IRS Tax Calendar

Today's Quote:

I walked by the field of a certain lazy fellow and saw that it was over grown with thorns, and covered with weeds, and its walls were broken down.

Then, as I looked, I learned this lesson:

A little extra sleep, A little more slumber, A little folding of the hands to rest means that poverty will break in upon you suddenly like a robber, and violently like a bandit.

THE LIVING BIBLE, PROVERBS: 24:30-34

Larry Villano, Publisher of LoopholeLewy.com

Getting Married?

There are several things you need to consider once you're married. Here are some helpful tips:

  • Name change: The names and Social Security numbers on your tax return must match your Social Security Administration records. If you change your name, report it to the SSA. To do that, file Form SS-5, Application for a Social Security Card. You can get the form on ssa.gov, by calling 800-772-1213 or from your local SSA office.
  • Change tax withholding: A change in your marital status means you must give your employer a new Form W-4, Employee's Withholding Allowance Certificate. If you and your spouse both work, your combined incomes may move you into a higher tax bracket. Use the IRS Withholding Calculator tool at IRS.gov to help you complete a new Form W-4. See Publication 505, Tax Withholding and Estimated Tax, for more information.
  • Changes in circumstances: If you receive advance payment of the premium tax credit in 2014, it is important that you report changes in circumstances, such as changes in your income or family size, to your Health Insurance Marketplace. You should also notify the Marketplace when you move out of the area covered by your current Marketplace plan. Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace. Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.
  • Address change: Let the IRS know if your address changes. To do that, file Form 8822, Change of Address, with the IRS. You should also notify the U.S. Postal Service. You can ask them online at USPS.com to forward your mail. You may also report the change at your local post office.
  • Change in filing status: If you’re married as of Dec. 31, that’s your marital status for the whole year for tax purposes. You and your spouse can choose to file your federal income tax return either jointly or separately each year. You may want to figure the tax both ways to find out which status results in the lowest tax.
  • Note for same-sex married couples: If you are legally married in a state or country that recognizes same-sex marriage, you generally must file as married on your federal tax return. This is true even if you and your spouse later live in a state or country that does not recognize same-sex marriage. See irs.gov for more information on this topic.

IRS Help-Line Worker Suspended and Loses Pay for 100 Days for Urging Callers to Reelect Obama in 2012

According to a news release on July 10, 2014 from the OSC (the U.S. Office of Special Council, the ethics watchdog agency), an IRS employee tasked with fielding taxpayer questions on the IRS help-line “acknowledged that he had used his authority and influence as an IRS customer service representative for a political purpose and did so while at work,” .

The IRS worker agreed to a 100-day unpaid suspension for violating the Hatch Act, which prohibits federal employees from either running as candidates or soliciting contributions and promoting candidates for political office while they’re on duty and in a federal workplace. The settlement agreement resolves the formal Hatch Act complaint OSC filed with the Merit Systems Protection Board in April.

Hearing the news, Rep. Charles Boustany (R-La.) blasted the IRS as “totally out of control.”

“This latest development exposes a culture that tolerates or even encourages politically motivated activities, contrary to the agency’s mission and purpose,” he said in a statement. “This is inexcusable. If the IRS wishes to preserve what little credibility it has with the American people, they will immediately terminate this employee and conduct a thorough internal review into this matter."

The Hatch Act of 1939, officially An Act to Prevent Pernicious Political Activities, is a United States federal law whose main provision prohibits employees in the executive branch of the federal government, except the president, vice-president, and certain designated high-level officials of that branch, from engaging in partisan political activity. The law was named for Senator Carl Hatch of New Mexico. It was most recently amended in 2012.

The Merit Systems Protection Board (MSPB) is empowered to hear and decide complaints for corrective or disciplinary action when an agency is alleged to have committed a prohibited personnel practice. 5 U.S.C. §§ 1214, 1215. It is a prohibited personnel practice to (among other things) take an action in violation of the Merit System Principles. 5 U.S.C. § 2302(b)(12). In addition, Merit System Principles are mirrored in the list of prohibited personnel practices.

For example, Merit System Principle No. 9 provides that employees "should be protected against reprisal for the lawful disclosure" of waste, fraud, and abuse, while the list of prohibited personnel practices also prohibits reprisal for such disclosures.

Do you have insurance through the Health Insurance Marketplace?

