BREAKING: IRS Announces Start Dates for 2015 Filing Season

Today, the IRS announced that the start of the 2015 filing season will be as follows:

Individual returns (1040): Tuesday, January 20, 2015

Business returns (Corporate, S-Corp and Partnership): Friday, January 9, 2015

See the Tax Season Opens As Planned Following Extenders Legislation news release on the IRS website for more information.

Federal Tax Provisions Extended for One Year

On December 16, 2014, Congress finished passing legislation that extended, for one year, virtually all of the provisions that had expired at the end of 2013. The bill HR 5771 will become law once the President signs it.

Here is a list of some of the provisions that are now applicable for Tax Year 2014 returns:

• $250 Educator Expense Deduction – Form 1040, line 23
• Tuition and Fees Deduction – Form 8917
• Itemized Deduction for Sales Tax – Schedule A
• 50% Bonus Depreciation
• Exclusion of gain from income for foreclosed home mortgage debt (Form 982)
• Section 179 Deduction:
• Maximum Amount: $200,000
• Maximum Cost: $2,000,000
• Qualified Real property category which includes leasehold improvements, restaurant property and retail property with a maximum deduction of $250,000
• Qualified Real Property
• 15 year straight line depreciation allowed for qualified leasehold restaurant and retail improvements
• Tax-free distributions from IRAs for charitable purposes
• Nonbusiness energy property tax credit on Form 5695
• Contributions of capital gain real property made for conservation purposes (50% limitation applies instead of 30% limitation)

For a complete listing of the individual and business provisions that were extended for 2014 only, as well as changes related to the Affordable Care Act and other reminders, see the Things to Know for the Current Tax Year page on the Crosslink Tax website.

New IRS Direct Deposit Limits

Beginning with the upcoming filing season the IRS will be limiting the number of refunds that may be electronically deposited into a single financial account or pre-paid debit card to three.

Any subsequent deposits will be automatically converted to a paper refund and mailed to the taxpayer at the address shown on the federal return.

If this occurs, the taxpayer will be sent a notice informing them the reason why the refund will not be direct deposited and that they will receive a paper check in approximately four weeks.

This new procedure has been instituted as part of the IRS’ continuing efforts to combat fraud and identity theft.

To read more about this new limitation on direct deposits see the Direct Deposit Limits page on the IRS website.

IRS Update: Additional Tax (Penalty) for Not Having Health Insurance for 2014

The following is a reminder of how the individual shared responsibility payment (penalty or additional tax) for not having health insurance for all or part of the year will be calculated for 2014, as well as how much it increases in 2015. Read More

The individual shared responsibility payment (penalty) will not apply to an individual who qualifies for an exemption that they either obtained from the Marketplace or requested when filing their 2014 federal return.

It is important to remember that the penalty, as explained below, is based on the individual not having insurance for the entire year. If an individual did not have insurance for only part of the year, then the penalty would be pro-rated based on the number of months they did not have health insurance.

The individual shared responsibility payment for 2014 is the greater of:

• 1% of their modified adjusted gross income that exceeds their personal exemption (doubled for married couples filing jointly), plus the standard deduction for their filing status.

Modified Adjusted Gross Income is Adjusted Gross Income plus:

• Tax exempt interest
• Portion of social security income not included in income
• Foreign earned income and the housing cost of individuals who live abroad

Therefore, the penalty begins to be calculated once the modified adjusted gross income exceeds:

• $10,150 for single individuals
• $20,300 for married couples filing jointly

Or

• A flat dollar amount of $95 per adult family member age 18 and older and $47.50 for each dependent under age 18. This amount is capped at $285 for 2014.

One percent (1%) of income will begin to exceed the flat dollar amount when an individual’s Modified Adjusted Gross Income exceeds

• $19,650 for Single individuals
• $39,300 for Married couples with no dependents
• Read more

Put another way, Single individuals subject to a penalty will pay the flat dollar amount when their income is between $10,150 and $19,650. Once their income exceeds $19,650 they will pay 1% of their income.

Married couples subject to the penalty will pay the flat dollar amount when their income exceeds...Read more

Click here to read the entire CrossLink Tax Update that includes further information on the additional penalty for not having health insurance for 2014.

IRS Update: Individual’s 2014 Federal Return and the Affordable Care Act

As we get closer to the beginning of the 2015 filing season, it is important to understand how the Affordable Care Act will impact every individual who files a 2014 federal return. They may be impacted in a small way or major way depending on their health insurance status and where they obtained their health insurance during 2014.

Since the majority of taxpayers will be covered for the entire year by their employer, a government sponsored plan (such as Medicaid or Medicare), or from other qualifying health insurance, they will only need to check the Full Year Coverage Checkbox on Form 1040, line 61.

