For the majority of people who pay taxes, April 15th is the last day you can file your return. If you are owed a refund from the IRS you will not incur a penalty for filing late. Though if you end up owing money at the end of the tax year and you do not file or pay on time you will have late charges and interest added to the amount you owe the IRS. It make it very important to make any tax payments on time as these fees can add up quickly. The IRS levies two different penalties if you file late and owe money; a failure to pay penalty and a failure to file penalty.

The failure for filing can be just about 10 times more than the failure to not pay penalty, so if you are unable to pay your taxes on time it is still smart to have them filed before the deadline. A taxpayer is able to pay as much as they can to the IRS and file their return on time to avoid the penalty for failure to file. Generally the IRS will help you with payment arrangements for any taxes that you owe. You can visit the IRS website at irs.gov and use the Online Payment Agreement tool to help arrange payments. (more…)

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If you happen to use your personal vehicle for business purposes or you have a vehicle dedicated to you by your business you may be able to deduct some of the expense need to keep it road worthy. While learning how to effectively manage your auto expenses the deductions can be well worth the time.

You can claim deductions for auto expenses one of two ways, either by taking the standard deduction or using the Actual expense method. If you decide to use the actual expense method you will have to keep an itemized log of all of your costs. You will get a standard mileage reimbursement of .56 cents per mile driven for business, this does not include the fee for parking or tolls.

If you use the itemized method many times newer car will lead to a bigger deduction. By using the itemized method you can deducted the depreciation of the vehicle as well. If you have claimed accelerated depreciation in previous year you cannot change to the standard deduction.

If you happen to use the same vehicle for both personal and business use you can only claim the portion of the time that you use the vehicle for business purposes. Since you can only claim the use for business purposes you will have to keep track of when and how you use the vehicle and total it at the end of the year. If you only own one car you will never succeed in trying to claim 100% of it for business deductions.

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The tax season is upon us and now is the perfect time for taxpayers to make sure they know the relationship between their health insurance coverage and the two tax forms that help figure out the amount of tax credit that is due to each person. Forms 8962 (Premium Tax Credit) and Form 1095-A (Health Insurance Marketplace Statement) are needed by taxpayers who have received health insurance through the Marketplace.

Form 1095-A

You will receive this form from the Health Insurance Marketplace, it will provide you with all the information necessary for your taxes. If you have received coverage from either the federal or state health insurance exchange, you will receive Form 1095-A via postal my by January 31st, 2015. You will need this statement of calculate your Premium Tax Credit and it is important if you decided to use advance tax credits to help with payment of your monthly insurance premium.

When you receive Form 1095-A you will notice it looks different than other tax forms such as a W-2 or 1099. Although it looks different it is important that you retain your copy of it with the rest of your tax documentation after you complete your tax return. You can request copies of 1095-A from the Marketplace if needed.

Included on Form 1095-A will be the following information:

  • Advances you received from a premium tax credit to help offset the cost of your monthly premium.
  • The information of the coverage of all the persons living in the household under your insurance plan.

Form 8962

If you received your health coverage from the Marketplace and were eligible to receive a premium tax credit you will have to use this form. Many taxpayers opted to use the credit during the tax year to help lower the cost of monthly premiums.

If you did use the credit help offset the cost of your monthly health insurance premiums, you will have to fill out Form 8962 and figure out the actual amount of tax credit allowance compared to your monthly subsidy. The actual amount of your allowance is affected by your total yearly income and family size for 2014. An import thing to note is that the advance credit was paid directly to your health insurance provider.

If you do not file Form 8962 Premium Tax Credit with your tax return the IRS will reject your return. So that you can avoid any delay of any refunds due to you it is imperative that you make sure all forms are completed correctly and filed with your tax return. The IRS will let you know if you are required to file Form 8962 if you fail to include it with your return. Failure to include this form may affect your eligibility to receive advance premium tax credits in the future.

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There is a chance that if you have children that they may be required to file a tax return, even if they are a dependent child. Generally, children will be held accountable for filing any returns as well as paying taxes that may be owed along with penalties and interest. The parents may also hold some liability in some cases where the child files to pay. If a child is unable to files taxes for any reason the parents will have to file them on behalf of the child.

Filing a return is determined by the amount of income that is earned or unearned through the year. Unearned income is generally earned through investments while earned income refers to money made working. (more…)

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Every year you are required to pay taxes on any earnings from investment income. For example, if you have a savings account that accrues $2,000 in interest you will have to add that amount to your taxable income and will be required to pay taxes on it. There are certain investments which are tax free, these investments do not require you to pay tax on any interest or additional income from these investments. Local and state government bonds are great for investors as they allow investing without having to pay taxes on returns.

