Itemized Deductions Reduced for Higher-Income Taxpayers

Most, but not all itemized deductions are subject to an overall reduction rule if AGI exceeds the annual threshold. Itemized deductions are reduced by 3% of the excess of AGI over the threshold.  If AGI is extremely high, the 3% reduction applies until 80% of itemized deductions are eliminated.
The reduction in itemized deductions cannot exceed 80%, there cannot be a complete phaseout of itemized deductions; a minimum of 20% is protected from this dis-allowance.

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Secure Online Document Portal

The security of your personal and financial information is of utmost importance. To protect your sensitive data and to comply with recent laws and regulations, we are implementing a secure online portal service for electronically sharing and storing tax documents. In addition to being secure, we believe you will find this method to be extremely convenient and time-saving.

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Obamacare Penalties: 3 Things to Know Before 2014

By Keith Speights, Motley Fool

America, get ready for some “shared responsibility.”

That’s the rather benign-sounding term used by the Affordable Care Act, commonly known as Obamacare, to describe the financial penalties that millions of individuals in the U.S. could face if they don’t purchase health insurance. Here are three important things you need to know about the Obamacare penalties before 2014.

1. Do the penalties apply to you?
If you already have health insurance through your employer, you’re off the hook. If you don’t, you could be subject to Obamacare penalties if you don’t have health insurance for most of next year.

Even if you aren’t insured for most of 2014, there’s still a reasonable chance that the penalties won’t apply to you. The Congressional Budget Office estimates that of the 30 million Americans who likely won’t have coverage in 2016, only 6 million or so will be subject to financial penalties.

Several groups of people are exempted by law from paying the Obamcare penalties. If the lowest-cost insurance plan is more than 8% of your income, for example, you won’t be stuck with a fine if you don’t obtain coverage. You can also apply for economic hardship exemptions.

If receiving insurance benefits runs counter to your religious beliefs (provided you belong to a religious group recognized by the federal government), no penalties are applicable for you. If you opt to join a federally recognized health care sharing ministry, you can be exempted from paying the penalties.

You’re not subject to Obamacare penalties if you’re a Native American or if you’re not an American citizen. In prison? Don’t worry — at least about paying financial penalties for failing to obtain health insurance.

2. When must you have insurance to avoid the penalty?

While the open enrollment period for the Obamacare health insurance exchanges extends through March 31, 2014, there’s a catch. If you don’t purchase a plan by the end of February, you’ll get stuck with a penalty.

Obamacare mandates that individuals who go without coverage for three consecutive months must pay a penalty. Enrolling in an insurance plan during the first half of March gets you an effective date of April 1. Signing up in the latter part of March pushes that effective date out to May. Either way, you would go three months in a row without coverage — and therefore face the penalty.

3. How much will the penalty cost if you didn’t have coverage?
The calculations can get a little confusing, but here goes. For 2014, the minimum penalty will be $95 per uninsured adult and $47.50 per child, up to $285 for a family. You could pay more, though, depending on how much money you make.

Take your household income, then subtract $20,000 if you have a family and $10,000 if you don’t. Multiply that number by 1%. You’ll owe the greater of the resulting amount and the minimum penalty mentioned above. Probably. The exception to this rule is that no one will be required to pay more than the average annual premium for a bronze plan (lowest-cost option) in Obamacare.

There’s still some good news and bad news. The good news is that if you have insurance for part of the year, your penalty will be prorated. The bad news? Penalties increase annually through 2016.

Penalty, shmenalty?
You might also want to know about one other minor detail about the Obamacare penalties: The IRS can’t go after taxpayers who don’t pay up. That’s right — the Affordable Care Act didn’t include any provisions for the tax agency to enforce collection of the penalties.

2014 tax returns, which aren’t due until April 2015, will include a spot for taxpayers to provide information about health insurance. If any penalties apply, the IRS will subtract the penalty amount out of any refund owed. If you don’t get a refund or the penalty is greater than your refund, the agency will want you to mail a check to them or send funds electronically.

What happens if you decide not to send the money? The IRS could take it out of any future tax refunds. If your taxes are withheld through your employer, the agency could also get the money through that route. However, it can’t press criminal charges or assess further financial penalties for not paying. The IRS also can’t place a lien on property as it can when seeking payment of overdue taxes.

Take advantage of this little-known tax “loophole”
Recent tax increases have affected nearly every American taxpayer. But with the right planning, you can take steps to take control of your taxes and potentially even lower your tax bill. In our brand-new special report “The IRS Is Daring You to Make This Investment Now!,” you’ll learn about the simple strategy to take advantage of a little-known IRS rule. Don’t miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

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20 Things Taxpayers Don’t Get

20 Things Taxpayers Don’t Get

By: Robert W Wood, contributor at Forbes

The incredible popularity of 20 Things 20-Year-Olds Don’t Get made me reflect on the many important things about taxes most taxpayers don’t get. Across a huge age range and even bigger economic spectrum, we all pay taxes. Yet we may not know key points.

To help put dollars in your pocket and ease your interactions with the tax system, these are far more important to your tax health than you might think.

