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Still Time to Act to Avoid Surprises at Tax-Time
How the Obamacare Tax Penalty Works
Social Security Announces 1.7 Percent Benefit Increase for 2015
IRS Announces 2015 Pension Plan Limitations
Local Lodging Expenses
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Still Time to Act to Avoid Surprises at Tax-Time

-...4 form. You usually can have less tax withheld by increasing your withholding allowances on line 5.

Report changes in circumstances. If you purchase health insurance coverage through the Health Insurance Marketplace, you may receive advance payments of the premium tax credit in 2014. It is important that you report changes in circumstances to your Marketplace so you get the proper type and amount of premium assistance. Some of the changes that you should report include changes in your income, employment, or family size. Advance credit payments help you pay for the insurance you buy through the Marketplace. Reporting changes will help you avoid getting too much or too little premium assistance in advance.

•Change taxes with life events. You may need to change the taxes you pay when certain life events take place. A change in your marital status or the birth of a child can change the amount of taxes you owe. When they happen you can submit a new Form W–4 at work or change your estimated tax payment.

•Be accurate on your W-4. When you start a new job you fill out a Form W-4. It’s important for you to accurately complete the form. For example, special rules apply if you work two jobs or you claim tax credits on your tax return. Your employer will use the form to figure the amount of federal income tax to withhold from your pay.

•Pay estimated tax if required. If you get income that’s not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay the tax four times a year. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax.

How the Obamacare Tax Penalty Works

For 2014, if you don't have health insurance and you don't qualify for an exemption, you'll have to pay a penalty of $95 per adult plus $47.50 per child (up to a maximum of $285 for a family) or 1% of your household income, whichever is greater. The flat dollar amount is reduced by 50% for dependents under the age of 18.

The fee increases each year until you g......et coverage. For 2015, penalty is $325 per adult plus $162.50 per child (with a family maximum of $975) or 2% of annual family income. And in 2016, the fee will be $695 per adult plus $347.50 per child (with a maximum of $2,085) or 2.5% of family income.

For purposes of determining the penalty, "income" is defined as what your household earns in excess of the income-tax filing threshold. (For 2014, the threshold is $10,150 for an individual and $20,300 for married couples filing jointly.) For instance, if you are a single woman who earns $45,000 in 2014, the penalty will be based on $34,850 of your income. One percent of $35,000 is $348.50. Because that amount is greater than $95, your penalty will be $348.50.

Social Security Announces 1.7 Percent Benefit Increase for 2015

Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 64 million Americans will increase 1.7 percent in 2015, the Social Security Administration announced today.

The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 58 million Social Security beneficiaries receive in Ja...s Bureau of Labor Statistics.

Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $118,500 from $117,000. Of the estimated 168 million workers who will pay Social Security taxes in 2015, about 10 million will pay higher taxes because of the increase in the taxable maximum.

IRS Announces 2015 Pension Plan Limitations

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

•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.

up contribution limit for employees aged 50 and over who participate in 401(k...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.

Local Lodging Expenses

TD 9696 finalizes rules that the IRS put into effect in 2012 which allow employees to deduct certain expenses paid or incurred for local lodging as business expenses. Taxpayers may deduct certain expenses for lodging when not traveling away from home (local lodging). These include local lodging expenses that are considered ordinary and necessary business expenses in approp...riate circumstances.

Some of these circumstances include:

•The lodging is necessary for the individual to participate fully in or be available for a bona fide business meeting, conference, training activity or other business function.
•The lodging is for a period that does not exceed five calendar days and does not recur more frequently than once per calendar quarter.
•If the individual is an employee, the employee’s employer requires the employee to remain at the activity or function overnight.
•The lodging is not lavish or extravagant under the circumstances and does not provide any significant element of personal pleasure, recreation or benefit.

How the Obamacare Tax Penalty Works

For 2014, if you don't have health insurance and you don't qualify for an exemption, you'll have to pay a penalty of $95 per adult plus $47.50 per child (up to a maximum of $285 for a family) or 1% of your household income, whichever is greater. The flat dollar amount is reduced by 50% for dependents under the age of 18.

The fee increases each year until you g...et coverage. For 2015, penalty is $325 per adult plus $162.50 per child (with a family maximum of $975) or 2% of annual family income. And in 2016, the fee will be $695 per adult plus $347.50 per child (with a maximum of $2,085) or 2.5% of family income.

For purposes of determining the penalty, "income" is defined as what your household earns in excess of the income-tax filing threshold. (For 2014, the threshold is $10,150 for an individual and $20,300 for married couples filing jointly.) For instance, if you are a single woman who earns $45,000 in 2014, the penalty will be based on $34,850 of your income. One percent of $35,000 is $348.50. Because that amount is greater than $95, your penalty will be $348.50.