Taxpayers who purchased their health insurance at the Marketplace (State or Federal Exchange) will need to do the following:

• Taxpayer will receive by mail a Form 1095-A (Health Insurance Marketplace Statement) from the Marketplace. This information return should be received by the taxpayer by January 31, 2015 and will include details needed to complete the premium tax credit and do the reconciliation if they received an advance premium tax credit (subsidy) that helped pay their monthly health insurance premiums during 2014.
• Complete Form 8962 (Premium Tax Credit)
• Calculate the premium tax credit based on their 2014 income and family size.
• Enter the advance premium tax credit (subsidy) information from Form 1095-A, Part III, if applicable.
• Read more

Taxpayers who did not have health insurance for 2014 will do one of the following:

• Complete Form 8965 (Health Coverage Exemptions) to claim an exemption from the health care coverage requirement;

Or

• Have to pay shared responsibility payment (penalty) which will be calculated according to a worksheet in the Form 8965 instructions and entered on Form 1040, line 61.

Click here to read the entire CrossLink Tax Update that includes further information on individual's 2014 federal returns and the Affordable Care Act.

IRS Update: 2015 Employer Shared Responsibility Payment (Penalty) Under the Affordable Care Act

As a reminder, the employer shared responsibility (penalty) portion of the Affordable Care Act will be applied beginning on January 1, 2015. Therefore, all large employers (generally employed 100 or more full-time employees during 2014) are required to offer affordable health insurance to their employees that provides minimum essential coverage. Large employers who fail to do so will be subject to a shared responsibility payment (penalty). Read More

For 2015 there is transitional relief from the penalty for businesses that employed between 50 and 100 full-time equivalent employees during 2014. To be eligible, an employer must meet the following conditions:

• Did not reduce the size of its workforce or overall hours of service of its employees during the period starting on February 9, 2014 and ending on December 31, 2014.
• Did not eliminate or materially reduce the health coverage it offered as of February 9, 2014 during the period beginning on February 9, 2014 and ending on December 31, 2015.
• Read more

If the employer does not meet these conditions, then the definition of a large employer is 50 or more full-time employees during 2014.

Generally, a large employer will be subject to a shared responsibility payment (penalty) for 2015 once at least one full-time employee receives a premium tax credit and:

• Employer does not offer health insurance coverage to at least 70% of their employees – Penalty is calculated as $2,000 x (Total number of full-time employees minus 30) which is prorated for each month that they did not offer coverage;

Or

• Employer offers health insurance coverage that is not affordable or does not meet the minimum value standards – Penalty is $3,000 for each full-time employee who opts out of the employer’s coverage and obtains their health insurance through a Marketplace and is eligible for a premium tax credit.

Click here to read the entire CrossLink Tax Update that includes further information on the 2015 Employer Shared Responsibility Payment (Penalty) under the Affordable Care Act.

IRS Announces 2015 Pension Plan Limitations; Taxpayers May Contribute up to $18,000 to their 401(k) plans in 2015

From the IRS Newswire Issue Number: IR-2014-99

"WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015. Many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment. However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment. Highlights include the following:

• The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
• The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
• The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
• The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014. For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000. For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000. For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
• The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014. For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000. For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
• The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.

Below are details on both the adjusted and unchanged limitations.

• Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases. Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415. Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.
• Effective January 1, 2015, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000. For a participant who separated from service before January 1, 2015, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2014, by 1.0178.
• The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A). After taking into account the applicable rounding rules, the amounts for 2015 are as follows:

• The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,500 to $18,000.
• The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $260,000 to $265,000.
• The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000. The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5 year distribution period remains unchanged at $210,000.
• The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000.
• The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $5,500 to $6,000. The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $2,500 to $3,000.
• The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $385,000 to $395,000.
• The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $550 to $600.
• The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.
• The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.
• The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000. The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $210,000 to $215,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3). After taking the applicable rounding rules into account, the amounts for 2015 are as follows:

• The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $36,000 to $36,500; the limitation under Section 25B(b)(1)(B) is increased from $39,000 to $39,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $60,000 to $61,000.
• The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $27,000 to $27,375; the limitation under Section 25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to $45,750.
• The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $18,000 to $18,250; the limitation under Section 25B(b)(1)(B) is increased from $19,500 to $19,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,000 to $30,500.
• The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.
• The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000. The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000. The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0. The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.
• The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000. The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000. The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.
• The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,084,000 to $1,101,000."

IRS Update: Reminder to Renew Your PTIN for 2015

The IRS has begun accepting renewals and new applications for PTINs for calendar year 2015. Read More

All paid preparers of federal tax returns must renew their PTINs for 2015. Renewal must be completed before preparing any 2014 tax returns.

Although the IRS may not require federal tax return preparers who are not EAs, CPAs, or attorneys to pass a test and complete yearly continuing education, the IRS still has the authority to require that all paid federal tax return preparers register with the IRS and obtain a PTIN.

Click here to read the entire CrossLink Tax Update that includes further information on renewing or registering your PTIN for the 2015 tax season.

