New Tax Rules for 2014

Posted in Facts On Tax  on October 22nd, 2014  by msheriff -  link

Washington, D.C.

Dear Client:
  2014 starts with one set of tax rules. But changes are coming. Lawmakers decided to allow dozens of tax breaks to expire after 2013, and most of them likely won’t be retroactively revived until late 2014. They include the R&D tax credit, the deduction for state sales tax in lieu of income tax, and the exclusion of up to $2 million of forgiven debt on a debtor’s primary home. Also the ability of folks who are 70½ and older to make direct distributions of up to $100,000 annually from their IRAs to charity. For now, we’ll turn to 2014’s new tax rules. 

  A health reform change tops the list: Individuals without insurance owe a tax. Although the Obama administration delayed to 2015 the requirement that employers with 50 or more full-time workers provide employees with affordable health coverage or pay a stiff fine, the 2014 starting date for the individual mandate wasn’t deferred. Folks must have qualifying coverage for themselves and their dependents to avoid the tax. This includes, for example, health coverage provided by an employer that meets minimum federal requirements, coverage purchased through an exchange and federal coverage such as Medicare, Medicaid, Tricare and veterans coverage.

  Individuals for whom coverage is too expensive are exempt from the tax. Employees whose share of premiums exceeds 8% of the household’s AGI won’t be hit. Ditto for people ineligible for employer coverage if the cost of a basic bronze-level plan in an exchange, less any tax credit for buying insurance, exceeds 8% of household AGI. Also exempt: Filers without coverage for periods of less than three months. And people who can show that a hardship forced them to go without coverage, including folks whose insurance was canceled and who can’t buy an affordable policy.

  The tax for being uninsured is normally the higher of two amounts: The basic penalty or an income-based levy. The basic penalty is $95 a person ($47.50 for each family member who is under the age of 18), with a ceiling of $285. The income-based penalty is 1% of the excess of the taxpayer’s household AGI over the minimum level of AGI needed to trigger filing a return…$10,150 for singles and $20,300 for couples, plus $3,950 per dependent. The tax is lowered proportionally for any months the taxpayer had coverage. The levies will be higher in 2015 and 2016. But in no case can the tax exceed the cost of a bronze-level exchange plan for the taxpayer and family members, also adjusted for months with health coverage. IRS has limited remedies to collect this tax. It cannot use liens or levies, so it can only offset tax refunds. Nor can it charge interest on the unpaid balance.

  Lower-incomers get a refundable tax credit to help them afford coverage. They can elect to have the credit sent directly to an exchange to help pay premiums or take the credit on their returns. The credit is allowed on a sliding scale for filers with household income over $11,490 for singles and $23,550 for a family of four. It ends as household income hits $45,960 for singles and $94,200 for a family of four.

SOCIAL SECURITY:  The Social Security wage base increases this year to $117,000, up $3,300 from the cap for 2013. The tax rate imposed on employers and employees remains 6.2%, and the employer’s share of Medicare tax stays at 1.45% of all pay. The employee’s share is 1.45%, but the 0.9% Medicare surtax kicks in for singles with wages exceeding $200,000 and couples earning over $250,000. The surtax doesn’t affect the employer’s share. Self-employeds are also subject to the surtax. Social Security benefits rise just 1.5% in 2014, due to low inflation. The earnings limits are heading up, too. People who turn 66 this year do not lose any benefits if they make $41,400 or less before they reach that age. Individuals between ages 62 and 66 by the end of 2014 can make up to $15,480 before they lose any benefits. There’s no earnings cap once a beneficiary turns 66. The amount needed to qualify for coverage climbs to $1,200 a quarter. So earning $4,800 anytime during 2014 will net the full four quarters of coverage. And the threshold for the nanny tax rises to $1,900 this year, a $100 boost.

MEDICARE:  The basic Medicare Part B premium remains $104.90 per month in 2014. But upper-income seniors still have to pay higher Part B and D premiums if their modified adjusted gross income for 2012 exceeded $170,000 for couples or $85,000 for single people. Modified AGI is AGI plus any tax-exempt interest, EE bond interest that’s used for education and excluded foreign earned income. The Part B surcharge for 2014 won’t change, and the Part D add-on will rise slightly. The total surcharges on upper-incomers can be as large as $300.10 a month.

