ($6,500 if you’re 50 or older) to a traditional or Roth IRA. Contributions to a traditional IRA may be tax-deductible, depending on your income and on whether you’re covered by an employer’s retirement plan. In addition, there are income limits for contributing to a Roth IRA. For those who are self-employed or own a small business, the contribution limits are significantly higher.
The normal statute of limitations is three years from the later of the due date or when the return was filed. However, some records should be kept for seven years or even permanently. We create an electronic copy of your documents when we prepare your tax returns. If you would like to receive an electronic copy of your documents as well, we would be more than happy to provide you with a copy through our secure portal.