There are quite a few changes will take affect this filing season. And oddly enough they are many tax provisions expiring. Are you ready? Take a look at the brief summaries of the key changes below:
The 2014 tax filing season will start on January 31st . This date is 10 days later than the originally planned starting date of Jan. 21. The reason for the delay: the 16-day government shutdown in October 2013 stifled the IRS preparations for the upcoming tax season. The filing deadline is still April 15, 2014.
Standard Mileage Rates
Starting Jan. 1, 2014, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) is 56 cents per mile for business miles driven. For personal purposes, 23.5 cents per mile driven for medical or moving purposes and 14 cents per mile driven in service of charitable organizations are allowed.
The Affordable Care Act
If your small business has under 50 employees, you’re not required to offer insurance. However, you can always offer group insurance or help your employees purchase their own health insurance. Some employees may qualify for a government subsidy. The open enrollment period for the healthcare exchanges officially ends March 31, 2014. This means the government subsidies will end as well. The penalty for not having health insurance in 2014 will be 1 percent of your income or $95 per adult and $47.50 per child in a household—whichever of the two amounts is greater.
Home Office Safe Harbour
This change actually debuted in 2013. The safe harbor is a simplified method of $5 per square foot of the portion of the home used for business, rather than the actual expenses for the portion of the home used for business. The safe-harbor method deduction is capped at 300 square feet, or $1,500; a comparison with the amount claimed on prior-year returns should give a quick estimate to help clients decide whether they wish to elect it.
Same-sex Marriages are recognized by the IRS
Back in August, same-sex couples legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies whether or not their marriage is recognized in the state they reside, so long as they were legally married. Legally-married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status.
Tax Bracket Increases
The tax brackets will create some sticker shock for some people. A new top rate of 39.6% applies to taxable income over $400,000 for single filers, $425,000 for head-of-household filers, and $450,000 for married taxpayers filing jointly ($225,000 for each married spouse filing separately). The last time the income tax brackets had a 39.6% marginal rate on individuals was in 2000.
For 2013 return, a 10%-of-AGI threshold will apply for taxpayers under age 65 when deducting medical expenses Schedule A, Itemized Deductions, for. Those 65 and older (or whose spouse is 65 or older) still have through 2016 to use the 7.5% threshold previously applicable to all taxpayers. This means the younger you are, the less you can deduct.
Expiring Tax Provisions, Etc.
I asked myself “Why should I beat a dead horse?” I found an easy to read article on Forbes.com that clearly explains the expiring tax provisions.
Jéneen R. Perkins is a freelance accountant and consultant serving entrepreneurs, families and small businesses. She prides herself in being fluent in English instead of “Accountant-ese”.
"Putting My Money Where My Mouth Is" is a journal about real life experiences and answers to tough tax questions posed to Jéneen R. Perkins, Owner of Eclat Enterprises, LLC