Government and companies use bonds as one of the biggest ways to raise capital. Purchasing a bond is like making a loan to the government or company for a specific amount of time. The agency who issues your bond makes interest payments determined by the rates when your bond was issued. This rate is referred to as the coupon rate, it also agrees to cover the face value of the bone when the time period expires. Generally interest payments you receive are taxable, although there are certain bonds which are tax free. (more…)

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If you are self-employed or a contract employee you will have likely received a Form 1099-MISC at some point. Even if you are not self-employed for the whole year you will still receive a 1099-MISC for any client or company who paid you more than $600. In simple terms this form is like a W-2 for persons who are self-employed. Box 7 of Form 1099-MISC, Nonemployee Compensation will show you any funds you are paid by clients or employers, you may also receive multiple 1099-MISC if you worked for more than one client throughout the year.

The 1099-MISC may also give you more information of which you may be required to report. You can use the information below to help figure out what information you need the most when preparing your return.

  • Box 1: Rents – This box will include the amount of any income paid to you for rent by another party that is more than $600. This can include rental income from office space, machinery and equipment or farmland.
  • Box 2: Royalties – Any income greater than $10 earned via licensing fees from patents, trademarks or copyrights will have to be reported.
  • Box 7: Nonemployee Compensation – This is the taxable income earned from self-employment or contract work. Any persons you rendered services of more than $600 will be reported in this box. An example of this can be if you provide freelance work such as writing and earned more than $600 will be reported in Box 7 of Form 1099-MISC.
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You will receive a 1099-B if you have sold any stock, bonds, mutual fund or securities in the tax year. You should receive this form from the financial institution or broker you used to make the deals. This form can be sent separately or may also be combined into a statement with other tax information such as earnings from interest and dividends.

You will receive a 1099-B for each sale made during the year. If you receive a statement from your financial institution or broker it may list multiple sales, with each line on the statement representing a single sale.

Recently the rules have been revised for the reporting of sales. Your agent is required to report the acquisition date and the cost basis for each individual sale. Your cost basis is generally listed at the original purchase price of the stock, bond, asset or property, including all associated costs. Because of the new regulations the IRS will be able to confirm the accuracy of the amounts and dates that are reported.

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If you purchased a health plan through the Health Insurance Marketplace you can expect to receive a Form 1095-A Health Insurance Marketplace Statement by January 31, 2015. Many have decided to take a premium tax credit in advance that helps subsidize their monthly health insurance premiums. The credit you receive will be reported on 1095-A, and you are required to report this information on Form 8962 (Premium Tax Credit). This form is required to be filed along with your 2014 tax return.

There are three steps to figure out your premium tax credit amount:

  • You will have to figure out the actual amount of credit you received in relation to your yearly income and family size.
  • You enter the amount of the advance tax credit you received each month in 2014.
  • Subtract the credit amount that you received in advance from the actual amount of your credit.

Once you completed the three above steps you will have an outcome of either being entitled to a refund if your credit is greater than the total advance credit you received. If you received a larger advance credit then you qualified for you will owe more tax at the end of the year to pay for the overpayment via the advance credit.

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If you received any income from stocks, capital gains or mutual funds during the tax year you can expect to receive a Form 1099-DIV. Below is a listing of what each box on Form 1099-DIV represents.

  • Box 1a: This box will include the fully amount of ordinary dividend payouts.
  • Box 1b: This box will include the amount of qualified dividend reported from Box 1a.
  • Box 2a: This box reports income from Capital Gains from mutual fund investments.
  • Box 4: This box will report any federal taxes withheld from distributions.
  • Box 14: This box will report any state taxes withheld.

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Often times when people consider itemizing it is for the three big deductions; home mortgage interest, state and local taxes and charitable donations. Although there are numerous more deductions in addition to the big three. These types of deductions are generally considered miscellaneous itemized deductions and are claimable if they exceed 2% of your adjusted gross income.

Unreimbursed job expenses are one cost that can be deducted that can help save you money at tax time.

Things you may have paid for but are deductible are;

  • The cost of business trips; including meals, entertainment and travel expenses.
  • Insurance coverage for your business including liability coverage.
  • Devices required for work such as computer equipment and cell phones.
  • Work related membership dues for organizations.
  • Due paid to occupational societies related to your field of work.
  • Training and education costs.
  • Expenses for home offices for normal use.
  • Job seeking expenses if you are seeking the same line of work.
  • Any legal fees incurred through work.
  • Malpractice insurance fees.
  • Passport expenses if you travel internationally for work.
  • Trade Magazine subscriptions for your occupation.
  • Supplies and tools.
  • Union dues
  • Uniforms if they are required.

 

If you paid for any of these expenses and were not reimbursed by your employer you may be able to deduct them by claiming a miscellaneous itemized deduction on your tax return. All of these expenses need to be directly related to your work and need to be for reasonable amounts. They should be expenses that are necessary for your job and ordinary purchases.

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