IRS UPDATE: Update on Expired Federal Tax Provisions

The industry is awaiting on Congress to act on federal tax provisions that expired at the end of 2013. The earliest any extender legislation will be taken up by Congress is after the election in November. Once again, it appears that any extension of these provisions will not take place until late December.

Right now it appears that a two year extension is on the table but it is not clear that all of the expired provisions will be extended. So we will have to wait and see what Congress does include in any extender bill that is passed in December.

With that in mind, below is a list of the some of the provisions that have either expired or have significantly changed for tax year 2014.

Provisions no longer applicable for tax year 2014 returns:

• $250 Educator Expense Deduction – Form 1040, line 23
• Tuition and Fees Deduction – Form 8917
• Itemized Deduction for Sales Tax
• 50% Bonus Depreciation
• Exclusion of gain from income for foreclosed home mortgage debt (Form 982)
• 15 year straight line depreciation allowed for qualified leasehold restaurant and retail improvements
• Tax-free distributions from IRAs for charitable purposes
• Nonbusiness energy property tax credit on Form 5695
• Contributions of capital gain real property made for conservation purposes (50% limitation applies instead of 30% limitation)

Also note that the following Section 179 Expense provisions have been reduced as follows for 2014:

• Maximum Section 179 Deduction amount: $25,000
• Maximum Cost before Section 179: $200,000
• Qualified Real Property category is eliminated

Stay tuned for more information on which provisions will be extended and what impact the lateness of any extender legislation passage will have on the start of the 2015 filing season.

See below for a complete listing of the expired federal tax provisions:

• Individual
• Business

Form 8962 (Premium Tax Credit) and Related Form 1095-A (Health Insurance Marketplace Statement)

As we approach the 2015 filing season, now is a good time to clarify how the new Form 8962 (Premium Tax Credit) is laid out and how the Form 1095-A (the information an individual will receive from the Marketplace) is related to the calculation of the premium tax credit for Tax Year 2014.

Form 1095-A (Health Insurance Marketplace Statement)
Any taxpayer who obtained their health insurance through a federal or state exchange (Marketplace) will receive Form 1095-A (Health Insurance Marketplace Statement) in the mail by January 31, 2015. The information on this form will be used to calculate the Premium Tax Credit, especially if the individual received assistance in paying for their health insurance premiums (advance premium tax credit).

Since this information return looks very different from a W-2 or 1099 that an individual is used to receiving, some education for your customers will be necessary to ensure that they understand what Form 1095-A is for and the importance for them to keep it and include it with the rest of their tax information when they have their 2014 federal tax return completed.

If the taxpayer loses the Form 1095-A, a copy may be obtained from the Marketplace where they received their health insurance.

The Form 1095-A (Health Insurance Marketplace Statement) will show the taxpayer the following information:

• Advance premium tax credit (subsidy) they received (if any) to help pay for their monthly premiums. This is shown by month in Part III along with the total for the year. The information reported in Part III will be used to complete Form 8962 (Premium Tax Credit), Part 2 (Premium Tax Credit Claim and Reconciliation of Advance Payment of Premium Tax Credit).
• Health insurance coverage information including a listing of all members of the household who were covered.

See the current draft of Form 1095-A to see how it looks and how it is different from other information returns such as a W-2 or 1099.

Form 8962 (Premium Tax Credit)
This form will be used by any taxpayer who obtained their insurance through the Marketplace and are eligible for the premium tax credit. In most cases, the taxpayer will have received an advance premium tax credit (subsidy) during the year to help pay their monthly health insurance premiums.

It is important to remember that any taxpayer who received a subsidy must complete Form 8962 and reconcile the calculated premium tax credit based on their actual 2014 income and family size with the advance premium tax credit (subsidy) that they received during the year. Also remember that the subsidy went directly to the insurance company and not the taxpayer.

If the taxpayer is required to include the Form 8962 (Premium Tax Credit) with their return and they do not, the following will occur:

• The IRS will not complete processing the return until they receive the Form 8962. This means their refund will be delayed and they will receive a notice from the IRS requesting the Form 8962 be completed and sent to them.
• The taxpayer can be denied an advance of the premium tax credit (subsidy) in future years.

See the current draft of Form 8962 to see what it looks like and how the credit is calculated.

To recap, any individual who obtained their health insurance through the marketplace will receive a Form 1095-A (Health Insurance Marketplace Statement) in the mail by January 31, 2015. If they opted (as most individuals will have done) to receive an advance premium tax credit (subsidy) to help pay for their monthly health insurance premiums, that information will be reported on the Form 1095-A which must be included on Form 8962(Premium Tax Credit) as part of the calculation of their premium tax credit and included with their 2014 federal individual income tax return.

Finally, remember that the calculation of the Premium Tax Credit is a three-step process as follows:

• Step 1 – Calculate the actual premium tax credit for 2014 based on the taxpayer’s 2014 income and family size.
• Step 2 – Enter the advance premium tax credit that the taxpayer received each month of 2014.
• Step 3 – Subtract the advance premium tax credit from the calculated premium tax credit which will result in a:
• Refundable credit if the calculated credit is greater than the total advance premium tax credit (which will be reported on Form 1040, line 69); Or
• Additional Tax if the total amount of advance premium tax credit is greater than the calculated premium tax credit (which will be reported on Form 1040, line 46).