If so, the IRS says now is the time for a mid-year premium tax credit checkup.

If you obtained health insurance through the Health Insurance Marketplace you may be getting tax credits in the form of advance payments made directly to your insurance company to lower your monthly premium.

If this applies to you, it is important to keep in mind that changes in your income or family size may affect your premium tax credit. In fact, depending on your income, you may have to pay back part or all of the premium tax credit.

If your circumstances have changed, the IRS says the time is right for a mid-year checkup to see if you need to adjust the premium assistance you are receiving.

Where to Report Changes

Report changes that have occurred since you signed up for your health insurance plan to your Marketplace as they occur. Here are examples of some of the changes you should report:

  • an increase or decrease in your income
  • marriage or divorce
  • the birth or adoption of a child
  • starting a job with health insurance
  • gaining or losing your eligibility for other health care coverage
  • changing your residence

Why You Should Report Changes

Reporting the changes will help you avoid getting an advance payment that is either higher or lower than the allowed premium tax credit. Getting too much means you may owe additional money or get a smaller refund when you file your taxes. Getting too little could mean missing out on premium assistance to reduce your monthly premiums.

Repayments of Excess Premiums

Repayments of excess premium assistance may be limited to an amount between $400 and $2,500 depending on your income and filing status.

However, if advance payment of the premium tax credit was made but your income for the year turns out to be too high to receive the premium tax credit, you will have to repay all of the payments that were made on your behalf, with no limitation. Therefore, it is important that you report changes in circumstances that may have occurred since you signed up for your plan.

Changes in circumstances also may qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances.

Find out more about the premium tax credit and other tax-related provisions of the health care law at IRS.gov/aca.

Gambling This Summer?

Gambling winnings are taxable and are reported on your tax return as "Other income". Gambling losses are deductible on Schedule A as "Other Miscellaneous Deductions" up to the amount of your winnings. Gambling losses do not have to exceed 2% of adjusted gross income to get a tax benefit.

Here are seven tips to keep in mind if you're a casual gambler and plan on doing some gambling this summer:

  1. Gambling income includes winnings from lotteries, horse racing and casinos. It also includes cash prizes and the fair market value of prizes like cars and trips.
  2. If you win, you may get a Form W-2G, Certain Gambling Winnings, from the payer. The IRS also gets a copy of the W-2G. The payer issues the form depending on the type of game you played, the amount of your winnings and other factors. You’ll also get the form if the payer withholds taxes from what you won.
  3. Report all your gambling winnings as income even if you don’t receive a Form W-2G. Report gambling winnings on Form 1040, line 21 as "Other income".
  4. Gambling losses are deducted on line 28 of Schedule A, Itemized Deductions (the section for "Other Miscellaneous Deductions") .
  5. You may only deduct losses up to the amount of winnings. For example, if you win $2,000 and have $3,000 in gambling losses, you may only deduct a maximum of $2,000 on Schedule A. The excess $1,000 is not deductible and may not be carried over to the following year.
  6. Gambling losses do NOT have to exceed 2% of adjusted gross income to get a tax benefit.
  7. Keep gambling receipts and records including items such as, a gambling log or diary, receipts, statements or tickets.

Tips and Tid Bits...

Tax Scam Warning!

On March 23, 2014 it was reported by various news media that people are receiving phone calls from individuals purporting to be from the IRS claiming that taxes are due and must be paid immediately over the phone. About 20,000 people have been affected so far. The victims are asked to use their credit or debit cards to pay the bogus tax.

If you get such a call (or email), IGNORE it. The IRS does not call or email taxpayers regarding tax problems, it always initiates contact by snail-mailing written correspondence. Follow-up contacts are also sent through the U.S. postal service.

The only time the IRS may call you is when YOU contacted them FIRST and they are simply responding to your contact.

Report suspicious calls or emails to the Treasury Inspector General at 1-800-366-4484. You can also report fraud by going to the Treasury Inspector General for Tax Administration web site.

IRS Collects $2.9 Trillion During Fiscal Year 2013

During fiscal year 2013, the IRS collected almost $2.9 trillion in federal revenue and processed 240 million returns of which 151 million were filed electronically. Out of the 146 million individual income tax returns filed, almost 83 percent were e-filed. More than 118 million individual income tax return filers received a tax refund, which totaled almost $312.8 billion. On average, the IRS spent 41 cents to collect $100 in tax revenue during fiscal year 2013.

