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Social Security Benefits and Your Taxes
Tax Tips about Reporting Foreign Income
Seven Tips to Help You Determine if Your Gift is Taxable
What to Know about Late Filing and Late Paying Penalties
Scam Phone Calls Continue; IRS Identifies Five Easy Ways to Spot Suspicious Calls
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Social Security Benefits and Your Taxes

If you receive Social Security benefits, you may have to pay federal income tax on part of your benefits. These IRS tips will help you determine whether or not you need to pay taxes on your benefits. They also explain the best way to file your tax return.
Form SSA-1099. If you received Social Security in 2014, you should receive a Form SSA-1099, Social Security Benefit Statement, showing the amount of your benefits.

Only Social Security. If Social Security was your only income in 2014, your benefits may not be taxable. You also may not need to file a federal income tax return. If you get income from other sources you may have to pay taxes on some of your benefits. Tax Formula. Here’s a quick way to find out if you must pay taxes on your Social Security benefits: Add one-half of your Social Security to all your other income, including tax-exempt interest. Then compare the total to the base amount for your filing status.

If your total is more than the base amount, some of your benefits may be taxable. Base Amounts. The three base amounts are: $25,000 – if you are single, head of household, qualifying widow or widower with a dependent child or married filing separately and lived apart from your spouse for all of 2014 $32,000 – if you are married filing jointly $0 – if you are married filing separately and lived with your spouse at any time during the year

Tax Tips about Reporting Foreign Income

1. Report Worldwide Income. By law, U.S. citizens and residents must report their worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.
2. File Required Tax Forms. You may need to file Schedule B, Interest and Ordinary Dividends, with your U.S. tax return. You may also need to file Form 8938, Statement of Specified Foreign Financial Assets. In some cases, you may need to file FinCEN Form... 114, Report of Foreign Bank and Financial Accounts. See IRS DOT GOV for more information.
3. Review the Foreign Earned Income Exclusion. If you live and work abroad, you may be able to claim the foreign earned income exclusion. If you qualify, you won’t pay tax on up to $99,200 of your wages and other foreign earned income in 2014. See Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion, for more details.
4. Don’t Overlook Credits and Deductions. You may be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce your taxes if both countries tax the same income.
 5.Tax Filing Extension is Available. If you live outside the U.S. and can’t file your tax return by April 15, you may qualify for an automatic two-month extension of time to file. That will give you until June 16, 2015, to file your U.S. tax return. This extension also applies to those serving in the military outside the U.S. You will need to attach a statement to your return explaining why you qualify for the extension.

Seven Tips to Help You Determine if Your Gift is Taxable

If you gave money or property to someone as a gift, you may wonder about the federal gift tax. Many gifts are not subject to the gift tax. Here are seven tax tips about gifts and the gift tax.

1. Nontaxable Gifts. The general rule is that any gift is a taxable gift. However, there are exceptions to this rule. The following are not taxable gifts:...
Gifts that do not exceed the annual exclusion for the calendar year,
Tuition or medical expenses you paid directly to a medical or educational institution for someone,
Gifts to your spouse (for federal tax purposes, the term “spouse” includes individuals of the same sex who are lawfully married),
Gifts to a political organization for its use, and
Gifts to charities.
2. Annual Exclusion. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year. For 2014 and 2015, the annual exclusion is $14,000.
 3. No Tax on Recipient. Generally, the person who receives your gift will not have to pay a federal gift tax. That person also does not pay income tax on the value of the gift received.
4. Gifts Not Deductible. Making a gift does not ordinarily affect your federal income tax. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
5. Forgiven and Certain Loans. The gift tax may also apply when you forgive a debt or make a loan that is interest-free or below the market interest rate.
6. Gift-Splitting. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. You can consider that one-half of the gift be given by you and one-half by your spouse.
 7. Filing Requirement. You must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply:
You gave gifts to at least one person (other than your spouse) that amount to more than the annual exclusion for the year.
You and your spouse are splitting a gift. This is true even if half of the split gift is less than the annual exclusion.
You gave someone (other than your spouse) a gift of a future interest that they can’t actually possess, enjoy, or from which they’ll receive income later.
You gave your spouse an interest in property that will terminate due to a future event.

What to Know about Late Filing and Late Paying Penalties

April 15 was the tax day deadline for most people. If you are due a refund there is no penalty if you file a late tax return. But if you owe tax, and you failed to file and pay on time, you will usually owe interest and penalties on the tax you pay late. You should file your tax return and pay the tax as soon as possible to stop them. Here are eight facts that you should know about these penalties.