IRS to Limit the Number of Direct Deposit Refunds into Single Account

As part of the ongoing IRS effort to combat fraud and identity theft, beginning with the 2015 filing season, the IRS will limit the number of refunds that may be electronically deposited into a single bank account or pre-paid debit card to three. Read more.

Once the limit of three is reached, any subsequent refunds will be switched to a paper check which will be mailed to the taxpayer at the address that is included on their federal return.

If this occurs, the taxpayer will receive a notice informing them they have exceeded the limit of direct deposits that may be made to a single account and that they will receive a paper check within 4 weeks.

It will also prevent tax preparers from obtaining payment of their tax preparation fees by having part of the taxpayer’s refund deposited into their bank account through the use of Form 8888 (Allocation of Refund) or by preparers opening a joint account with the taxpayer. Read more

Click here to read the entire CrossLink Tax Update that includes further information on the IRS's limit on direct deposit refunds into a single account.

IRS Announces New Voluntary Program for Professional Tax Return Preparers

The IRS announced on June 26, 2014 that they will soon be issuing guidance on a new voluntary program for unenrolled professional tax return preparers. Under this new program, tax return preparers would be able to obtain a record of completion from the IRS for completing a required number of hours of continuing education. All tax return preparers who elect to participate in this program and receive a record of completion will be included in a database on IRS.gov that will be available by January 2015 to help taxpayers determine return tax preparer qualifications.

In order for an unenrolled tax return preparer to obtain an IRS record of completion, they must complete the following number of hours of continuing education:

• For the upcoming 2015 filing season only:
• Complete 11 hours of continuing education (CE) from an IRS approved CE provider as follows:
• 6 hours – Federal tax filing season refresher course (which includes a comprehensive test at completion)
• 3 hours – Other federal tax law topics
• 2 hours – Ethics

This requirement will need to be met by December 31, 2014.

• Each year after 2015:
• Complete 18 hours of continuing education (CE) from an IRS approved CE provider as follows:
• 6 hours – Federal tax filing season refresher course (which includes a comprehensive test at completion)
• 10 hours – Other federal tax law topics
• 2 hours – Ethics

Once the continuing education requirement is met, a professional tax preparer will also be required to consent to the duties and restrictions related to practice before the IRS that are detailed in Circular 230, Section 10.51.

A list of all IRS approved CE providers (https://ssl.kinsail.com/partners/irs/publicListing.asp) is available on IRS.gov and now includes a new column indicating which providers plan to offer the qualifying courses.

For further details, see the New IRS Filing Season Program Unveiled for Tax Return Preparers (http://www.irs.gov/uac/Newsroom/New-IRS-Filing-Season-Program-Unveiled-for-Tax-Return-Preparers) news release on the IRS website.

IRS Update: Changes to Small Business Health Care Tax Credit

Since 2010, the Small Business Health Care tax credit has been available to eligible small businesses that offer health insurance and have 25 or fewer employees. The purpose of this credit is to help small businesses pay for the premiums on health insurance for their employees.

The following changes have been made to this credit for tax years beginning in 2014:

• The maximum credit has increased to 50% of health insurance premiums paid.
• To be eligible for the credit, the small employer must purchase their health insurance through a Small Business Health Options Program (SHOP) offered through a health insurance exchange (marketplace).
• Read more

The credit will work with the new changes as follows:

• Credit is available to employers with 25 or fewer full-time equivalent employees whose average annual salaries are not more than $50,000.
• Credit is calculated on a sliding scale with a maximum credit of 50% of the employer's contribution toward their employees' health insurance premiums.
• Read more

An eligible employer claims the credit by completing Form 8941 (Credit for Small Employer Health Insurance Premiums) and including it with their federal return.

Click here to read the entire CrossLink Tax Update that includes further information on changes to the Small Business Health Care tax credit.

Thank you for another great season!

"Thank you!

Because of great customers like you, CrossLink once again experienced a record year of growth. We could not do it without you and I would like to personally thank you for your business.

If you recall from previous seasons, I strongly believe that well rested employees are essential to meeting your needs, developing industry leading solutions, and enabling your continued success. In support of this, I wanted to let you know in advance that our employees will be out of the office for the period of May 24th through June 1st.

We are preparing for another exciting year and we want to hit the ground running on June 1st with the passion, creativity, and energy you have come to expect from your CrossLink Team.

Should you have any questions regarding this break, please do not hesitate to contact your CrossLink Team for additional information.

Thank you very much for your business!"

Charles Petz, CPA
Chief Financial Officer
Petz Enterprises, LLC

IRS Update: Qualifying Exemptions from the Requirement to have Health Insurance for 2014

Individuals who do not have health insurance for at least nine months in 2014 will owe an additional tax (penalty) when they file their 2014 federal income tax return unless they qualify for an exemption.

