How the Health Care Law Affects Your 2014 Taxes

Crazy woman with tax sheets

Tax-crazy

The Affordable Care Act has some provisions that affect your 2014 tax return. For many, it means simply checking a box on their return to report health care coverage for themselves and their dependents for 2014. Some might report being eligible for an exemption. Others will need to calculate a shared responsibility payment.

Regardless of how the Affordable Care Act affects your taxes, you will need to have the correct documentation. This paperwork does not go to the IRS, but if the IRS comes back to you with questions, you will want to keep it handy. You will want to keep this as well as your other tax documents generally for three years after you file.

If you obtained health insurance coverage through the Marketplace in 2014, the unfamiliar form you receive this year is the Form 1095-A. This form outlines information about you, family members covered under your policy, and information about monthly coverage. Use this form to fill out the Form 8962 Premium Tax Credit (PTC).

Need help with your taxes? Set up a meeting with me here.

Why Not to Pull Money Out of Retirement Accounts Early

Retirement account penalties

recite-early withdrawal 10%

Hopefully, you have been doing the responsible thing and putting away a nice little nest egg in retirement plans such as pensions, profit sharing plans and individual retirement accounts (IRAs). If you did, resist the urge to take money out of those accounts before your turn 59½. For starters, the money you withdraw will be taxable to you. Additionally, it is subject to a 10% early-withdrawal penalty. It’s an IRS “red flag” to forget to include that 10% penalty and increases your chance of an audit.

There are some exceptions to this early-withdrawal penalty. The penalty does not apply if you are disabled, distribution is due to the taxpayer’s death, or benefits are paid out as an annuity over the remaining life expectancy. It also does not apply to IRS withdrawals for educational expenses, certain home-buying expenses, and unreimbursed medical expenses in excess of 7.5% AGI.

Tweet: Pull money out of retirement accounts before 59½ and face a 10% early-withdrawal penalty. Read more:bit.ly/1ujjPSt @BetteHochberger

When You Need To File a 1099 For a Vendor Or Contractor

payments over $600 require 1099s

recite-1099s

I regularly get questions about whether or not to file 1099s.  They are often surprised that more vendors and contractors need 1099s than they think. The list goes well beyond a freelancer you hire or a subcontractor you use.

In general, 1099s are required for payments over $600 made to individuals and partnerships – NOT corporations. The following is a list of common vendors you will need to issue 1099s for:

  • Payments for services
  • Payments for rent to landlords
  • Payments for prizes and awards
  • Payments to attorneys

The biggest exception to the general rules above is that a 1099 needs to be filed for attorneys and legal services even if they are a corporation.

Not sure if you should file a 1099? My theory is- if in doubt, file it. There is no problem if you file a 1099 you did not need to file. However, the IRS can hit you for up to $100 per 1099 you do not file if you needed to.   Even worse, the IRS can disallow the corresponding deduction on your income tax return.

Tweet it! Payments over $600 for services, rent, and legal fees require 1099s. bit.ly/1kt4NSu @BetteHochberger 

2012 Individual, Partnership, LLC, and Trust returns are due April 15, 2013

The tax filing deadline for individuals (Form 1040), partnerships and LLCs (Form 1065), and trusts (Form 1041) is next Monday, April 15, 2013. If you have not started your tax return yet you might want to consider filing an extension form. Individuals file Form 4868, and partnerships, LLCs, and trusts file Form 7004.

Why should you file an extension? By filing an extension you will avoid late filing penalties and interest. Remember, an extension to file is not an extension to pay. If you owe taxes this year you are still supposed to be paid in by April 15. If not you might owe penalties and interest. Confused? Need help? Hire a CPA. 🙂