Posts Tagged ‘2015 tax season’

Update: Ohio Tax Quiz Appears To Be Working

Friday, March 13th, 2015
Tax ID Quiz

According to officials at the Ohio Department of Taxation, while the new Identification Confirmation Quiz may be a pain in the neck, it appears to be working as a identity theft deterrent – Rea & Associates – Ohio CPA Firm

We have learned over the last month that Ohio’s new system of validating taxpayer identification, the Identification Confirmation Quiz, appears to be working.

In an effort to boost security and prevent tax-fraud in the state, the Ohio Department of Taxation introduced the quiz at the onset of the 2015 tax season and began flagging tax returns with data points that are inconsistent with public and commercial data sources. If their returns are flagged, taxpayers are required to take a Quiz to prove their identities.

Read: Theft Safeguards To Cause Tax Return Delays In Ohio

“Through Feb. 18, more than 1.3 million tax returns have been filed with about 874,000 requesting a state income tax refund. About half of the refund requests have been selected for additional screening to ensure that they were not filed by an I.D. thief,” stated Ohio’s Tax Commissioner Joe Testa in a press release. “About 97 percent of taxpayers taking the quiz are passing. That proves they are who they say they are.”

That means about 3 percent who fail the test are being declined to receive refunds that they would have normally received in previous years. As long as that 3 percent consists of actual identity thieves, the results reported are significant.

By Lisa Beamer, CPA (New Philadelphia Office)

 

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Obamacare: Some Taxpayers Get Second Chance To Purchase Health Insurance

Thursday, March 12th, 2015
Special Obamacare Open Enrollment Period

The Centers for Medicare & Medicaid Services (CMS) have taken steps to create a special enrollment period to allow individuals and families to secure 2015 health insurance coverage through the federal marketplace. – Rea & Associates – Ohio CPA Firm

Did you get hit with the “shared responsibility payment” for not carrying health insurance on yourself or your family members in 2014? If so, you’re not alone.

Read: Are You Prepared To Pay? Obamacare’s Shared Responsibility Provision

Americans who were unaware of (or who simply didn’t understand) the fees they would be subjected to as a result of not carrying health insurance coverage may have been equally surprised to learn that the open enrollment period to obtain coverage for 2015 closed last month – meaning that even if they wanted to avoid the fees next year, they were out of luck. Fortunately, the Centers for Medicare & Medicaid Services (CMS) realized this dilemma and took steps to create a special enrollment period to allow individuals and families in this bind to secure 2015 health insurance coverage through the federal marketplace. This will be a big help to those who may have found out that they were eligible for premium subsidies to help pay for insurance – a little too late. The new open enrollment period is March 15, 2015, through April 30, 2015, and is only available for individuals and/or families that:

  • Are not currently enrolled in federally-facilitated coverage for 2015,
  • Had to pay an individual mandate on Form 1040 of their 2014 tax return, and
  • Live in a state with a federally-facilitated exchange (Ohio residents qualify. Those who do not live in Ohio may click here for a full list of other qualified states).

According to CMS, eligible enrollees also must “attest that they first became aware of, or understood the implications of, the Shared Responsibility Payment after the end of open enrollment in connection with preparing their 2014 taxes.” “We recognize that this is the first tax filing season where consumers may have to pay a fee or claim an exemption for not having health insurance coverage,” sad CMS Administrator Marilyn Tavenner in a press release. “Our priority is to make sure consumers understand the new requirement to enroll in health coverage and to provide those who were not aware or did not understand the requirement with an opportunity to enroll in affordable coverage this year.” Note that even if you don’t qualify for this open enrollment, there are a number of qualifying events that let you sign up for coverage on the exchange any time of year. If you want to know whether you qualify for subsidies to help shoulder the burden of health insurance, click here. Or you can email Rea & Associates for any Affordable Care Act questions.

By Joseph Popp, JD, LLM (Dublin office)  

 

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Virtual Money Is Real Money – Don’t Forget To Report Your Bitcoin

Monday, February 2nd, 2015
Virtual Money Is Real Money – Don’t Forget To Report Your Bitcoin

Virtual Money Is Real Money – Don’t Forget To Report Your Bitcoin

Now that the official 2015 tax season is upon us, you may be going through the process of checking off the laundry list of forms you need to have on hand to file your 2014 tax return. (If you still aren’t sure what files to gather, you can find a thorough checklist here.) While you’re collecting your W-2s and 1099s, don’t forget Form 1099-MISC, which is the form to use if you have used virtual currency over the last year.

