Why is Halloween So Scary – 2015 Tax Planning Will Be Hugely Complicated and Profoundly Significant for most ALL Taxpayers

Once again another year is almost behind us and right after the new year income taxes are coming. The forthcoming tax environment is extraordinarily unusual and can subsequently be very scary. Basically what you need to know is that ALL Americans will be seeing changes on their tax returns many of which congress ONCE AGAIN still hasn’t been able to work out as of yet. While the pusillanimous reprobates in federally elected positions of authority continue to ‘discuss’ last minute income tax bills you can be assured that I make a concerted effort to stay abreast of all the latest changes as they occur.

So have fun this weekend celebrating all hallows eve – may favorite of all the ‘holidays’ – but prepared to reach out to a knowledgeable and reputable Enrolled Agent to do some 2015 tax planning OR prepare to pay substantially more income tax. To help you prepare for a tax planning meeting I’ve listed several items below to think about. Hopefully this helps you get kick started.

Affordable Care Act
All Americans will be affected in some manner by the Affordable Care Act from 2010 (some people call it Obamacare) 5 new tax forms were released by the IRS as a result of this act for 2014. If you received a Form 1095 from any issuer or agency, your tax practitioner MUST have all copies to prepare your tax return. If you did not receive a 1095, your tax practitioner must ask you a number of additional questions about insurance coverage so that we can help you avoid any penalties for failure to have health insurance. The new 5 forms will add between $150-250 to this year’s tax preparation bill, courtesy of the Affordable Care Act and the estimated 1-3 hours of additional time on our part to get things right.

Health Care Deductions
Last year’s tax bill reduced your deduction for medical costs, including health insurance for 2014. We will see very few deductions available for medical costs now unless you have substantial bills. The amount of your medical expenses in most cases must now be more than 10% of your income before we can deduct anything, so weigh carefully whether to go to the trouble of summarizing these costs. If you are self-employed, we still need to know how much you paid for health insurance.

Charity
ALL deductions of any amount must have a receipt. Any individual contribution over $250 must also have an acknowledgement letter from the charity, and the letter must be dated by the date we file your return. The letter should show the date and amount of any individual contribution over $250 and should also state that no goods or services were received in return for the contribution.

Foreign Accounts
If you have read any news in the last year, you know that the IRS is looking closely for offshore accounts. If you have an 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), let your tax practitioner know as some special rules will apply to you. There are substantial penalties for failure to disclose these items.

Mortgage Interest
You must obtain Form 1098 from you when you pay mortgage interest. Additionally you must obtain refinancing closing statements, and if you drew money out on a home mortgage or refinancing you must have general information on the use of the money according to the IRS.

Children/Student Tax Returns
Under absolutely no circumstances can you allow your dependent children or college students to file their own returns this year. You must file their return because of the Affordable Car Act. Allowing a child to file their own return, particularly a student, can cost the child and parent literally thousands of dollars in Health Care penalties and/or credits.

Rental Property
If you own rental property, this year the IRS has demanded substantially more information. You now need, FOR EACH PROPERTY SEPARATELY, the physical location, the type of property (single-family, duplex, etc), and Forms 1099-K received, and a record, by property, of the number of days rented and the number of days used for personal purposes.

Roth IRA Conversions
You will be continue to hear from lots of “experts” this year that you need to convert your retirement accounts to Roth IRAs. While there are a number of advantages to conversions, there are an equal number of disadvantages that carry some major tax consequences. Please do not convert your accounts in 2014 without fully understanding both the positives and negatives. All conversions for 2014 must be completed by December 31, 2014.

Gift Changes
Effective 1/1/2013, the amount you may give to one person in one year without any return filing requirements was increased to $14,000. Very, very few Americans need to worry about Federal estate taxes because of changes in the estate tax limit at the Federal level.

Surtaxes
If you are in what the press has called the 2% club, be aware that the rest of America will soon be joining you! When the surtaxes on this group of Americans were passed, Congress purposefully did not adjust the thresholds for inflation, and in 6 years, over 50% of all Americans will pay these surtaxes based on estimated inflation rates. Begin planning now whether you are a 2% club member or not by -in order- maximizing 401-k contributions; utilizing employer-sponsored cafeteria plans to their fullest limit; investigating and using employer sponsored fringe benefits such as child care and education; turn in job expenses for reimbursement; and consider your marital status as your income increases because of the incredible marital penalty built in to the surtaxes.

Tax Planning
There is still time to setup an appointment for year-end tax planning by December 31. I recommend meeting your tax practitioner if you have had any major changes during 2014 or are expecting major financial changes in 2014 or 2015, such as retirement, inheritances, etc.

Future Income Tax Rates & Other
I highly recommend that when you are getting your information compiled for your 2014 Federal tax return, that you set an appointment for an after tax season “Tax Tune Up” with your tax practitioner to examine tax and estate planning strategies, particularly if your income is over $200,000 as you will be dinged by surtaxes.

If you receive any Form 1099-k, please be sure to bring it to your tax practitioner as it may have a direct impact on your return.

There are literally hundreds of other changes, extensions and deletions that a good tax practitioner will consider this year while preparing your return. Because of these changes, you should try to have your tax information compiled at least two weeks earlier than normal, and no later than March 21, 2015.