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.

Additional 2013 Federal Tax Changes

In order to reduce taxpayer burden, the IRS has added the following new options to Schedule C and Schedule D:

Home Office Deduction — New Simplified Method
This new simplified method has been added to Schedule C and may be used by taxpayers that use 300 square feet or less of their home for business purposes.

Here are highlights of the simplified method:

• Uses flat deduction amount of $5 per square foot to calculate the expenses for business use of your home on Schedule C, line 30.
• If simplified option is used, then Form 8829 (Expenses for Business Use of Your Home) does not need to be completed.
• Allowable mortgage interest and property taxes may be claimed in full on Schedule A if the simplified method is used.
• A depreciation deduction may not be claimed for years that the simplified option is used.
• If the home office expense that is calculated using the simplified method is limited because it exceeds the business gross income, the excess may not be carried forward to a future year. Under the regular method any excess can be carried forward.
• You may choose to use either the simplified method or the regular method (complete Form 8829) for any taxable year. This means you can switch back and forth each year.

For more details see the Simplified Option for Home Office Deduction.

Aggregate Transaction Reporting on Schedule D
(Capital Gains and Losses)
For stock sales, if the basis that is reported on the Form 1099-B (Proceeds From Broker and Barter Exchange Transactions) is correct, then the totals of all of these transactions may be reported directly on Schedule D on new lines 1a or 8a instead of completing Form 8949 (Sales and Other Dispositions of Capital Assets).