Deductions, IRS Audit, IRS penalties, IRS Problems, IRS Tax Problems

Internal Revenue Service is always Watching the Clock!

December 11, 2013 - Deductions, IRS Audit, IRS penalties, IRS Problems, IRS Tax Problems

Do you hear that tax clock ticking, ticking, ticking? There are certain things to keep in mind as we come to the close of another tax year. December is the LAST month in the LAST quarter of the year. What should you do before time runs out? Tax laws change every year. Moving from 2013 to 2014, we are going to experience some major changes. Some of the deductions we are used to taking are being adjusted, changed, or even eliminated. If you are a classroom teacher, your $250 ‘above the line” or 1040 front page, deduction goes back to the Schedule A for itemized deductions.  You may or may not remember that it started there. Chances are, you’ve made your purchases already this year, but if your total is under $250, now is the time to take full advantage of that little benefit. With only a few weeks left in the year, do you have any medical expenses you need to pay for in 2013? We can include in our itemized deductions unreimbursed medical expenses that exceed 7.5% of our adjusted gross income. That’s pretty technical. What you need to know is that in 2014 that “floor” rises to 10%. That just means that we will be deducting a little less.  As I mentioned in a previous article, medical is NOT the deduction I want you to benefit from… I want you to be healthy. Speaking of healthy, 2013 is the year that the Affordable Care Act, commonly referred to as “Obamacare” kicked in. There is a provision for a Premium Tax Credit to help low income taxpayers pay for heath care coverage.  However, there is also a “Shared Responsibility Penalty” for anyone who fails to maintain a minimum essential health care coverage.  Medicare counts as qualified coverage. The IRS is charged with allowing the tax credit or imposing the tax penalty. What does that mean to your tax return preparer? We will be looking to confirm your coverage. SO, 2014 is only a few weeks away. Keep your coverage and keep track of your payments. Check into getting coverage if you don’t already have it. I’ll be learning more, too. If you are used to deducting sales tax instead of state income taxes paid, that sales tax deduction will not be a choice for your 2014 tax return. Most of the big ticket items that created a big sales tax deduction were vehicles. IF, and I say IF, you need a new car, this may be the month to buy it, but DO NOT BUY IT just to take advantage of the sales tax deduction. You are still out of pocket thousands of dollars for that new car. My parents always told me, “Watch your pennies and the dollars will take care of themselves.”  So I tell you to watch your expenditures.  Take advantage of what will benefit you, but don’t lose sight of the true cost of your deductions.