The following scenarios may qualify an individual for an exemption:

• The amount required to pay for the lowest price coverage is more than 8% of the household income
• Individual does not have to file a tax return because their income is too low
• Individual is not lawfully present in the U.S.
• Member of federally recognized Native American tribe
• Read More

If an individual does not qualify for one of the above exemptions they may qualify for a hardship exemption. Some of the hardship exemptions an individual may qualify for are:

• Filed for bankruptcy in the last six months
• Had medical expenses that the individual could not pay in the last 24 months
• Read more

The type of exemption an individual is eligible for can determine how they obtain the exemption. Some exemptions may be obtained only through the Marketplace (Exchange), others only from the IRS, and yet others from either the Exchange or the IRS.

Click here to read the entire CrossLink Tax Update that includes further information on qualifying exemptions from the requirement to have health insurance for 2014.

IRS Update: Change in Income or Family Size During 2014 and the Advanced Premium Tax Credit (Subsidy)

For individuals that received an advanced premium tax credit (subsidy) to help pay for their 2014 health insurance premiums, it is important to report any change in their circumstances (such as in their income or family size) to the Health Insurance Marketplace (Exchange) where they obtained their insurance. This is important because any change in circumstances for an individual can affect the subsidy amount that was calculated when they first signed up for health insurance.

The subsidy is actually an advance of the 2014 premium tax credit which is paid directly to an individual’s health insurance provider each month. This amount will be reconciled with the actual premium tax credit that will be calculated on the individual’s 2014 federal return (which is based on the 2014 income and family size reported on it).

The impact of this reconciliation to the individual is as follows:

• A refundable credit will occur if the actual credit is greater than the subsidy received.
• An additional tax will be due if the subsidy received is greater than the actual credit.
• Read More

Click here to read the entire CrossLink Tax Update that includes further information on changes in income or family size during 2014 and how it affects the advanced premium tax credit subsidy.

Federal Tax Provisions Not Applicable for 2014 Tax Returns

This is a reminder that a number of tax provisions expired at the end of 2013.

Looking ahead to next year’s filing season, everyone will need to keep an eye out on what Congress does with regard to these expired tax provisions.

Below is a list of the most used provisions that have either expired or have significantly changed for Tax Year 2014.

Provisions no longer applicable for Tax Year 2014 returns:

• $250 Educator Expense Deduction - Form 1040, line 23
• Tuition and Fees Deduction - Form 8917
• Itemized Deduction for Sales Tax
• 50% Bonus Depreciation
• Read more

Also note that the following Section 179 Expense provisions have been reduced as follows:

• Maximum Section 179 Deduction amount: $25,000
• Maximum Cost before Section 179: $200,000
• Read more

Click here to read the entire CrossLink Tax Update that includes further information on federal tax provisions that are not applicable for 2014 tax returns.

IRS UPDATE: Modernized e-File (MeF) Delays Possible today

"Due to a high volume of submissions transmitters can expect delays with most service requests, including retrieving acknowledgements and States retrieving new submissions today."

(Posted at 11:00 a.m., Eastern on 4/15/2014)

Check the status of MeF here:

http://www.irs.gov/uac/Modernized-e-File-%28MeF%29-Status-Page

April 15 Tax Return and Filing Deadline Reminders

This is a reminder that the federal filing deadline for individual returns is this Tuesday, April 15, 2014.

April 15, 2014 is also the deadline for the following:

• Filing an automatic six month extension (Form 4868) — Remember the six month extension is for filing the return only. Any tax due must be paid by April 15, 2014 to avoid any penalty and interest.
• First individual estimated tax payment for 2014
• Making a contribution to an IRA for Tax Year 2013
• Filing federal partnership tax returns (Form 1065)
• Filing estate or trust income tax returns (Form 1041)

Also, for returns rejected on April 15, 2014, the return will be considered timely filed if it is re-transmitted and accepted by April 20, 2014.

The original filing deadline is later for the following taxpayers:

• U.S. Citizens and Resident Aliens — Citizens and Resident Aliens who live and work abroad, as well as members of the military on duty outside the U.S. have until June 16, 2014 to file. Any tax due must still be paid by April 15, 2014.
• Members of the military and others serving in Afghanistan or other combat zone localities — These taxpayers can wait until at least 180 days after they leave the combat zone to file returns and pay any taxes due. For more details see Extensions and Deadlines in Publication 3 (Armed Forces’ Tax Guide).
• People that are affected by certain recent natural disasters.

Small Business Tax and Health Care Reminders for the 2014 Tax Season

As we head into the home stretch of the 2014 filing season, here are a couple of reminders related to returns that include Schedule C or other small business income tax returns.

Simplified Home Office Deduction
Beginning with Tax Year 2013 returns, a taxpayer may choose to calculate their home office expense by using the new simplified method thus removing the requirement to file Form 8829 (Expenses for Business Use of Your Home).

