Posts by Trista Acker, CPA, CFP:
- Don’t assume that filing your taxes will be the same as the year before. More than 50 tax provisions expired on Dec. 31.
- Do make yourself aware of any changes that have occurred since last tax season. Some of the most common expired provisions include:
- Itemized deduction for state and local general sales tax
- Itemized deduction for mortgage insurance premiums (PMI)
- Tax-free distributions from individual retirement plans for charitable purposes
- 50 percent accelerated tax depreciation (“Bonus depreciation”).
- Increased expensing. (This provision allows businesses to deduct the full purchase price of qualified equipment.) Current 2014 provisions are $25,000 deduction with a $200,000 limitation on purchases.
- Do take time to manage your files. It’s much more manageable to file six months’ worth of receipts vs. a whole years’ worth in January. Are you looking for inspiration? Now is a good time to start organizing medical and charitable contribution receipts.
- Do make a note as to whether the size of your household changed.
- Don’t forget to review your withholdings. Did you receive a large refund in 2013? Did you owe the IRS in April? To adjust your withholdings, speak with your payroll representative and complete a new W-4.
- Do send your estimated payments for income to the IRS every quarter to avoid charges and penalties for underpayments. If you forgot to make a payment or you underpaid in April or June, don’t worry. There’s still time to catch up on your September and January payments.
- Don’t underestimate the short-term value of retirement contributions. Aside from the long-term savings benefits, many retirement accounts are a great tax deferral. If you are participating and not maxing out, consider increasing your contribution. Contributions to a Traditional IRA are another consideration.
- Do set aside some time to review your health insurance situation. Alternatively, if you did not maintain health care coverage (and were not exempted) you will owe a penalty with your 2014 1040.
- Do confirm that you comply with the new repair/capitalization regulations.
It’s warm and muggy now, but once winter blankets the Buckeye State with record snowfall and subzero temperatures again, you will likely be kicking yourself for not having hightailed it to Florida after last year’s bitter cold snap. Sure, it’s easy to say that you would like to pack up and head for a warmer climate during a seemingly endless freeze, but once the icicles melt and the flowers bloom, you begin to remember why you’ve stayed around for so long in the first place. Maybe the fact that your family and friends still call Ohio home is enough to convince you to stay put. Or perhaps its memories of your own childhood that are keeping you tethered to the state. Either way, now that it’s summer – the need doesn’t seem so intense anymore … that is, unless you are considering taking advantage of possible tax savings.
Will Taxes Influence Your Decision To Fly South This Winter?
What if I told you that the State of Ohio has made it a little easier for you to escape the winter chill, spend more time in the nation’s heartland during the seasons you love and save on your tax bill? Would you consider making the move then? If so, you’re in luck!
Which State Do I Call Home?
For some, it’s relatively easy to buy and maintain several homes across state lines. The hard part comes when the Internal Revenue Service wants you to decide which home should be considered your primary residence based on how much time you spend in each state. These are the facts that will ultimately influence whether you pay taxes or not. If you are a snowbird who flocks back and forth between Ohio and Florida, for example, to avoid reporting your income to Ohio for tax purposes, it’s up to you to prove that you have spent no more than seven months (or fewer than 212 contact periods) in the Buckeye State. That compares to the 182 contact sessions (or six months) snowbirds were allowed to remain in Ohio under prior rules. The rules were changed in March.
How Do I Change My Residence For Tax Purposes?
Now that you have settled on whether or not you will be packing up and moving for tax and/or weather reasons, make sure you know what’s involved when it comes to changing your state of domicile. Some states, such as Florida, require basic documentation to establish your change of domicile. Therefore, you should make sure all your paperwork is in order, including your Declaration of Domicile. And while you are filing paper work to establish your new residence for tax purposes, keep in mind that some states, including Ohio, require documentation in order to relinquish your residency. Ohioans looking to relocate must complete and sign an Affidavit of Non-Ohio Residency/Domicile. This document helps establish your desire to establish nonresidency within the state. But keep in mind that there are there are other bright line tests the State of Ohio may look at to help determine whether you are actually domiciled in another state. For example, the State may look for information that indicates where you are registered to vote, which state issued your driver’s license, where your vehicles are titled and what address is listed on your tax return.
Email Rea & Associates to learn more about the tax benefits some snowbirds enjoy and whether migration is right for you.
By Trista Acker, CPA, CFP (Dublin office)
Planning to buy a new big-screen television? Airline tickets for that Caribbean vacation you’ve been looking forward to? A new car? You might want to wait a little longer.
IRS Commissioner John Koskinen recently warned American taxpayers that some federal refunds could be delayed for a week or more because of recent budget cuts. So, if you file your tax return on paper, before you start spending that income tax refund check, you might want to wait for the cash to actually find its way into your bank account. Expect to feel a little discomfort during this tax season.
Historically, refunds for electronically filed federal returns were processed within 21 days of the e-filing acceptance date. Paper returns were typically processed within six to eight weeks from the date they were received. Amended tax return refunds take even longer – the turnaround for these returns were typically 12 weeks.
“People who paper file tax returns could wait an extra week – or possibly longer – to see their refund,” said Koskinen in a memo sent to IRS staff. “Taxpayers with errors or questions on their returns that require additional manual review will also face delays.”
In his memo, Koskinen didn’t explicitly address electronically filed returns, but it wouldn’t be a surprise for these refunds to be delayed (at least a little bit) as well.
Nearly eight out of ten taxpayers receive an average tax refund totaling $2,800, which prompts many taxpayers to check in on the status of their refunds by calling the IRS. The agency is predicting an abysmal connection rate of these calls this year – 43 percent connection rate with a hold time of 30 minutes or more.
Instead, if you would like to track the status of your refund, hang up the phone and log onto the IRS’s website to use its Where’s My Refund feature.
Time will only tell how these budget cuts will impact next year’s tax return process, as well as other services provided by the IRS. In the meantime, start preparing to file your tax return as early as possible to avoid additional delays. Email Rea & Associates to learn more.
It’s the beginning of August and you’re probably not keeping yourself up at night thinking about your taxes. Frankly, who has time to think about itemized deductions and tax-free distributions when you would rather be grilling out, soaking in the sun, or enjoying your family vacation? April 15, 2015, may be more than 260 days away, but now is a great time to look at your taxes and make necessary adjustments to effectively sidestep any potential problems that might cause problems when tax season does arrive.
Consider These Tax Prep Do’s and Don’ts
Tax Prep Help
A few minutes of work and organization now could save you some major headaches in April. Don’t miss out on your opportunity to jump start your tax prep. Want more tax prep tips? Contact Rea & Associates. Our team of Ohio tax professionals can help you determine what you need to do now to ensure tax time goes smoothly for you.
Want more tax prep tips? Check these blog posts out:
Bitcoin has been all over the news lately, and you may be asking – what exactly is it? Bitcoin is a virtual currency. Only existing online, it’s powered by its users and not backed by any government agency. This new currency offers anonymity, convenience, helps facilitate international commerce and can fluctuate in value. Check out www.bitcoin.org for more information and frequently asked questions. Read the rest of this entry “
We have all lost things from time to time. Our keys, our phones, and sometimes it seems our minds. But did you know that more than 200,000 Ohioans have lost financial assets worth more than $1 billion? As a result and in an effort to protect property rights and reunite the owners with their rightful funds, Ohio enacted unclaimed property laws. Read the rest of this entry “