MEDICALS:  The annual caps on deductible contributions to HSAs inch up this year. The ceilings rise slightly to $6,550 for account owners with family coverage and to $3,300 for self-only coverage. Folks born before 1960 can put in $1,000 more. The limits on out-of-pocket costs, such as deductibles and copayments, will increase to $12,700 for people with family coverage and to $6,350 for individual coverage. Minimum policy deductibles will stay at $2,500 for families and $1,250 for singles. The limits on deducting long-term-care premiums are a tad higher. Taxpayers who are age 71 or older can write off as much as $4,660 per person. Filers age 61 to 70…$3,720. Those who are 51 to 60 can deduct up to $1,400. Individuals age 41 to 50 can take $700. And people age 40 and younger…$370. Also, the limit for tax free payouts under such policies increases to $330 a day.

FRINGE BENEFITS:  U.S. taxpayers working abroad have a slightly larger exclusion…$99,200. But the caps on transit passes and commuter vans fall sharply this year to $130 a month…bad news for those who use public transportation to get to work. Meanwhile, the monthly limitation on tax free parking goes up to $250. 

EDUCATION:  The income caps are higher for tax free EE bonds used for education. The exclusion starts phasing out above $113,950 of AGI for married couples
and $76,000 for singles. It ends when AGI hits $143,950 and $91,100, respectively. The student loan interest deduction begins to phase out at higher levels, beginning when AGI exceeds $130,000 for couples and $65,000 for single filers. The lifetime learning credit also starts phasing out at higher income levels… from $54,000 to $64,000 of AGI for singles and $108,000 to $128,000 for couples.

ADOPTION:  The adoption credit can be taken on up to $13,190 of costs, a $220 boost. If the credit is more than a filer’s tax liability, the excess is not refundable. The full $13,190 credit is available for a special needs adoption, even if it cost less. The credit starts to dry up for filers with AGIs over $197,880 and ends at $237,880. The exclusion for company-paid adoption aid also increases to $13,190.

PERSONAL TAXES:  This year’s income tax brackets are a tad wider than those for 2013, because of an increase in inflation during the 12-month period that’s used to figure the adjustments. The tax rates for this year didn’t change.

Marrieds: If taxable income is                                             The tax is
Not more than $18,150                                                         10% of taxable income
Over $18,150 but not more than $73,800                               $1,815.00 + 15% of excess over $18,150
Over $73,800 but not more than $148,850                             $10,162.50 + 25% of excess over $73,800
Over $148,850 but not more than $226,850                           $28,925.00 + 28% of excess over $148,850
Over $226,850 but not more than $405,100                           $50,765.00 + 33% of excess over $226,850
Over $405,100 but not more than $457,600                           $109,587.50 + 35% of excess over $405,100
Over $457,600                                                                     $127,962.50 + 39.6% of excess over $457,600
Singles: If taxable income is                                               The tax is
Not more than $9,075                                                          10% of taxable income
Over $9,075 but not more than $36,900                                $907.50 + 15% of excess over $9,075
Over $36,900 but not more than $89,350                              $5,081.25 + 25% of excess over $36,900
Over $89,350 but not more than $186,350                            $18,193.75 + 28% of excess over $89,350
Over $186,350 but not more than $405,100                           $45,353.75 + 33% of excess over $186,350
Over $405,100 but not more than $406,750                           $117,541.25 + 35% of excess over $405,100
Over $406,750                                                                     $118,118.75 + 39.6% of excess over $406,750
Household heads: If taxable income is                                 The tax is
Not more than $12,950                                                         10% of taxable income
Over $12,950 but not more than $49,400                               $1,295.00 +15% of excess over $12,950
Over $49,400 but not more than $127,550                             $6,762.50 + 25% of excess over $49,400
Over $127,550 but not more than $206,600                            $26,300.00 + 28% of excess over $127,550
Over $206,600 but not more than $405,100                            $48,434.00 + 33% of excess over $206,600
Over $405,100 but not more than $432,200                            $113,939.00 + 35% of excess over $405,100
Over $432,200                                                                      $123,424.00 + 39.6% of excess over $432,200

  Standard deductions for 2014 rise a bit. Marrieds get $12,400. If one spouse is age 65 or older…$13,600. If both are…$14,800. Singles can claim $6,200…$7,750 if they’re 65. Household heads get $9,100 plus $1,550 more once they reach age 65. Blind people receive $1,200 more ($1,550 if unmarried and not a surviving spouse). High-incomers lose their itemized deductions above a higher level for 2014. Their write-offs are slashed by 3% of the excess of AGI over $254,200 for singles, $279,650 for household heads and $305,050 for marrieds. But the total reduction can’t exceed 80% of itemizations. Medicals, investment interest, casualty losses and gambling losses (to the extent of winnings) are exempted from this cutback. Personal exemptions increase to $3,950 for filers and their dependents. However, this write-off is phased out for upper-incomers. It is trimmed by 2% for each $2,500 of AGI over the same thresholds for the itemized deduction phaseout.