By using the new simplified method, the taxpayer may use a flat deduction amount of $5 per square foot for up to 300 square feet of their home for business purposes.

If this method is used, then the entire allowable home mortgage interest and property taxes may be claimed on Schedule A.

It is important to note that the criteria for claiming an office in home deduction does not change if the taxpayer chooses to use the simplified method.

For more details see the Simplified Option for Home Office Deduction page on IRS.gov and/or the 2014 Schedule C instructions for Line 30.

Small Business Health Care Tax Credit
The Small Business Health Care Tax Credit is available to businesses with fewer than 25 full time employees with average wages of less than $50,000. To be eligible, a qualifying employer must provide health insurance that covers at least 50 percent of the cost of single health care coverage for their employees.

Eligible small employers may claim this credit by completing Form 8941 (Credit for Small Employer Health Insurance Premiums) and including it with their 2013 federal tax return.

Credit is calculated on a sliding scale with a maximum credit of 35% of the employer's contribution that is made for their employees' health insurance premiums.

Maximum credit is available to employers with 10 or fewer full time employees and average wages of no more than $25,000. The credit is then reduced based on each additional employee and for each $1,000 increase in the average wages until the limits are reached.

For more information on the Small Business Health Care Tax Credit see the following:

• 2013 Form 8941 instructions
• What You Need to Know about the Small Business Health Care Tax Credit page on IRS.gov.
• IRS news article of March 10, 2014 encouraging small employers to take advantage of the Small Business Health Care Tax Credit.

IRS Health Care Tax Tips and Reminder about the Premium Tax Credit for 2014 Returns

Even though most tax provisions of the Affordable Care Act do not begin to affect federal tax returns until next filing season, the provisions will have an impact on the decisions taxpayers make if they need to obtain their health insurance through an Exchange and they receive the advanced premium tax credit (subsidy) to help them pay for their premiums. Below you will find more IRS resources available to taxpayers that help explain the tax provisions and a reminder about the Premium Tax Credit.

New IRS Health Care Tips Page
The IRS has added a Health Care Tax Tips page to their website to help individuals understand how the Affordable Care Act may affect their taxes beginning with their 2014 federal return.

At the present time this site provides links to information on:

• Premium Tax Credit
• Why it is important for individuals who obtain health insurance through an Exchange and receive a subsidy to help pay for their insurance premiums to inform the Exchange of changes in their income or family size during 2014
• Overview of the penalty for not obtaining health insurance and who is exempt from the penalty provision
• Where to obtain more information on health insurance exchanges, other tax law provisions of the Affordable Care Act, and individuals’ health care choices

The IRS will be adding to this site throughout 2014 so be sure to check it periodically to see what new information the IRS has posted.

Premium Tax Credit
Even though the calculation of the premium tax credit will not take place until next year, it is essential to become familiar with this credit. Doing so will enable you to better explain to your clients who received a subsidy how it will affect them when they file their 2014 federal return next filing season.

Below is a brief overview on the premium tax credit:

Every taxpayer who received an advanced premium tax credit to help pay for their health insurance will have to complete the 2014 Premium Tax Credit form when filing their 2014 federal return. The calculated amount of the 2014 premium tax credit will then be compared to the subsidy amount they received which will result in one of the following:

• The taxpayer will receive a refundable credit if the premium tax credit is more than the subsidy amount.
• The taxpayer will have to pay an additional tax if the subsidy amount is higher than the premium tax credit. The amount of additional tax will be limited based on where the taxpayer falls on the federal poverty line. It will range from a minimum of $300 ($600 for married filing joint) to a maximum of $1,125 ($2,500 for married filing joint).

It is important to understand that a taxpayer who receives a subsidy to help pay for their health insurance premiums is required to file a 2014 federal return and complete the premium tax credit form. This is true even if they otherwise would not be required to file a federal return. If they do not complete the premium tax credit form, they will not be able to receive a subsidy in future years.

For a more detailed explanation of the Premium Tax Credit, see the How the Affordable Care Act will Affect You and Your Tax Return - Premium Tax Credit page on the CrossLink Tax website.

Also, here are other Premium Tax Credit resources available on the IRS website:

• IRS Premium Tax Credit
• IRS Questions and Answers for the Premium Tax Credit

Additional Tax (Penalty) for Not Having Health Insurance for 2014

It is important that everyone understands what the penalty will be for not having health insurance for all or part of 2014.

If someone does not have health insurance for Tax Year 2014 the penalty is calculated as the greater of:

• 1% of their modified adjusted gross income that exceeds their personal exemption (doubled for those who file married filing jointly) plus the standard deduction for their filing status.
  Modified Adjusted Gross Income is defined as Adjusted Gross Income plus:
• Tax exempt interest
• Portion of social security income not included in income
• Foreign earned income and the housing cost of individuals who live abroad
This means the penalty will begin to be calculated once the modified adjusted gross income exceeds:
• $10,150 for single individuals
• $20,300 for married couples filing jointly
Or
• A flat dollar amount of $95 per adult family member age 18 and older, and $47.50 for each dependent under age 18. This amount is capped at $285 for Tax Year 2014.

