By Anthony C Rivieccio, MBA,PFA
Taxpayers and tax professionals looking for certainty in the federal tax laws were generally disappointed in 2014. The year began with expectations high that Congress would finally take up tax reform and simplification.
As the months passed, those expectations faded. The 114th Congress, which convened on Jan. 6, 2015, is likely to start the tax reform process anew. Whether the White House and Congressional Republicans will reach any agreement is still speculative at this time.
We believe, as we have for the last 5 years, that the”lack of action” on tax reform, has actually made our taxes marginally go up, although the White House-led media would lead you to believe otherwise.
Yep, we’re into another tax season where people will blame the tax man! We are thinking of binding our client tax preparation forms with our clients’ Congressperson’s name and phone number so they will know who to blame directly for this mess!
Last minute tax law changes coupled with long, long, long, waiting times at IRS call centers for assistance, have people, businesses & tax professionals, SCREAMING!
Looking for help? Check out my helpful guide to understanding these tax changes.
* The Tax Extenders package
The Tax Increase Prevention Act renewed many so-called ‘business extenders’ retroactively through 2014.
Now in place to be claimed on 2014 tax returns are bonus depreciation, enhanced Section 179 expensing and the research tax credit, among over 50 provisions. Many tax preparers who were told these valuable deductions were dead in 2014, well, they just got re-approved again!
Own a business? Were you planning to deduct furniture but your tax man (or woman) said you could not? Well, bingo, now you can! This, in our opinion, is a very important deduction as depreciation is treated more like a tax credit; a dollar for dollar deduction.
*Affordable Care Act
This new TAX, at approximately $300 per uninsured person, is the flip side to Obamacare. Remember, health care is mandated by law! How does the tax work? It is calculated based on the number of people in the household –and the person filing for the household– is the one responsible for health insurance.
Employers, ones with fewer than 50 full-time employees or a combination of full-time and part-time employees that is equivalent to fewer than 50 full-time employees, are permanently exempted by the ACA from the employer mandate. So, some sole prioprietors, for this year, do not have to worry, but next year — look out!
*IRS operations
Taxpayer Advocate Nina Olson, recently noted in The New York Times, that taxpayer service is “The Most Serious Problem #1.” Olson acknowledged that while the IRS budget has decreased by about 17 percent between fiscal years 2010 and 2015, the number of taxpayers has increased “significantly,” thus leading to an equally significant demand in service.
In fiscal year 2014, 36% of phone calls to the IRS went unanswered by customer service reps and 50% of written correspondence were not handled timely.
*Investments
Oh boy, another “rich person tax deduction” taken away!
The 3.8% net investment income tax, was part of the American Taxpayer Relief Act of 2012. Taxpayers with a modified adjusted gross income over $200,000 for singles and $250,000 for married-filing-jointly will now pay 3.8% tax to finance social security and the ACA (aka Obamacare).
*Identity theft
The IRS received more than 5.7 million suspicious returns last year. The IRS strongly suggests that you ask your tax preparer how they “protect” your identity — especially during e-filing. Our firm uses a double security coding system.
*Same-sex marriage
Thirty-five states and Washington, D.C., recognize same sex marriage and nine states have pending court decisions.
What’s most important is for tax preparers to check these couples’ estate planning documents. Many have set up trusts and wills as an extra step when their marriage wasn’t recognized. Those documents may not work anymore or may have a different effect, if those clients’ marriages are now recognized. After tax season, revising their estate planning documents would be the smart thing for those affected couples to do.
Anthony Rivieccio is the founder & the CEO of The Financial Advisors Group, celebrating their 18th year as a fee only financial planning firm specializing in solving one’s financial problems. Anthony, a recognized financial expert since 1986, has been featured by many national and local media including: Klipingers Personal Finance, The New York Post, News12 The Bronx, Bloomberg News Radio, Bronxnet Channel 67 TV, The Norwood News, The West Side Manhattan Gazette, Labor Press Magazine, Financial Planning Magazine, WINS 1010 Radio, The Bronx News and The Bronx Chronicle.
Anthony can be reached at 347.575.5045
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