Melinda Thurman head shotby Melinda Thurman

Now that the 2013 tax filing deadline is behind you, it’s not too early to turn your attention to the 2014 filing season. This attention requires an awareness of the direct impact that many “ordinary”, as well as one-time transactions and events will have on the tax you will eventually be obligated to pay by April 15, 2015. Taking the approach of looking back before moving forward might prove to be worthwhile.

This approach generally involves 2 steps:

  1. Glancing at your 2013 tax return to pinpoint new opportunities, as well as “lessons learned”
  2. Consider what has happened in the ‘tax world’ since January 1, 2014

Your 2013 Form 1040
Examining your 2013 Form 1040 individual tax return can help identify certain changes that you might want to consider this year, as well as encourage you to continue what you are doing right. These “key ingredients” to your 2014 tax return may include, among many other considerations, a fresh look at:

  • Investment Income: This is one area that blindsided many taxpayers on their 2013 tax returns. With many taxpayers experiencing a significant rise in investment income, they also saw a rise in taxable investment gains. Additionally, dividends and long-term capital gains were taxed at a higher 20 percent rate and an additional 3.8 percent net investment income surtax. Short-term capital gains saw the highest rate jump from 35 percent to 43.4 percent, which reflected a new 39.6 percent regular rate and the new 3.8 percent surtax.
  • Personal Exemption/Itemized Deductions: Effective January 1, 2013, the American Taxpayer Relief Act revived the personal exemption phase-out.
  • Medical/Dental Expenses: Starting in 2013, the Affordable Care Act increased the threshold to claim an itemized deduction for unreimbursed medical expenses from 7.5 percent of adjusted gross income (AGI) to 10 percent of AGI.
  • Recordkeeping: If proper documentation is unavailable to prove the right to claim a deduction or credit, this amount cannot be claimed.

2014 Filing Season Developments
So far this year, the IRS, other federal agencies and the courts have issued guidance on individual and business taxation, retirement savings, foreign accounts, the ACA, and much more. Congress has also been busy working up a “tax extenders” bill as well as tax reform proposals. All of these developments can impact how you plan to maximize benefits on your 2014 income tax return. Upon review of these developments, consider the following:

  • Tax Reform Proposals: These proposals range from comprehensive tax reform to more piece-meal approaches.
  • Tax Extenders: The Senate Finance Committee approved legislation in April that would extend nearly all of the tax extenders that expired after 2013. Some of these extenders include state and local sales tax deduction, higher education tuition deduction, teacher’s deduction and many more.
  • Individual Mandate: Effective January 1, 2014, individuals not carrying minimum insurance coverage may be required to make an individual shared responsibility payment on their 2014 tax return.
  • Employer Mandate: The responsibility provision for employers will generally apply to large employers in 2015, rather than the original 2014 launch date.

Contact us if you have any questions about Tax Planning 417-881-0145.