1. Everything is Income. The IRS taxes all income from any source, whether in cash or in kind. Lottery? Taxed. Gambling? Taxed. You name it, it’s taxed. If you find a diamond ring, you pay tax on its fair market value even if you don’t sell it. See Who Pays Tax On Hef’s Engagement Ring Sale?

2. Forms 1099 Really Count. Those little tax forms you get in January are keyed to your Social Security number. The IRS always gets a copy. Pay attention to them—the IRS sure does. See 1099 Or W-2?
3. Beware Foreign Accounts. Foreign bank accounts may generate income but you won’t receive a Form 1099. Still, reporting them is key. If balances exceed $10,000 in the aggregate any time during the year, you also must file a Treasury Form TDF 90-22.1, also known as an FBAR, separate from your tax return. These days the scrutiny is high, and how you transition from failures to report in the past is delicate. See Undisclosed Foreign Bank Accounts? They’re Even More Explosive Now.
4. Hire a Representative. Handling a tax case by yourself is usually a mistake. Hire an accountant or lawyer to handle it. Even simple audits can come off the rails or extend into other areas if you aren’t careful. See Should You Lawyer Up Against The IRS? You Bet.

5. Pay Taxes Later. Most tax planning involves timing. You want to accelerate tax deductions and defer tax payments, subject to constraints such as the constructive receipt doctrine. If you have a legal right to pay and say “pay me later,” it’s taxed now. But you can condition payment, such as refusing to sell your house or settle a lawsuit unless you are paid next year. See What To Buy And Expense Before Year End.

6. Pay Small Tax Bills. If you get a small tax bill, pay it even if the IRS is wrong. What’s “small” varies, but don’t risk an audit or dispute escalating by fighting over small dollars. See 5 Steps To Keep The IRS Out Of Your Hair.

7. Reply to Every IRS Letter Unless it Says Not To. This is common sense. Keep a good record. Often, fighting the IRS is about attrition. See Got A Tax Notice? Here’s What To Do.

8. Don’t Talk To the IRS if They Visit. If the IRS comes to your home or business, decline to speak and tell them your lawyer will call. Take their card and be polite but firm. See When IRS Criminal Agents Come Calling.

9. Don’t Lie. If you say anything to the IRS, don’t lie. See When IRS Criminal Agents Come Calling.

10. The IRS Can Audit for 3 Years. The usual IRS statute of limitations is 3 years after you file your return. If you understate your income by 25% or more, the IRS gets 6 years. See IRS Statute Of Limitations—Is Your Return Safe?

11. Keep Your Records for 7 Years. Tax records are important. See Keep Tax Records In The Vault!

12. Keep Your Old Tax Returns Forever. Although you can probably throw out most tax records after 6 years, keep copies of your returns themselves forever. See Tax Return Filed? Now Consider Your Records.

13. Avoid Amending Tax Returns. Don’t take amending tax returns lightly. Amended returns have a high audit rate, especially if they request a refund. See 5 Simple Rules to Follow When Amending Your Tax Return.

14. You Usually Don’t Have to Amend Your Return. The IRS says you “should” amend your return if you discover a mistake after it’s filed. But there’s no legal obligation. The only time you really must amend is if you knew at the time you filed the original return that it was false. See Five More Tips For Amending Tax Returns.

15. If You Amend, You Can’t Cherry-Pick. If you decide to amend, you can’t cherry-pick which items to fix. The amended return must correct everything, not just the items in your favor.

16. File Returns Even if You Can’t Pay. Many taxpayers don’t file on time because they don’t have the tax money. They would be much better off if they filed on time. Payment can come later, and might be the subject of an IRS installment agreement. Penalties too will likely be smaller if you file on time.

17. Don’t Explain Too Much. Tax returns should be concise. If an explanation or disclosure is needed, keep it succinct. See Five Must-Do Steps Before Filing Your Taxes.

18. Don’t Attach Too Much. Attachments to tax returns should be limited to tax forms and, where required, plain sheets of paper listing additional deductions, income, etc. Don’t attach other documents. If the IRS wants documents it will ask. See Shhh, Home Office And Other IRS Audit Trigger Secrets.

19. Be Careful With Big Refunds. Getting a refund? Consider applying it to next year’s tax payments rather than asking for the cash, especially if it is large. You’ll have a lower profile with an initial or amended return. See Getting A Tax Refund? Ten Things To Know.
20. Get Some Advice. Whether you need practical procedural advice about a Tax Refund Too Good To Be True? Don’t Spend It, advice about Independent Contractor Or Employee: Why It Matters, or you already know why tax opinions are valuable, get some advice from someone with experience in your issue. And don’t wait until the last minute.

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Form 8965 (New) – Health Coverage Exemptions & Shared Responsibility Payment

Beginning in 2014, individuals must have health care coverage, have a health coverage exemption, or make a shared responsibility payment with their tax return.  Use Form 8965 to report a coverage exemption granted the Marketplace (also called the “Exchange”) or to claim a coverage exemption on your tax return.

Form 8965 Instructions:  i8965–dft