Medicare Tax For 2014: What You Should Know

Medicare payroll tax on earned income

The Medicare payroll tax is 2.9%. It applies only to earned income, which is wages you are paid by an employer, plus tips. You’re responsible for 1.45% of the tax, and it’s deducted automatically from your paycheck. Your employer pays the other 1.45%.

High-wage earners now owe an additional 0.9% on earned income a...bove $200,000 for individuals, $250,000 for couples filing jointly, and $125,000 for spouses filing separately. So, for example, if you are an individual filer whose income is $225,000, you will pay a 1.45% Medicare tax on the first $200,000, then 2.35% (1.45% plus 0.9%) on the next $25,000. Your employer is required to withhold the extra 0.9% once your wages pass the $200,000 threshold for individuals.

Another example: If you’re married and you and your spouse each earn $150,000, your employers will withhold 1.45% for Medicare tax, because neither of you exceeds the $200,000 individual threshold. But if you file a joint tax return, your combined earned income of $300,000 is $50,000 above the married filing jointly threshold. This means you will have underpaid your Medicare tax by $450 (0.9% of $50,000) and will owe the additional amount when you file your taxes. Speak to your tax adviser about potentially being required to make estimated tax payments.

Tax on net investment income

In the past, taxpayers weren’t required to pay Medicare tax on income generated from investments such as capital gains, dividends, and taxable interest. Since 2013, however, you could owe a 3.8% Medicare tax on some of or all your net investment income.

The amount you owe is based on the lesser of your total net investment income or the amount of your MAGI that exceeds $200,000 for individuals, $250,000 for couples filing jointly, or $125,000 for spouses filing separately.

In other words, you owe the 3.8% tax on the amount by which your investment income exceeds the income thresholds, or, if your wages alone already are higher than the income thresholds, you’ll owe tax on the lesser of net investment income or MAGI that exceeds the thresholds.

IRS COMMISSIONER KOSKINEN REQUESTS SWIFT TAX EXTENDERS ACTION

IRS Commissioner John Koskinen wrote all of the top tax writers in Congress to warn them that lawmakers must act swiftly to renew expired and expiring tax provisions or risk a delay in the start of the 2015 tax filing season.

He told Senate Finance Committee Chairman Ron Wyden, Sen. Orrin Hatch, the top Republican on the committee, Ho...use Ways and Means Committee Chairman Dave Camp, and Rep. Sander Levin, the top Democrat on the committee, that uncertainty over the future of a bundle of miscellaneous tax breaks creates a major burden for the IRS.

He said the tax writers should decide which breaks to extend and which will expire before the end of November.

"This uncertainty, if it persists into December or later, could force the IRS to postpone the opening of the 2015 filing season and delay the processing of tax refunds for millions of taxpayers," he wrote. "Moreover, if Congress enacts any policy changes to the existing extenders or adds new provision, the IRS could have to reprogram systems and make processing changes."

It is the same warning that the IRS has had to issue on several occasions in recent years. The tax extenders are frequently allowed to expire only to be renewed retroactively at a later date. The Finance Committee passed an extension of the majority of expired and expiring provisions in May but the full Senate has yet to consider that legislation.

Meanwhile, the House has passed a series of permanent extensions of individual extenders. Democrats largely oppose the approach and prefer to see a 1-2 year extension of all of the provisions to allow time for lawmakers to work on tax reform.

Business and Pleasure Travel Tax Deductions

Let Uncle Sam help pay for your business trip. When you tack on personal vacation days to the beginning or end of a business trip, your out-of-pocket costs could be minimal since much of the business portion of your travel could be tax deductible.

Ordinary, Necessary Expenses

The IRS has no problem with business owners deducting legitimate expenses. As long as the travel benefits or advances your business, you can write off ordinary and necessary expenses.

What's considered ordinary and necessary? That depends, says the IRS, on the facts and your circumstances. In general, an ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your business.

Under these standards, deductible travel expenses typically include hotels, meals, entertainment and round-trip travel to meet with existing or potential out-of-town clients.

Convention and seminar costs also could be deductible as long as the conferences specifically relate to your business or profession or help improve your career skills. That's why so many professional groups hold conventions in vacation spots like Orlando, Florida, or Las Vegas.

Getting There

Traveling to a business meeting obviously is work-related and the IRS doesn't really care whether you get there a few days early or hang around for a bit after your business is concluded.

Since you had to travel anyway, you can deduct the cost of your transportation as a business expense when you file your company's taxes. This applies to both auto travel as well as airfare.

In fact, when you fly for business purposes and extend your stay to get a reduced fare by, for example, spending a Saturday night at your destination, the associated stay-over costs usually are deductible, too, even though you have no business meetings that extra day.