1. Two penalties... may apply. If you file your federal tax return late and owe tax with the return, two penalties may apply. The first is a failure-to-file penalty for late filing. The second is a failure-to-pay penalty for paying late.
2. Penalty for late filing. The failure-to-file penalty is normally 5 percent of the unpaid taxes for each month or part of a month that a tax return is late. It will not exceed 25 percent of your unpaid taxes.
3. Minimum late filing penalty. If you file your return more than 60 days after the due date or extended due date, the minimum penalty for late filing is the smaller of $135 or 100 percent of the unpaid tax.
4. Penalty for late payment. The failure-to-pay penalty is generally 0.5 percent per month of your unpaid taxes. It applies for each month or part of a month your taxes remain unpaid and starts accruing the day after taxes are due. It can build up to as much as 25 percent of your unpaid taxes.
5. Combined penalty per month. If the failure-to-file penalty and the failure-to-pay penalty both apply in any month, the maximum amount charged for those two penalties that month is 5 percent.
6. File even if you can’t pay. In most cases, the failure-to-file penalty is 10 times more than the failure-to-pay penalty. So if you can’t pay in full, you should file your tax return and pay as much as you can. Use IRS Direct Pay to pay your tax directly from your checking or savings account. You should try other options to pay, such as getting a loan or paying by debit or credit card. The IRS will work with you to help you resolve your tax debt. Most people can set up an installment agreement with the IRS using the Online Payment Agreement tool on IRS DOT GOV 
7. Late payment penalty may not apply. If you requested an extension of time to file your income tax return by the tax due date and paid at least 90 percent of the taxes you owe, you may not face a failure-to-pay penalty. However, you must pay the remaining balance by the extended due date. You will owe interest on any taxes you pay after the April 15 due date.
8. No penalty if reasonable cause. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show reasonable cause for not filing or paying on time. There is also penalty relief available for repayment of excess advance payments of the premium tax credit for 2014.

Scam Phone Calls Continue; IRS Identifies Five Easy Ways to Spot Suspicious Calls

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:

1.Call to demand immediate payment, nor will we call about taxes owed without first having mailed you a bill.

2.Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.

3.Require you to use a specific payment method for your taxes, such as a prepaid debit card.

4.Ask for credit or debit card numbers over the phone.

5.Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

What You Should Know if You Changed Your Name

Did you change your name last year? If you did, it can affect your taxes. All the names on your tax return must match Social Security Administration records. A name mismatch can delay your refund. Here’s what you should know if you changed your name:

Report Name Changes. Did you get married and are now using your new spouse’s last name or hyphenated your last name? Did you divorce and go back to using your former last name? In either case, you should notify the SSA of your name change. That way, your new name on your IRS records will match up with your SSA records.

Dependent Name Change. Notify the SSA if your dependent had a name change. For example, this could apply if you adopted a child and the child’s last name changed.

If you adopted a child who does not have a SSN, you may use an Adoption Taxpayer Identification Number on your tax return. An ATIN is a temporary number. You can apply for an ATIN by filing Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, with the IRS. 

Get a New Card. File Form SS-5, Application for a Social Security Card, to notify SSA of your name change. You can get the form on ssa dot gov or call 800-772-1213 to order it. Your new card will show your new name with the same SSN you had before.

Report Changes in Circumstances in 2015. If you purchase health insurance coverage through the Health Insurance Marketplace you may get advance payments of the premium tax credit in 2015. If you do, be sure to report changes in circumstances, such as a name change, a new address and a change in your income or family size to your Marketplace throughout the year. Reporting changes will help make sure that you get the proper type and amount of financial assistance and will help you avoid getting too much or too little in advance.

Ten Facts That You Should Know about Capital Gains and Losses

When you sell a capital asset the sale results in a capital gain or loss. A capital asset includes most property you own for personal use or own as an investment. Here are 10 facts that you should know about capital gains and losses:

1. Capital Assets. Capital assets include property such as your home or car, as well as investment property, such as stocks and bonds.

2. Gains and Losses. A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.

3. Net Investment Income Tax. You must include all capital gains in your income and you may be subject to the Net Investment Income Tax. This tax applies to certain net investment income of individuals, estates and trusts that have income above statutory threshold amounts. The rate of this tax is 3.8 percent.

