February 2, 2015
Here are the changes with the greatest impact on the preparation of 2014 individual returns:
FORM 1040-NEW FORMS-PREMIUM TAX CREDIT
Form 1095-A and Form 8962. If the taxpayer, his spouse, or a dependent enrolled in health insurance through the Health Insurance Marketplace, he should have received Form(s) 1095-A. If the taxpayer receives Form(s) 1095-A for 2014, he should save it as it will help him figure his premium tax credit on new Form 8962, Premium Tax Credit. If he did not receive a Form 1095-A, he should contact the Marketplace.
FORM 1040-NEW FILING REQUIREMENT-PREMIUM TAX CREDIT
Premium tax credit. Advance payments of the premium tax credit may have been made to the health insurer to help pay for the insurance coverage of taxpayer, his spouse, or his dependent. If advance payments of the premium tax credit were made and/or the taxpayer will be claiming the premium tax credit, he must file a 2014 tax return and Form 8962.
ADJUSTED GROSS INCOME
Line 26. Moving expenses. The 2014 standard mileage rate for moving expenses is 23.5¢ per mile.
Line 32. IRA deduction. In general, an individual who isn't an active participant in certain employer-sponsored retirement plans, and whose spouse isn't an active participant, may make an annual deductible cash contribution to an IRA up to the lesser of: (1) a statutory dollar limit, or (2) 100% of the compensation that's includible in his gross income for that year. For 2014, the statutory dollar limit is $5,500, plus an additional $1,000 for those age 50 or older. If the individual (or his spouse) is an active plan participant, the deduction phases out over a specified dollar range of modified AGI (MAGI). For 2014, a taxpayer may be able to take an IRA deduction if he was covered by a retirement plan and his 2014 MAGI is less than $70,000 ($116,000 if married filing jointly or qualifying widow(er)). If the taxpayer's spouse was covered by a retirement plan, but the taxpayer was not, he may be able to take an IRA deduction if his 2014 MAGI is less than $191,000.
TAX AND CREDITS
Line 40. Itemized deductions or standard deduction. For 2014, the standard deduction is $6,200 for single filers and for married persons filing separately, $12,400 for joint filers and qualifying widow(er)s, and
$9,100 for heads of household.
Line 42. Exemptions. The amount for each exemption for 2014 is $3,950. Exemptions are reduced for taxpayers with adjusted gross incomes in excess of the "applicable amount" ($305,050 for joint filers or a surviving spouse, $279,650 for a head of household, $254,200 for a single individual who isn't a surviving spouse, and $152,525 for marrieds filing separately).
Line 45. Alternative minimum tax. Under Code Sec. 55(d), the AMT exemption amount for 2014 is $52,800 ($82,100 if married filing jointly or a qualifying widow(er); $41,050 if married filing separately). IRS has added a worksheet to the instructions for line 45. A taxpayer who is not sure whether he needs to complete Form 6251, Alternative Minimum Tax - Individuals, can use this worksheet to see whether he should complete it.
Line 46. Excess advance premium tax credit repayment. The premium tax credit helps pay premiums for health insurance purchased from the Health Insurance Marketplace. If advance payments for this credit were made for the taxpayer, his spouse, or his dependent, the taxpayer must complete Form 8962. If the advance premium credits were more than the taxpayer can claim, the taxpayer must enter that excess, if any, from Form 8962, line 29.
Line 54. Other credits. For 2014, the maximum adoption credit is $13,190 per eligible child for both non-special needs adoptions and special needs adoptions.
Line 57. Self-employment tax. Maximum amount of self-employment income subject to FICA tax is $117,000; no ceiling on Medicare wage base.
Line 61. Health care: individual responsibility. A taxpayer must either:
• Indicate on line 61 that he, his spouse (if filing jointly) and his dependents had health care coverage throughout 2014;
• Claim an exemption from the health care coverage requirement for some or all of 2014 and attach Form 8965; or
• Make a shared responsibility payment if, for any month in 2014, he, his spouse (if filing jointly) or his dependents did not have coverage and do not qualify for a coverage exemption.
Line 62. Additional Medicare tax. IRS has issued final regs on the additional 0.9% Medicare tax on employee compensation and self-employment income above a threshold amount received in tax years beginning after Dec. 31, 2012. For most individuals, many provisions of the regs effectively first apply on Jan. 1, 2014 (the technical effective date is geared to calendar quarters beginning after Nov. 29, 2013 or certain actions taken on or after that date).
Line 62. 3.8% surtax on unearned income. IRS issued final and proposed reliance regs on the new 3.8% surtax on net investment income (NII) that first went into effect in 2013. The surtax is 3.8% of the lesser of: (1) NII, or (2) the excess of modified adjusted gross income (MAGI) over an unindexed threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 in any other case). The final regs are voluminous, clarify many aspects of this new tax, and are generally effective for tax years beginning after 2013. They explain, among other items, how NII is calculated, the individuals subject to or excepted from the tax, and the deductions taken into account in figuring the tax. The proposed regs (upon which taxpayers may rely) provide guidance on the computation of NII with respect to a number of specialized provisions and situations including various payments to partners and former partners.
Line 66. Earned income credit (EIC). The maximum credit is higher, and the AGI-based phaseout figures are revised.
Line 68. American Opportunity Credit from Form 8863, line 8. Choosing to include otherwise tax-free scholarships or fellowships (e.g., Pell grants) in the taxpayer's income can increase an education credit and lower the total tax.
Line 69. Net premium tax credit. A taxpayer may be eligible to claim the premium tax credit if he, his spouse, or a dependent enrolled in health insurance through the Health Insurance Marketplace.
Line 71. Excess social security and RRTA tax withheld. Maximum Social Security (OASDI) tax for 2014 is $7,254.00 (computed on the first $117,000 of wages) for purposes of credit for excess tax withheld.
FORM 1040-SCHEDULE A, ITEMIZED DEDUCTIONS
Line 1. Medical and dental expenses. The 2014 standard mileage rate for medically-related use of an auto is 23.5¢ per mile.
Line 21. Unreimbursed employee expenses. The 2014 standard mileage rate for business travel is 56¢ per mile.
Line 29. Limit on itemized deductions. Itemized deductions for taxpayers with adjusted gross incomes in excess of the "applicable amount" ($305,050 for joint filers or a surviving spouse, $279,650 for a head of household, $254,200 for a single individual who isn't a surviving spouse, and $152,525 for marrieds filing separately) may be reduced.
FORM 1040-SCHEDULE D, CAPITAL GAINS AND LOSSES
Form 1099-B. Form 1099-B has been redesigned so that the information is reported in boxes that are numbered to match the corresponding line and column on Form 8949. (Form 8949 is used to report the sale or exchange of capital assets not reported on another form or schedule. Schedule D is used to figure the overall gain or loss from transactions reported on Form 8949.) A new box has also been added at the top of Form 1099-B to tell the taxpayer which box to check when completing Form 8949. These changes are designed to make it easier to complete Form 8949.
Form 1040-SCHEDULE E, SUPPLEMENTAL INCOME AND LOSS
Standard mileage rate. The 2014 standard mileage rate for miles driven in connection with the taxpayer's rental activities is 56¢ per mile.
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