  The 20% top rate on dividends and long-term gains starts at a higher level for 2014…singles with taxable income above $406,750, household heads over $432,200 and joint filers above $457,600. The 3.8% Medicare surtax boosts the rate to 23.8%. The regular 15% maximum rate applies for filers with incomes below these amounts, except that filers in the 10% or 15% income tax bracket still get the special 0% rate.

MINIMUM TAX:  AMT exemptions are increasing for 2014. They jump to $82,100 for couples and $52,800 for both singles and heads of household. The phaseout zones for the exemptions start at higher income levels as well…above $156,500 for couples and $117,300 for single filers and household heads. Also, the 28% AMT tax bracket kicks in a little later in 2014…above $182,500 of alternative minimum taxable income.

ESTATE & GIFT TAX:  The estate and gift tax exemption for 2013 ticks upward to $5,340,000. The rate remains 40%. The gift tax exclusion stays at $14,000 per donee. Up to $1,090,000 of farm or business realty can receive discount estate tax valuation. And more estate tax qualifies for an installment payment tax break. If one or more closely held businesses make up greater than 35% of an estate, as much as $580,000 of tax can be deferred, and IRS will charge only 2% interest.

RETIREMENT PLANS:  Several dollar ceilings on retirement plans are heading up this year: The payin limitation for defined contribution plans increases to $52,000. That’s a $1,000 hike for Keogh plans, profit sharing plans and similar arrangements. Retirement plan contributions can be based on up to $260,000 of salary. And the benefit limit for pension plans is rising to $210,000 in 2014. The income ceilings on Roth IRA payins go up. Contributions phase out at AGIs of $181,000 to $191,000 for couples and $114,000 to $129,000 for singles.

SAVINGS PLAN:  The deduction phaseouts for payins to regular IRAs start at higher levels, from AGIs of $96,000 to $116,000 for couples and $60,000 to $70,000 for singles. If only one spouse is covered by a plan, the phaseout zone for deducting a contribution for the uncovered spouse begins at $181,000 of AGI and finishes at $191,000. And the partial credit for retirement plan payins phases out at higher levels. For marrieds…at AGIs over $60,000. Household heads…$45,000. Singles…$30,000. Several key items won’t change. The 401(k) payin limit remains $17,500. Folks born before 1965 can put in an extra $5,500. Ditto for 403(b) and 457 plans. The ceiling on SIMPLEs stays $12,000…$14,500 for folks age 50 or older this year. Payin caps for IRAs and Roths remain $5,500 plus $1,000 more for anyone 50 and up.

BUSINESS TAXES:  The standard mileage rate declines to 56¢ per mile for business driving, down half a cent from 2013. The rate for medical travel and moving also falls, to 23.5¢ a mile. But the allowance for charitable driving is unchanged…14¢ a mile. Users of the standard mileage rate can also claim the cost of parking and tolls. The tax credit for small firms that offer health coverage is juicier for 2014. The top credit rises to 50% (35% for tax-exempt groups) of the lesser of what they pay for employee coverage bought via an exchange or the average group exchange premium for small businesses in their state. However, the full credit is available only to firms with 10 or fewer full-time-equivalent employees and average wages of $25,400 or less. It falls rapidly for firms with more employees and higher pay, completely phasing out for businesses with more than 25 workers or average pay in excess of $50,800. Employers must contribute at least 50% toward the cost of coverage to get the credit. Only $25,000 of business assets can be expensed, as the law now reads, and the $25,000 phases out once more than $200,000 of assets are put in service. 50% bonus depreciation has ended. Congress allowed it to lapse after 2013. Ditto for several other business tax breaks: The work opportunity tax credit for hiring disadvantaged workers. 15-year depreciation for restaurant renovations and leasehold improvements. And the R&D tax credit, as we noted on page 1. A bill to reinstate these provisions sits atop Congress’ to-do list for 2014. Tax reform is there, too, as lawmakers continue to lay the groundwork. We’ll watch the debate closely and report to you on any developments.
Yours very truly,

