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.
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.
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.
The filing deadline for Form TD 90-22.1 is June 30, 2013. You can find the form here. Don’t forget- there are no extensions for this form. Not sure if you need to file? Check out my post explaining the FBAR.
FBAR (Report of Foreign Bank and Financial Accounts) is required filing to report foreign bank account information. This information is reported to the Department of the Treasury on Form TD F 90-22.1, which can be found here. These forms are due on June 30 and there are NO EXTENSIONS for filing it. Effective July 1, 2013 these forms will need to be electronically transmitted.
Who Needs to File?
FBAR must be filed if the following criteria are met:
A United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported.
Don’t be fooled by the language “United States Person.” This does not just include people! It also applies to businesses, partnerships, trusts- any entity formed under the laws of the United States.
You also need to understand the $10,000. This is a balance of $10,000 at any point of the year for any period of time, not just the end of the year. For example, if you have a foreign bank account and you transfer $10,000 for one day during the year and then transfer it right back out, you would have an FBAR filing requirement.
What If I Don’t File?
There are severe penalties for persons who do not file the FBAR when there is a filing requirement. The penalties can range from $10,000 up to the greater of $100,000 or 50 percent of the account balances. In some case criminal penalties can apply.
What To Do
If you think you might have an FBAR filing requirement, contact a CPA. These forms are complicated and time sensitive, and with big penalties attached. This is one form you do not want to take lightly.
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. 🙂
If you make quarterly estimated payments, the fourth payment for 2012 is due today, January 15, 2013. If you need a voucher and instructions for filing estimated tax payments they can be downloaded from the IRS website here. Filing estimated tax payments helps you avoid those late payment penalties and interest that are calculated when you file your return.