Over 99% of All Returns Unaudited

The IRS examined just under one percent of all tax returns filed and about one percent of all individual income tax returns during fiscal year 2013. Of the 1.4 million individual tax returns examined, over 39,000 resulted in additional refunds.

Seven States With No Personal Income tax

Seven states do not have a personal income tax. They are: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee do not tax wages. They tax investment income from stocks and bonds.

How the IRS Flags Excessive Travel Expenses

The IRS uses occupational codes to measure typical amounts of travel by profession. A tax return showing 20 percent or more above the norm might get a second look? Here are a few other red flags that can trigger an IRS audit.

Did You Rob a Bank Last Year?

Silly as it may seem, if you robbed a bank dung 2013, you had taxable income. Intentionally not reporting ill-gotten gains is considered tax evasion. The IRS doesn't care how we "earn" our loot as long as they get their cut, from a tax compliance standpoint of course. So, if you're selling drugs or scamming investors and not reporting the income, some day you could find yourself in the same predicament that Al Capone found himself in! Here are some of the top tax myths.

Updates...

W-2 Reporting of Employer-Sponsored Health Coverage

The Affordable Care Act requires employers to report the cost of coverage under an employer-sponsored group health plan on Form W-2, Box 12, with Code DD. This is for information purposes only. The amount reported in Box 12 for health care coverage is not taxable.

More >

Tax Changes for 2013

Several important tax changes went into affect in 2013. Depending on your income, age, marital status, or whether you operate a business, you could be affected.

For example, higher income taxpayers will be impacted by the new top tax bracket of 39.6% and the two additional Medicare taxes, 0.9% and 3.8%.

Taxpayers under age 65 will have a tougher time deducting medical expenses because the floor for deducting medical expenses was increased to 10% from 7.5%.

The 2013 social security wage base is $113,700. It will be increased to $117,000 in 2014. For 2013 and 2014, the self-employment tax rate is 15.3% (social security rate 12.4% plus Medicare tax rate of 2.9%).

For 2013, the social security rate for employees and employers is 6.2% each and the Medicare tax rate is 1.45% each. No change in 2014.

More tax changes >

IRS Meal Allowance

If keeping records of meal expenses while traveling away from home on business is difficult for you, you can claim the IRS meal allowance.

The IRS meal allowance shown in the General Services Administration (GSA) tables is referred to as the M&IE rate (meals and incidental expenses). The table lists six tiers for the lower 48 continental United States ranging from $46 to $71.

The rates are broken down by category: breakfast, lunch, dinner, and incidentals (i.e. fees and tips for various services).

If you need to deduct a meal amount, first determine the location where you will be working while on official travel. Next, look up location-specific information at www.gsa.gov/perdiem. The M&IE rate for your location will be one of the six tiers listed on this table.

Self-employed individuals may claim the M&IE allowance. Employees who have expenses that are not reimbursed under an "accountable" plan may also claim the M&IE allowance.

More on the meal allowance >

Guidelines for Year-End Charitable Contributions

To be tax-deductible, clothing and household items donated to charity generally must be in good used condition or better.

A clothing or household item for which a taxpayer claims a deduction of over $500 does not have to meet this standard if the taxpayer includes a qualified appraisal of the item with the return.

Donors must get a written acknowledgment from the charity for each gift worth $250 or more that includes a description of the items contributed. Household items include furniture, furnishings, electronics, appliances and linens.

To deduct cash donations, regardless of amount, a taxpayer must have a bank record or a written communication from the charity showing the name of the charity and the date and amount of the contribution.

Bank records include canceled checks, bank or credit union statements, and credit card statements. Bank or credit union statements should show the name of the charity, the date, and the amount paid. Credit card statements should show the name of the charity, the date, and the transaction posting date.

Donations of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction.

For payroll deductions, the taxpayer should retain a pay stub, a Form W-2 wage statement or other document furnished by the employer showing the total amount withheld for charity, along with the pledge card showing the name of the charity.

The taxpayer must obtain an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more.

Tax-Free Charitable Distributions for IRA Owners 70 1/2 or older

An IRA owner, age 70½ or over, can directly transfer tax-free up to $100,000 to an eligible charity and can use the excluded amount to satisfy any required minimum distributions that you must otherwise receive from your IRAs in 2013. This option, which is scheduled to expire at the end of 2013, was first available in 2006.