4. Deductible Losses. You can deduct capital losses on the sale of investment property. You cannot deduct losses on the sale of property that you hold for personal use.

5. Long and Short Term. Capital gains and losses are either long-term or short-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long-term. If you held it one year or less, the gain or loss is short-term.

6. Net Capital Gain. If your long-term gains are more than your long-term losses, the difference between the two is a net long-term capital gain. If your net long-term capital gain is more than your net short-term capital loss, you have a net capital gain.

7. Tax Rate. The capital gains tax rate usually depends on your income. The maximum net capital gain tax rate is 20 percent. However, for most taxpayers a zero or 15 percent rate will apply. A 25 or 28 percent tax rate can also apply to certain types of net capital gains.

8. Limit on Losses. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.

9. Carryover Losses. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they happened in that next year.

10. Forms to File. You often will need to file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses with your tax return.

REMINDER OF DIRECT A DEPOSIT LIMITS

In an effort to combat fraud and identity theft, new IRS procedures effective January 2015 will limit the number of refunds electronically deposited into a single financial account or pre-paid debit card to three. The fourth and subsequent refunds automatically will convert to a paper refund check and be mailed to the taxpayer. Taxpayers also will receive a notice informing them that the account has exceeded the direct deposit limits and that they will receive a paper refund check in approximately four weeks if there are no other issues with the return.

The direct deposit limit will prevent criminals from easily obtaining multiple refunds. The limit applies to financial accounts, such as bank savings or checking accounts, and to prepaid, reloadable cards or debit cards.

The new limitation also will protect taxpayers from preparers who obtain payment for their tax preparation services by depositing part or all of their clients' refunds into the preparers' own bank accounts. The new direct deposit limits will help eliminate this type of abuse.

Direct deposit must only be made to accounts bearing the taxpayer's name. Preparer fees cannot be recovered by using Form 8888 to split the refund or by preparers opening a joint bank account with taxpayers. These actions by preparers are subject to penalty under the Internal Revenue Code and to discipline under Treasury Circular 230 (also, see Circular 230 Tax Professionals page).

However, the limitation may affect some taxpayers, such as families in which the parent's and children's refunds are deposited into a family-held bank account. Taxpayers in this situation should make other deposit arrangements or expect to receive paper refund checks.

How to Claim the Premium Tax Credit and Health Coverage Exemptions

According to a statement released February 4, by the IRS, “Form 1095-A will tell you the dates of coverage, total amount of the monthly premiums for your insurance plan, information you may use to determine the amount of your premium tax credit, and any amounts of advance payments of the premium tax credit.”

You may receive more than one Form 1095-A if different members of your household had different health plans or if you changed or updated your coverage during the year.

Using the information provided on the Form 1095-A, you can reconcile advance payments and claim a tax credit for premiums paid on IRS Form 8962 Premium Tax Credit (PTC), which will be filed with your income tax return.

If you haven’t yet received Form 1095-A and you had purchased health care coverage last year from the Marketplace, contact them immediately to get the form. Or if you think any information is incorrect on the form you did receive, contact the Marketplace for a corrected Form 1095-A.

If for any reason you did not have health care coverage last year, you will be required to pay a penalty based on your income level and beginning at $95. However, you may enjoy an exemption based on your particular circumstances. To claim the exemption, you will be required to file IRS Form 8965 Health Coverage Exemptions.

Exemptions can be enjoyed for a variety of reasons from having income below the poverty level to being covered by Medicaid to other hardship issues. In fact, there are a total of 18 qualifying exemptions. Check out page 2 of the Instructions for Form 8965 to see a listing of the qualifying exemptions.

If your exemption is based on poverty or for another reason granted by the Marketplace, you will be required to list the Certificate number of the exemption issued to you by the Marketplace on Form 8965. This number will have been issued to you at the time you applied for coverage. If you don’t have the certificate number, contact the Marketplace to acquire it.

Think you qualify for a hardship exemption for not having health insurance?

You can file your tax return before the exemption has been OK’d

IRS says in the Form 8965 instructions the new form for reporting health coverage exemptions. Under the health reform law’s individual mandate, people without health insurance will owe a tax when they file their income tax returns unless they have an exemption.Folks seeking one of the hardship exemptions must submit a multipage application plus any required documentation to the exchange before filing their tax returns. Once they’ve done so, they can enter “pending” in column c of Part 1 of the 8965 and file their 2014 returns while waiting for the exchange to process their application.