One percent (1%) of income will begin to exceed the flat dollar amount when their modified adjusted gross income exceeds:

• $19,650 for Single individuals
• $39,300 for Married couples with no dependents
• $44,050 for Married couples with one dependent under age 18
• $48,800 for Married couples with two or more dependents under age 18

Put another way, Single individuals subject to a penalty will pay the flat dollar amount when their income is between $10,150 and $19,650. Once their income exceeds $19,650 they will pay 1% of their income.

Married couples subject to the penalty will pay the flat dollar amount when their income exceeds $20,300 and is below the income amounts above based on their family size. Once their income exceeds that amount they will pay 1% of their income.

If the taxpayer owes a penalty they must include it on their 2014 federal return.

Under the following circumstances, a taxpayer who does not have health insurance will not be subject to the penalty:

• Taxpayer does not have to file a federal income tax return because their income is below the filing threshold
• Taxpayer is uninsured for less than 3 months of the year
• The lowest cost health insurance coverage available to the taxpayer would cost more than 8% of their household income
• Taxpayer is in jail or prison
• Taxpayer is not lawfully present in the United States
• Taxpayer has a qualifying religious exemption
• Taxpayer is a member of one of the following:
• Federally recognized Indian tribe
• A recognized health care sharing ministry
• Taxpayer obtains a hardship exemption

For more information on when a taxpayer may qualify for a hardship exemption and how to apply for one, see How do I Qualify for an exemption from the fee for not having health coverage on the HealthCare.gov website.

New IRS Get Transcript Online Tool and Reminders of Other Useful IRS Tools

Get Transcript

The IRS has implemented a new online tool that allows a taxpayer to retrieve, download, and print a copy of their federal return transcript for the three prior years (and current year after it has been filed). This will eliminate the need to wait five to ten days while the IRS mails a copy of the transcript to the taxpayer.

The new Get Transcript application operates as follows:

• Once the taxpayer accesses the page, they will select Get Transcript Online
• The taxpayer will be walked through an authentication process
• Once authenticated, the taxpayer will see a screen that gives them the option to select:
• Tax Return transcript: Shows most line items on the tax return as originally filed, including accompanying forms and schedules.
• Tax Account transcript: Provides any adjustments that were made to a return after it was filed.
• Record of Account transcript: Combines the information from the tax return and tax account transcripts.
• Wage and Income transcript: Shows data from the taxpayer’s W-2s or 1099s reported to the IRS for the particular tax year.

Other Useful IRS Tools

As we begin the 2014 filing season, here is a reminder about two other IRS online tools that you may find useful:

Where’s My Amended Return?
If the taxpayer needs to file an amended return for the current year or the three prior years, they can now find out the processing status at the IRS.

They may do this by using the IRS look-up tool “Where’s My Amended Return?”. The status will be available on this application three weeks after it was mailed to the IRS.

The following information is available about the amended return once the Social Security Number, date of birth, and zip code has been entered:

• Confirmation that the IRS received the amended return
• An update on the amended return’s current status
• Estimated time the IRS will complete the processing of the amended return

First Time Homebuyer Account Look-up
Taxpayers who claimed a first time homebuyer credit of $7,500 in 2008 must repay the credit over 15 years. This is done by showing an additional tax on the taxpayer’s return beginning in 2009.

In order to help the taxpayer keep track of the total amount of credit they claimed, what the yearly repayment amount should be, and the balance remaining to be paid back, the IRS provides a First Time Homebuyer Credit Account Look-Up tool on the IRS website.

Change to IRS Help Line for 2014 Filing Season

The IRS Help Line will be changing how they respond to tax law related questions beginning with the 2014 filing season. These changes are being made in an effort to persuade taxpayers to use the IRS website and other resources to get answers to their tax law related questions. Additionally, the changes would allow the IRS to save money and for the IRS Help Line to be utilized more effectively.

The changes will be as follows:

• January 1 - April 15
  
  IRS will answer basic tax law questions when a taxpayer calls the IRS Help Line. Basic tax law questions are defined as questions pertaining to Forms 1040A, 1040EZ, and related area on Form 1040 such as filing status, dependents, exemptions and taxable income.
  More complex tax law questions will not be answered. Instead, the IRS help line will be referring taxpayers to other resources available on IRS.gov such as the Interactive Taxpayer Assistance, Tax Trails, IRS tax publications, and other resources such as the tax software product they are using to get answers to these questions.
• April 16 - December 31 
  
  Any tax law related questions (both basic and complex) asked by taxpayers will be referred to other resources available on IRS.gov, IRS tax publications, and other resources such as the tax software product they are using.

See Some IRS Assistance and Taxpayer Service Shift to Automated Resources on the IRS website for more details on this change and other changes the IRS is making to their website.