The funds must be transferred directly by the IRA trustee to the eligible charity. Distributed amounts may be excluded from the IRA owner’s income, which lowers taxable income and avoids taxes on the distribution

If the IRA owner excludes the distribution from income, no deduction, such as a charitable contribution deduction on Schedule A, may be taken for the distributed amount.

Distributions from employer-sponsored retirement plans, including SIMPLE IRAs and simplified employee pension (SEP) plans, are not eligible.

First-year Expensing Limit to be Cut 95% in 2014!

Unless Congress acts, the first-year expensing limit for qualified business property is scheduled to fall to $25,000 in 2014. The expensing limit for 2013 is $500,000. That's a 95% reduction!

In addition, the phaseout threshold for 2014 is scheduled to fall to $200,000. The threshold for 2013 is $2,000,000. That's a 90% reduction.

Bonus depreciation is scheduled to expire at the end of 2013.

Learn about first-year expensing and bonus depreciation >

Saver's Credit Can Slash Your Tax Bill

If you made contributions to a retirement plan, including a traditional IRA or Roth IRA, you may be able to claim the retirement savings contribution credit, (referred to as the saver's credit) on your 2013 return.

The maximum tax credit is $1,000 ($2,000 if married filing jointly). The deadline for setting up a new IRA or adding money to an existing one is April 15, 2014. Elective deferrals (contributions) must be made by the end of the year.

Learn more >

Important Dates for Retirement Plans

The IRS has posted important dates for December 2013 and January 2014 related to retirement plans administered by employers, trustees, and custodians.

More >

Interest Rates on Overpayments and Underpayments

The Internal Revenue Service recently announced that interest rates for overpayments and underpayments will remain the same for the calendar quarter beginning Jan. 1, 2014. The rates will be:

  • 3% for overpayments (2% for a corporation)
  • 3% for underpayments
  • 5% for large corporate underpayments
  • One-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000

More >

Fees for Offers In Compromise and Installment Agreements to Increase January 1, 2014

The IRS plans to increase fees charged for Installment Payment Agreements and Offers in Compromise effective January 1, 2014.

  • The fee for entering into installment agreements will be $120, a $15 increase. Taxpayers who make their payments by direct debit will still qualify for a lower fee of $52. Taxpayers who meet low income guidelines established by the Department of Health and Human Services will still pay a fee of $43.
  • The fee to reinstate a defaulted installment agreement will be $50, a $5 increase.
  • The fee for processing an Offer in Compromise will increase $36 to $186. Taxpayers who meet the low income guidelines still qualify for a fee waiver.

For more information on IRS Installment Payment Agreements and Offers in Compromise visit IRS.gov.

To apply for an IRS installment agreement online, use the Online Payment Agreement application.

To find out if you are eligible for an Offer in Compromise and what a reasonably acceptable offer amount might be, use the IRS Offer in Compromise Pre-Qualifier Tool.

New IRS Commissioner Confirmed

IRS Commissioner John Koskinen

John Koskinen, President Obama's nominee to head the IRS, was confirmed by a Senate vote of 59 to 36 December 20, 2013. Koskinen succeeds acting commissioner Daniel Werfel.

Koskinen's resume:

  • Served as non-executive chairman of Freddie Mac from 2008 to 2011 and acting CEO in 2009.
  • Deputy mayor and city administrator of Washington, D.C., from 2000 to 2003
  • Assistant to the president and chair of the President’s Council on Year 2000 Conversion from 1998 to 2000
  • Deputy director for management at the Office of Management and Budget from 1994 to 1997.
  • He also has experience in the private sector and received a B.A. from Duke University and an L.L.B. and J.D. from Yale University School of Law.

2014 Business Mileage Rate Reduced

Beginning January 1, 2014, the standard mileage rate for a car, van, pickup or panel truck, will be reduced to 56 cents per mile for business miles driven during 2014. The rate for 2013 is 56.5 cents per mile.

Medical and moving related miles will also be decreased 1/2 cent to 23.5 cents per mile. The 2013 rate is 24 cents per mile for medical and moving miles.

The 2014 rate for charitable-related miles is 14 cents per mile. This rate is based on statute and hasn't changed for several years.

Learn about the mileage allowance method >

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