Dear Friends and Clients,
The upcoming 2015 tax season has really snuck up on us. But there is still time to take actions that might help reduce the size of your tax bill. One huge complication as of this date is the ongoing debate in Washington about whether or not the “extender” tax bill will be passed retaining some or all of the items available in 2013. Including equipment expensing and depreciation options, sales tax deductions, MIP deduction, Qualified IRA distributions to Charity, and others. At this time the planning and paying taxes assuming these provisions will not be available is probably the best approach. A few items to consider before end of year:
Spreading income, if possible, between 2014 and 2015 to take advantage of lower tax brackets.
Timing recognition of capital gains and losses. Taking gains if possible to utilize losses or possibly re-setting basis by selling assets with gains (if in a low or zero tax bracket) and rebuying investment at higher basis.
Being aware of retirement or IRA options and the timing requirements to take advantage of them.
Gifting before end of year to take advantage of tax free gifting options and consideration of unlimited tax-free gifts for qualified tuition or medical expenses paid directly to a medical or educational institution.
Be aware of greatly increased documentation requirements for charitable deductions.
Be very careful if your children at home or college students file their own return. Big potential issues with exemptions, Affordable Care Act issues (penalties and or impact on credits) may result.
Net Investment Income tax was implemented to help fund health care reform. We will be required to ask you questions about the 3 categories of investment income to determine material participation, grouping election considerations to reduce or avoid paying this additional tax.
Complicated IRS regulations on tangible property when considering expensing elections for repairs, maintenance, improvements, supplies and acquisitions can apply. A de minimus safe harbor election may still allow expensing of some items.
And finally a few words about the Affordable Care Act (ACA). This law has and will further complicate tax preparation and reporting for many businesses and people. Unfortunately more time means more preparation cost.
All individuals must accumulate all forms 1095 from any issuer or agency. Numerous questions and forms are required to determine an individual’s requirement to carry insurance, exemptions, shared responsibility payments, credits, etc. Returns require, when applicable, reconciliation of any advance credits received to credits available on their tax filing, a big burden on taxpayers and preparers.
Employer offered health insurance will satisfy the mandate for many individuals, Medicare or Medicaid coverage provides an exemption, other exemptions are available if premium cost for required insurance is more than 8% of household income (a new calculation) and other hardship exemptions exist.
For businesses it is essential to be looking at current and long term planning to address the requirements of the ACA. Many rules based on the number of full time employees impact what provisions apply, when they apply and what the ramifications are.
Please call us if you have questions or would like to come in to meet and discuss any personal or business tax questions you have on related to any of these or other issues.