Tax
11.03.2015
Tax
Beginning in 2014, an eligible individual or family member covered under a qualified health plan through a Health Insurance Marketplace (Exchange) is allowed a premium tax credit.
The premium tax credit offsets the cost of premiums paid for healthcare coverage in a qualified health plan. It is unusual in that taxpayers are able to take advantage of the credit in advance of filing an income tax return for the taxable year of coverage.
Advance credit payments are made directly to the insurance provider. The amount of the advance credit payments is determined when an individual enrolls in a qualified health plan through an Exchange and is based on projected household income and family size for the year of coverage.
When a taxpayer claims the credit on their income tax return the amount of premium tax credit allowed on the tax return (based on actual household income and family size for the year of coverage) must be reconciled, or compared, with advance credit payments.
Taxpayers who have a balance due on their 2014 income tax return as a result of reconciling advance payments of the premium tax credit against the premium tax credit allowed on the tax return have been granted penalty relief by the IRS.
This relief applies only to tax year 2014 and does not apply to any underpayment of the individual shared responsibility payment.
11.03.2015
News, Tax
If you haven’t contributed funds to an Individual Retirement Arrangement (IRA) for tax year 2014, or if you’ve put in less than the maximum allowed, you still have time to do so. You can contribute to either a traditional or Roth IRA until the April 15 due date, not including extensions.
Be sure to tell the IRA trustee that the contribution is for 2014. Otherwise, the trustee may report the contribution as being for 2015 when they get your funds.
Generally, you can contribute up to $5,500 of your earnings for tax year 2014 (up to $6,500 if you are age 50 or older in 2014). You can fund a traditional IRA, a Roth IRA (if you qualify), or both, but your total contributions cannot be more than these amounts.
Traditional IRA: You may be able to take a tax deduction for the contributions to a traditional IRA, depending on your income and whether you or your spouse, if filing jointly, are covered by an employer’s pension plan.
Roth IRA: You cannot deduct Roth IRA contributions, but the earnings on a Roth IRA may be tax-free if you meet the conditions for a qualified distribution.
Each year, the IRS announces the cost of living adjustments and limitation for retirement savings plans.
Saving for retirement should be part of everyone’s financial plan and it’s important to review your retirement goals every year in order to maximize savings. If you need help with your retirement plans, give the office a call.
10.03.2015
Tax
If you itemize deductions on your tax return, you may be able to deduct certain miscellaneous expenses, which might reduce your federal income tax.
Examples include employee expenses and fees you pay for tax advice. If you itemize, these deductions could lower your tax bill. With that in mind, let’s take a closer look at miscellaneous deductions that might benefit you.
Deductions Subject to the Two Percent Limit. You can deduct most miscellaneous expenses only if they exceed two percent of your adjusted gross income. These include expenses such as:
- Unreimbursed employee expenses.
- Expenses related to searching for a new job in the same profession.
- Certain work clothes and uniforms.
- Tools needed for your job.
- Union dues.
- Work-related travel and transportation. Read more
10.03.2015
Tax
Do you plan to donate your services to charity this year? Will you travel as part of the service? If so, some travel expenses may help lower your taxes when you file your tax return next year. Here are five tax tips you should know if you travel while giving your services to charity.
1. You can’t deduct the value of your services that you give to charity, but you may be able to deduct some out-of-pocket costs that you pay to give your services–including the cost of travel. Out-of pocket costs must be:
- unreimbursed,
- directly connected with the services,
- expenses you had only because of the services you gave, and
- not personal, living or family expenses.
2. Your volunteer work must be for a qualified charity. Most groups other than churches and governments must apply to the IRS to become qualified. Ask the group about its IRS status before you donate. You can also ask us to check the group’s status. We are happy to do so.
3. Some types of travel do not qualify for a tax deduction. For example, you can’t deduct your costs if a significant part of the trip involves recreation or a vacation.
4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
5. Deductible travel expenses may include:
- air, rail and bus transportation,
- car expenses,
- lodging costs,
- the cost of meals, and
- taxi or other transportation costs between the airport or station and your hotel.
Please contact us if you have any questions regarding tax deductions for charitable services.
10.03.2015
Tax
Millions of Americans have hobbies such as sewing, woodworking, fishing, gardening, stamp and coin collecting, but when that hobby starts to turn a profit, it might just be considered a business by the IRS.
Definition of a Hobby vs. a Business
The IRS defines a hobby as an activity that is not pursued for profit. A business, on the other hand, is an activity that is carried out with the reasonable expectation of earning a profit.
The tax considerations are different for each activity so it’s important for taxpayers to determine whether an activity is engaged in for profit as a business or is just a hobby for personal enjoyment.
Of course, you must report and pay tax on income from almost all sources, including hobbies. But when it comes to deductions such as expenses and losses, the two activities differ in their tax implications. Read more