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.