The cost of travel by bus, train or auto, either your own car or one you rent, also is deductible. But don't try to slip in the price of airfare if you got your ticket via frequent flier miles.

Timing is Everything

Be sure, though, that you don't extend your personal stay too long. In order to deduct your transportation costs, your trip must be primarily for business. You do get to count your travel days as business, but carefully calculate the overall work-to-pleasure ratio.

If you spend three days getting to and meeting with clients, but bookend the travel with five extra days for sightseeing, the IRS will consider your trip more for fun and disallow your travel deductions.

Lodging Costs

Your hotel costs while conducting business also are deductible. Here, too, you need to differentiate between the portion of your stay that was personal.

For the extra days you stay to enjoy a location's recreational offerings, you cannot deduct those hotel charges.

Don't try to get cute here. The IRS frowns on counting a full day as business if you simply schedule a quick breakfast meeting with a client and then spend the other 23 hours on your own. In this case, that night's lodging will come out of your own pocket, not as a deduction on your tax return.

Dining Out

Speaking of eating, closing a deal over a meal is a time-honored business practice, but the IRS only helps out so much here.

Generally, you can only deduct 50 percent of your business-related meal costs. That limit also applies to your individual meals on business travel.

As for that breakfast business meeting, it isn't a total tax loss. Even though it isn't likely to get you the full day for lodging deduction purposes, you can include the morning meal's cost -- subject to the 50 percent limit -- with your client as a deductible expense.

Miscellaneous Expenses

When collecting your travel, hotel and meal receipts, be sure to note other miscellaneous expenses, too. Many of these work-related costs also are deductible.

You can write off taxi fares to and from the airport (or other transportation hubs, such as a train or bus station), as well as local fares from the airport to your hotel. And don't forget the cab costs from your hotel to your business meetings (and back).

If you shipped work material to your meeting destination, that expense is deductible. So are the extra charges you incur for business calls while on your trip, as well as Internet connection fees.

If your trip lasts longer than you planned, dry cleaning and laundry fees paid to make you look presentable also are deductible.

What are the Tax Implications of Filing for Bankruptcy

Here are the criteria that the IRS outlines for determining whether or not your tax is dischargeable:

All tax returns that represent the outstanding debt must have been filed with the IRS, the liability cannot stem from a Substitute Filed Return (SFR) prepared by the IRS;

There must not have been fraud or willful evasion involved with the f...iling of any of the tax returns eligible for discharge;

It must be an income tax liability. The trust fund portion of payroll tax liabilities (the withholdings from an employee’s pay) can never be discharged in bankruptcy. Nor can civil penalties associated with failure to file and pay payroll taxes be discharged.

Timing is critical. More than one bankruptcy case has been blown out of the water because these IRS guidelines were not met:

The return was due at least three years ago. The taxes must be from a tax return that was due (including all valid extensions) at least three years before you filed for bankruptcy. For example, if your 2009 income tax return were filed for which extensions to file the return expired on Oct. 15, 2010, the tax return due date test will be satisfied if the bankruptcy petition is filed after Oct. 15, 2013.

You filed the return at least two years ago. Not everyone files on time. You must have filed the tax return at least two years before filing for bankruptcy. To avoid additional objections from the taxing authority, you must make sure the return is signed and mailed or electronically filed, and sufficiently complete to be deemed a tax return. Using the above example, if extensions to file the 2009 return expired on Oct. 15, 2010, you filed the return on April 15, 2012, and you filed for bankruptcy on Oct. 15, 2013, you won't be able to discharge the debts. You will have satisfied the tax return due date test, but not the tax return filing date test. In this scenario, you must wait until two years after April 15, 2012, or until April 15, 2014, to file for bankruptcy.

The taxes were assessed at least 240 days ago. The IRS must have assessed the tax (processed the return and entered the liability in its records) against you at least 240 days before you filed for bankruptcy. Make sure you know the exact assessment date. You can get this information by contacting the IRS.

For individuals, the most common type of bankruptcy is a Chapter 13. The IRS states that before you consider filing a Chapter 13 here are some things you should know:
You must file all required tax returns for tax periods ending within four years of your bankruptcy filing;
During your bankruptcy you must continue to file, or get an extension of time to file, all required returns;
During your bankruptcy case you should pay all current taxes as they come due;
Failure to file returns and/or pay current taxes during your bankruptcy may result in your case being dismissed.

Some people are under the misconception that discharged taxes and other debt in a bankruptcy are considered cancellation of debt and therefore taxable. The good news is that they are not taxable income. The IRS will not kick you when you’re down. There is an exclusion for this type of cancellation of debt.