Year-End Tax Planning Tips for 2014
The 2015 tax season is quickly approaching, and businesses and individuals alike need to get their tax compliance strategies together for the 2014 tax year and upcoming filing period. Some new tax provisions, such as those from the Patient Protection and Affordable Care Act (PPACA), will be implemented for the first time. Additionally, an imminent Congressional decision regarding whether to extend certain tax deductions could affect tax planning.
As the year comes to a close, the key to managing these hurdles is to get ready now.
"Start early and have the necessary documentation to find all the deductions that are coming to you," said Cathy Goldsticker, member and co-director of the Brown Smith Wallace Tax Services practice. "Have the discussions with your tax consultant in December. Look at last year's return for tax deductions and make sure you consider them for this year."
We spoke with Goldsticker to gain some insight into steps businesses and individuals can take to address the pressing issues of the upcoming tax season as well as strategies she is suggesting to her clients for tax savings and to ensure compliance.
How will the PPACA impact businesses this filing season?
For the PPACA employer mandate, some businesses must provide health coverage for their employees, or face a penalty known as the “pay or play provision.” The number of full-time employees a business has will determine what a business needs to do and when.
If you're not a large employer (i.e., fewer than 50 full-time employees), you'll be exempt from the employer mandate. If a business has between 50 and 100 full-time employees, it will get an exemption from the mandate until 2016. Businesses with 100 or more full-time employees, beginning January 1, 2015, must comply with the mandate.
When I'm working with my clients to determine if they fall under the mandate, I work through the calculations of their full-time employees to make sure they're providing coverage for 2015 and have the systems in place for the health coverage reporting.
How will the PPACA impact individuals?
In the 2014 tax year, individuals must have minimum essential coverage, and if not, they're going to face a penalty based on the greater of 1% of their income or $95. Minimum essential coverage includes Medicare, an employer-sponsored plan, a self-insured plan, a marketplace plan or a grandfathered-in plan.
If your income is low enough and you pay into the marketplace, you could get a premium tax credit. That affects this upcoming tax season because individuals should get the credit on their personal returns by filing Form 8962, and perhaps they could get an advance of the premium tax credit.
Although 2015 will be a one-year trial run for businesses to get the health insurance information reported on the employees’ W-2s, it doesn't hurt to start reporting now, and it will be helpful for employees who are required to put this information on their personal 2014 tax return.
What can your clients - businesses and individuals alike - do to prepare for the upcoming tax season if they don't know which tax benefits will be extended?
I tell my clients traditional tax deductions are in place that aren't related to the uncertain tax extenders. Consider these items now:
- Make your charitable contributions before the year-end.
- Pay your mortgage interest in December.
- Bunch your expenses for phase- or kick-out items.
- Pay state tax before the year-end assuming you aren’t subject to Alternative Minimum Tax.
As far as the tax extenders and what we think will survive - because these are on both Republican and Democrat agendas - we think the higher Section 179 expense and 50 percent bonus first year equipment and furniture tax write-offs are very popular on both sides.
For older clients, hold off on making required minimum distributions from individual retirement accounts in hopes that it can go directly to your favorite charity. Wait a couple of weeks to see if these tax-free distributions will be extended. Hopefully, that's another popular extender that's going to survive under both parties’ agendas.
For more information on tax extensions, click here.
Do you have any final year-end tax tips?
If you've got some capital loss carried forward, go ahead and sell some winner investments you were going to sell anyway. If you've got some gains, think about selling some losers - but of course be mindful of the 30-day wash sale rules that will disallow the loss recognition.
Fund your Roth or traditional IRA - you have until April. Fund a non-deductible traditional IRA if you can't fund a Roth because of the various tax limitations and then roll it into a Roth. My clients and I like to do this for the various Roth IRA tax benefits.
To discuss your year-end tax planning strategy, contact your Brown Smith Wallace tax advisor (click here for a list of tax advisors) or Cathy Goldsticker at 314.983.1274 or firstname.lastname@example.org.