Changes to the IRS Identity Protection PIN Program for the 2014 Filing Season

The IRS is making the following changes to their Identity Protection PIN program for the 2014 Filing Season:

• If the spouse receives an Identity Protection PIN (IP PIN), they must include it on their electronically filed federal return. If it is not included or is entered incorrectly, the return will not be accepted by the IRS.
  The taxpayer will continue to also be required to include their IP PIN on their federal return as they have since this IRS program began two years ago.
• If the taxpayer and/or spouse lose or misplace their IP PIN they will need to get their original IP PIN via the new online IRS Identity Protection PIN system on the IRS website.
  In order to obtain their original IP PIN the taxpayer and/or spouse will need to go through a registration process to validate their identity. This process is to ensure that the IP PIN is being given to the correct taxpayer and to protect the taxpayer's personal and tax information.
  For taxpayers who are unable to use the online tool, or do not want to use it, they can obtain a replacement IP PIN by calling the IRS at 1-800-908-4490, extension 245. If a taxpayer receives a replacement IP PIN, the processing of their return and the issuance of their refund will be delayed.

Other things to know about the IRS Identity Protection PIN program are:

• The IRS will be issuing 1.2 million Identity Protection PINs for the upcoming season. IP PINs are issued to all taxpayers that have had an identity theft indicator applied to their IRS tax account.
• Affected taxpayers should have received IRS Notice CP01A from the IRS in December 2013. This notice includes their 6-digit IP PIN and information on the use of it.
• The Identity Protection PIN received by the taxpayer and or spouse in December 2013 is only valid for use on their 2013 federal individual return. Those who received an IP PIN for 2013 will receive a new IP PIN each year for as long as their IRS account has an identity theft indicator associated with it.
• When the taxpayer and/or spouse IP PIN is entered in the CrossLink professional tax software program, they will be transmitted to the IRS as part of Form 1040. The taxpayer's IP PIN will print on Form 1040 in the area designated for this purpose in the signature area. The spouse's IP PIN will not print on the Form 1040 because the IRS did not add it to the printed Form 1040 for tax year 2013.

For more information see the following:

• Understanding Your CPO1A Notice for more information about the IRS Identity Protection PIN and a copy of what this notice looks like and tells the taxpayer.
• IRS Identity Protection PIN Frequently Asked Questions
• Lost or Misplaced IP PINs page on the IRS website for further information on what to do if the taxpayer loses or misplaces their IP PIN.

Reminders for Upcoming 2014 Filing Season

Below are some reminders about when the 2014 Filing Season will begin and some of the new tax law changes that will affect individual returns for Tax Year 2013:

Start of Filing Season
Both the individual and business filing season will be starting later due to the government shutdown this past October 2013.

First day of filing season will be:

• For individual returns: Friday, January 31, 2014
• For business (Corporate, Partnership, Fiduciary) returns: Monday, January 13, 2014

New Tax Provisions for 2013 Federal Returns
The following federal provisions are new for the upcoming filing season:

• New Simplified Method for Home Office Deduction
  In order to provide simplification for taxpayers that claim the home office deduction on Schedule C, the IRS now gives taxpayers the option to use a simplified method to calculate the home office deduction. Instead of using Form 8829, the taxpayer may multiply the square footage used for business footage by $5.
  For more information, see the following on the IRS website:
  • Simplified Option for Home Office Deduction
  • 2013 Schedule C instructions
• Itemized Medical Expense Deduction Threshold Percentage 
  Starting with 2013 individual returns, the threshold percentages for when medical expenses are included as an itemized deduction have changed to:
  • Taxpayers under age 65: 10%
  • Taxpayers age 65 and older: 7.5%
  For more information see the 2013 Instructions for Schedule A.

• Changes for High Income Individuals
• New 39.6% tax rate when AGI exceeds $400,000 ($450,000 for Married Filing Joint (MFJ))
• Itemized Deduction and Personal Exemption will begin to be phased-out when AGI reaches $250,000 ($300,000 for MFJ)
• Additional 3.8% tax will be imposed on net investment income when AGI exceeds $200,000 ($250,000 for MFJ). This will be calculated on new Form 8960 (Net Investment Income Tax Individuals, Estates and Trusts).
• Additional Medicare Tax will be due for taxpayers with wage and self-employment income over $200,000 ($250,000 for MFJ). This will be calculated on new Form 8959 (Additional Medicare Tax).

For more details on these changes, see the following:

• IRS Questions and Answers for the Additional Medicare Tax
• IRS Questions and Answers on the Net Investment Income Tax
• 2013 Form 1040 instructions (Deduction for Exemptions Worksheet on Page 40) for phase out of the personal exemption
• 2013 Schedule A instructions (Itemized Deductions Worksheet on page A-13) for phase out of itemized deductions

For a complete listing of federal tax law changes that will affect individual 2013 tax returns, see the Things to Know for the Current Tax Year section of the CrossLink Tax Resource Center.