The IRS informed taxpayers of the proper way to report virtual currency such as Bitcoin last year. Because the value of virtual currency is converted to the value of real currency, for tax purposes, Bitcoin and other virtual currencies are considered capital assets by the IRS. Therefore, these forms of currency are subject to capital gains rules for any applicable gains or losses that may accrue.

Capital gains rates are more favorable than normal tax rates. For most taxpayers, the rate will be no more than 15 percent. However, if you are in one of the following categories, you will be taxed at 20 percent:

  • If you earned more than $406,750 in taxable income
  • If you are married and filing jointly and earned more than $457,600
  • If you’re the head of your household and earned more than $432,200
  • If you’re married, but filing separately and earned more than $228,800

Do you treat Bitcoin as an investment?

If you buy and sell virtual currency, the IRS will treat it as if you were buying and selling stock. You will be required to report the cost basis of the transaction, also known as the difference between the cash price and the futures price of stock. In addition to being taxed at a lower capital gains rate, losses can cancel out any gains. And left-over losses can be deducted from your regular income.

Do you use Bitcoin like cash?

From ordering a pizza to shopping for a new computer, the transactions you make online with Bitcoin may result in gains or losses as well – although determining the value of a particular item or service based on market value is easier said than done. A financial advisor can help you identify whether you have gains and losses to report to the IRS.

Do you get paid in Bitcoin?

For example, for tax purposes, a babysitter who is paid in Bitcoin is the same as a sitter who’s paid in cash and those earnings must go through the same channels to be considered by the IRS. Payments of virtual currency are required to be reported on Form 1099-MISC or a similar form and must be reported using the fair market value of virtual currency, which should be converted to U.S. dollars.

For more information about managing and reporting Bitcoin, email Rea & Associates.

By Lesley Mast, CPA (Wooster office)

 

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File Faster With This Tax Prep Checklist

Tuesday, January 20th, 2015

It’s that time of year again – time to gather your information and prepare to file your tax return. If you want the process to go smoothly, make sure to gather and organize your information before sitting down with your tax preparer. You may be surprised how fast the entire filing process goes if you spend a little time preparing!

Here’s a list of some items to compile before you get started.

Personal Information

Hopefully you know YOUR social security number and date of birth by heart. But do you know your spouse’s SSN? Your kids? Make sure you remember to bring the social security numbers and birth dates of everybody who will be claimed on your tax return.

Income Info

While your W-2 is important, there are many other pieces of information you will need to collect before you will be able to get started. Gather the following pieces of relevant information:

  • W-2s for you and your spouse.
  • Investment income: This type of income will be listed on various 1099 forms including –INT, -DIV, -B, etc.). You may also have K-1s and stock option information to provide to your tax preparer.
  • Income received from state and local income tax refunds and/or unemployment. This income can be found on the Form 1099-G.
  • Gather information about any alimony you may have received.
  • If you are a business owner or farmer, don’t forget to provide a profit/loss statement and capital equipment information.  And if you use your home for business, your tax preparer will need to know the size of your house, the size of your office and what you have paid to maintain your home and office.
  • You will need to provide your IRA/pension distributions as well. This information will be provided to you on Forms 1099-R or 8606.
  • If you rent a home or other type of property, be sure to gather that information that proves the profit or losses you realized as a result of the rental.
  • Be sure to claim any Social Security benefits you may have received. This information is found on Form SSA-1099.
  • If you sold your house in 2014, you must provide your tax provider with Form 1099-C, which will include the income you received from the sale of the property. Your preparer will also take the home’s original cost and cost of improvements, the escrow closing statement and cancelled debt information into consideration.
  • Some other information you will need to pass along to your tax preparer includes items such as jury duty, gambling winnings, scholarships, etc..

Adjustments To Your Income

Now that you have collected all the information you can to adequately identify your income in 2014, some adjustments may need to be made. Making the following adjustments to your income may help increase your tax refund or lower the amount you owe to the government. If you have documentation of any of the following information, be sure to bring them to your appointment.

