Taxpayers in 2014 do not have to be concerned about a lot of tax surprises. The American Taxpayer Relief Act of 2012 (ATRA) began on January 2, 2013, which President Obama signed the ATRA into law. This new law addresses many of the tax issues that were debated by Congress at the end of 2012, and they referred to by many as the "fiscal cliff".
ATRA is a compromise measure, it permanently extended reduced tax rates of much of the Bush tax cuts, while retaining the higher tax rate at upper income levels . The Act also establishes caps on tax deductions and credits for those at upper income levels. But even in the most stable economy, there is always something to worry while doing taxes. Here are 10 things to look out for and not fall for in 2014.
1. Those filing early in the year will have to wait.
In October, 2013, the federal government shut down for 16 days, and taxpayers are still paying for it. The Internal Revenue Service says that the earliest it would be able to process individual tax returns was January 31, 2014. People can submit their return electronically, and the e-filer will hold it until the IRS ready to accept returns.
2. Fiscal cliff replay in 2014.
Every year, some tax provisions that were temporary are renewed by Congress. However, in recent years, law makers have let the laws expire and then renew them retroactively, such as in the ATRA. People can expect this to happen again in 2014. Fifty-five tax provisions expired on December 32, 2013. This doesn't affect 2013 tax returns, but will most likely on 2014 returns.
3. The wealthy need to look for taxes that have been added.
The ATRA 2012, was hard on the wealthier tax payers, and they will see the to what extent whey they file their 2013 returns. The one that is the most difficult to take is the new net investment income tax of 3.8 %, also known as the Medicare surtax. The money will go toward the health coverage program for elderly Americans.
ACRA 2012, will continue on into 2014, meaning that people that are uninsured have some decisions to make that could have tax implications.Enrollment for health insurance under Obamacare, goes through March 31, 2014. If people do not buy an insurance plan, they could face a penalty. The charge for 2014 is either 1% of their yearly household income or $95 per uninsured adult and $47.50 per child, up to $285 per family. The penalty will have to paid while filing 2014 tax returns. If receiving a refund the IRS will deduct the amount owed.
5. File tax returns jointly if you are a same sex married couple.
Married same-sex couples now have the same federal tax return responsibilities as heterosexual couples. Following the Supreme Court invalidation of the Defense of Marriage Act, the IRS told same-sex married couples to file jointly or as a married couple filing separately even if the state where they live does not recognize their marriage. This will help make same-sex couples' tax returns to be much easier.
6. Simplified home office deduction
The recession has made many people have to start their own businesses, which many are running from their homes. For 2013, returns filed in 2014, the IRS is now offering a simplified home office deduction. The new deduction is $5 for each square foot of home office space, up to a maximum of 300 square feet.
7. Watch out for IRS troubles.
The IRS is suggesting new regulations for groups seeking nonprofit status. It was learned that during Congressional hearings, that more liberal, progressive groups were also targeted by IRS reviewers. The IRS is proposing limits on these "social welfare groups" spending on political campaign-related activities. Expect continued debate on the groups' activities and IRS oversight before any final regulations are issued.
8. Look out for tax preparer regulation.
The IRS effort to regulate professional tax payers will continue in 2014. They want to register all tax prepares who aren't already part of certain standards (attorneys, CPAs, or enrolled agents) that are required to competency exams and take continuing education classes. They are trying to minimize incorrect and fraudulent filed returns.
9. Tax Reform
2014 is an election year and talk of taxes is important for campaign ads. There is projected to be some tax reform before many of the representatives of the House Ways and Means And Senate Finance committees leave their chairmanship.
10. Inflation tax adjustments
Definitely inflation had a respectable effect on around 40 tax provisions. One main one being that income brackets were widened, meaning people can earn more money next year without being bumped into a higher tax bracket. However, the amounts people can contribute to their workplace pension plan and individual retirement account in 2014 have stayed the same as in 2013.
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Lang Premier Properties are Birmingham Realtors specializing in Oakland County Real Estate. Stephanie is an agent with Max Broock in Birmingham, Michigan. See what past clients have to say about Stephanie Lang. Lang Premier Properties looks out for your best interests when you purchase a new custom luxury home. We always recommend working with an experienced luxury real estate agent when buying a new luxury estate.