The New Year begins with many of us making resolutions to eliminate procrastination and committing to self-improvement. Why not include organizing and planning for preparation of your 2014 income tax return to decrease the stress or dread many feel when dealing with filing their income taxes?
Documents for preparing your 2014 tax return will begin arriving, soon. Planning and organizing are crucial when beginning a project with the potential complexity of a 1040. A great way to start is to review last year’s tax return and make a list of all the documents used in preparation of that return. As items are received, check them off and keep them together as items may be arriving over several months.
If you use a professional tax preparer, you will most likely be provided with a document that will help you organize your tax information based on your prior year tax return. It will include a list of questions designed to identify new developments in your life and tax law changes that may affect preparation of your return.
If you haven’t used a professional tax preparer in the past but intend to for 2014 tax return preparation, now is the time to make an appointment with the preparer to review your last three years’ tax returns and plan for your 2014 income tax preparation. If an error is found on a prior year return, an amended return may, generally, be filed up to three years from the original extended due date. For example, a 2011 1040 filed without extension by the due date of April 15, 2012 may be amended up to April 15, 2015.
Congress acted in late December to extend laws retroactively to January 1, 2014 that would have increased taxes for many if allowed to expire. Congressmen, true to form, labeled it the Tax Increase Prevention Act (TIPA) of 2014. TIPA temporarily extends more than 50 lapsed individual, business, and energy tax breaks for 2014. But guess what? The extenders expired December 31, 2014; they are not effective for 2015 until or unless Congress votes to extend them once again.
Some of the laws were originally enacted as economic incentives, such as 1) the research and development (R&D) credit; 2) first-year bonus depreciation; and, 3) increased Section 179 expense limits. Extending the laws so late in the year has little effect on economic incentive and does not allow for good business or personal tax planning. If you had known the sales tax deduction
would be extended more of you may have made the decision to buy a vehicle before the end of the year. However, the good news is Congress did act, the President signed the bill, and TIPA will benefit many taxpayers.
As mentioned above, TIPA extended the application of about 50 existing tax laws to 2014, therefore those aren’t truly changes so you should already be familiar with them. But beware, there were changes to tax laws taking effect for 2014. Some of those changes are highlighted below.
TIPA includes another bill (H.R. 647, the “Achieving a Better Life Experience Act of 2014”) that, among other new laws, establishes a new type of tax-advantaged account for disabled individuals, allowing them to save money for future needs while remaining eligible for government benefit programs.
The effects caused by the Patient Protection and Affordable Care Act, more commonly called the Affordable Care Act (ACA), signed into law March 23, 2010, appear most notably for the first time on 2014 1040s.
Capitalization and repair regulations released by the IRS in 2013 (T.D. 9636) are significant to taxpayers owning business or rental property. There are opportunities to make elections this year that will benefit taxpayers’ future and prior tax filings. Elections must be carefully evaluated and properly made.
Both the ACA and capitalization and repair regulations will be further addressed in future articles. Make it a point to familiarize yourself with the present and future impact of these changes to avoid unexpected consequences or missed opportunities. Or, make arrangements now to engage a qualified tax preparer to evaluate the impact for you.
Sue Price-Scott, CPA is a partner at Alegria & Company and specializes in business and personal income tax and is accredited in business valuation. She can be reached at firstname.lastname@example.org