  • IRA contributions
  • Student loan interest
  • Medical Savings Account contributions
  • Moving expenses
  • Self-employed health insurance payments
  • Pension plans such as SEP and SIMPLE
  • Alimony you paid
  • Educator expenses

Itemized tax deductions and credits

This is another way to increase your refund or reduce what you owe. The following deductions and credits help lower the tax burden on individuals. Be sure to collect this information before filing your return.

  • Child care costs – child care provider’s name, address, tax ID number and amount paid
  • Education costs – these can be found on Form 1098-T
  • Adoption costs – the SSN of the child as well as legal, medical and transportation costs associated with the adoption
  • Home mortgage interest and points you paid, which can be found on Form 1098
  • Investment interest expense
  • Charitable donations that were made to not-for-profit organizations. Make sure you have the amounts and value of the donated property, and any out-of-pocket expenses you may have accrued in your effort to make the donation, including transportation costs. Include receipts for any contribution over $250

o   Losses you realized as a result of casualty and loss (the cost of the damage and insurance reimbursements

  • Medical and dental expenses
  • Energy credits
  • Other deductions include items such as union dues, unreimbursed employee expenses, such as unreimbursed employee expenses

New for 2014 returns

For the first time, you will need to provide information about your health insurance coverage to your tax preparer. Be prepared to answer questions such as these:

  • Was everyone claimed on your tax return covered by health insurance?

o   If not, why?

  • Did you or anyone on your return obtain health insurance coverage through Healthcare.gov or through a state run exchange in 2014?

o   If yes, did any of those individuals receive a premium tax subsidy, cost reduction, or premium tax credit? If yes, provide Form 1095-A.

It’s likely that you have already started receiving tax forms in the mail from various places. It’s easy to misplace these documents if you’re not careful. If you haven’t already, set aside a place for these items until you have collected them all. Once you have everything you need, you can set an appointment to file your taxes with your financial advisor or tax preparer. For additional tax information, or to speak with a tax expert, email Rea & Associates.

By Lesley Mast, CPA (Wooster office)

 

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Too Close For Comfort?

Wednesday, December 17th, 2014

 

Tax Provisions Extended Just In Time

They may have waited until the 23rd hour, but members of Congress finally voted to extend more than 50 expired tax provisions slated to expire at the end of the year. Tuesday evening’s 76-16 vote in favor of the extensions was enough to send a collective sigh of relief among tax professionals nationwide. The bill will now be sent to President Barack Obama for his signature. Many tax professionals were worried that Congress would postpone the vote until after the New Year, which could have postponed the start of the 2015 tax season and hurt those on the tax prep front lines, including the IRS, tax preparers and some software providers. But today is a new day and instead of planning for the worst case scenario, tax planning can commence as planned. The Tax Increase Prevention Act of 2014, or H.B. 5771, temporarily extends several tax breaks and provisions while correcting some technical errors found in prior legislation. Including:

  • Extensions that benefit individuals:

–        A $250 above-the-line deduction for certain expenses of teachers

–        An election to deduct state and local sales tax

–        Tax-free charitable distributions from individual retirement accounts (IRAs)

–        The private mortgage insurance (PMI) itemized deduction

–        The energy efficient home improvement tax credit

  • Extensions that benefit businesses:

–        The work opportunity tax credit

–        A research and experimentation credit

–        The Section 179 expensing limit

–        50% bonus depreciation

A complete list of 2014 tax extenders can be found in this article, published by the Journal of Accountancy. Another bill within H.B. 5771 was also up for Congressional consideration – the Achieving a Better Life Experience (ABLE) Act of 2014. The legislation seeks to provide for tax-favored accounts that allow those who are disabled to save money to pay for disability expenses. This portion of the ABLE Act amends the definition of personal holding company income, institutes certain inflation adjustments and, for employment tax purposes, allows for certified professional employer organizations to be treated as employers for work-site employees who perform services for customers of the organization. The Tax Increase Prevention Act of 2014 is by no means a long-term fix. There were earlier proposals that sought to permanently extend some provisions while extending others for more than a year, but those suggestions were unable to find traction throughout the legislature. So, while we may be able to relax this year, we will likely have bouts of Déjà vu over the course of 2015. By Lisa Beamer, CPA (New Philadelphia office)

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