Tax Information for 2015

Posted in Facts On Tax  on October 22nd, 2014  by msheriff -  link

Washington, Oct. 10, 2014

Dear Client: 
  Filling out a tax return will be more complex for millions of people, thanks to the health reform law. This will affect taxpayers and preparers alike. Start with the health premium tax credit, applicable for coverage bought through an exchange. Filers will have to reconcile subsidies they got in advance with the actual credit they are entitled to. Folks will use Form 8962 to make this calculation. We noted these rules in our Aug. 1 Letter. The individual mandate has also kicked in. Filers with coverage all year for themselves and their dependents get off easy: They only have to check a box on their returns. This includes, for example, employer-provided insurance meeting minimum federal standards and policies bought through an exchange, as well as Medicare, Medicaid, Tricare and veteran’s coverage.

  But filing will get trickier for individuals who go without health insurance. They’ll owe a tax unless they have an exemption. Exemptions are numerous: People for whom health coverage is too costly. Employees whose share of premiums exceeds 8% of the household’s AGI won’t be hit. The same goes for folks who are not eligible for employer coverage if the cost of a basic bronze-level plan in an exchange, less any tax credit for buying insurance, exceeds 8% of household AGI. Filers who are without coverage for periods of less than three months. Those with household incomes below the thresholds for filing a return… $10,150 for singles, $13,050 for heads of household and $20,300 for joint filers. And people who can show that a hardship forced them to go without coverage. The feds have OK’d 14 qualifying circumstances. They include getting a shut-off notice from a utility, major property damage from a natural disaster, filing for bankruptcy, suffering domestic violence, and facing foreclosure or eviction from your residence. Individuals whose insurance was canceled and who can’t buy an affordable policy are also eligible, as are those with large unpaid medical bills within the past two years. And there’s a general catch-all hardship exception if none of the other listed items fit. See for details on all the rules.

  Taxpayers will report their health coverage exemptions on Form 8965. Individuals seeking a hardship exemption must apply through the exchange. If the exchange approves the exemption, the applicant will be given a code number that he or she will enter on Part I of the form to substantiate the claimed exemption. Most other exemptions can be claimed on Form 8965 when filing the return. Folks will use a worksheet in the instructions to Form 8965 to figure the tax that they owe for each month they and their dependents are uninsured and not eligible for an exemption. They will then transfer the amount to a separate line on the 1040. We’ve seen a draft of the worksheet. It is very complex and will be confusing to fill out.

MORE ON THE TAX:  The tax for being uninsured is typically the higher of two amounts: The basic penalty or an income-based levy. The basic penalty for 2014 is $95 a person ($47.50 for each family member under age 18), with a ceiling of $285. The income-based penalty is 1% of the excess of the taxpayer’s household income over the minimum level of income needed to trigger the filing of an income tax return. The tax is lowered proportionally for any months the taxpayer had health insurance. But in no case can the tax exceed the cost of a bronze-level exchange plan for the taxpayer and family members, also adjusted for months with health coverage. For 2014, that monthly cost is $204 per person and $1,020 for a family of five. IRS has limited remedies to collect this tax. It cannot use liens and levies, so it can only offset tax refunds. Nor can it charge interest on the unpaid balance. For 2015, the tax will be significantly higher. The basic penalty will soar to $325 a person ($162.50 for each family member under 18), with a ceiling of $975. The income-based penalty will be 2% of household income over the filing threshold. In 2016, the basic penalty rises to $695, and the income-based levy is a tad higher.

IRAs:  An IRA payout used to fund a government pension plan isn’t a tax-free rollover, a divided Tax Court says. After a worker retired from the federal government, he elected to boost his monthly pension annuity by making an additional $18,000 payin to the government’s civil service retirement plan. He scraped up the funds in part by first withdrawing from his IRA, and later tapped it again to restore his bank account. He claimed the withdrawals qualified as tax-free rollovers. IRS said that the payouts were taxable because the federal retirement plan doesn’t accept tax-free rollovers, and a majority of the Tax Court’s judges concurred (Bohner, 143 TC No. 11). However, several judges said the first IRA payout was rolled into the federal plan within 60 days and thus should be a tax-free rollover. As a result, an appeal of the decision is likely.

BENEFIT PLANS:  IRS has a handy reference tool for retirement plan sponsors. It describes many of the reporting and disclosure requirements for plan administrators. The guide covers required IRS filings and notices for participants and beneficiaries. Go to to view the complete details. Also, check out another helpful retirement toolkit from the Dept. of Labor, which includes filing, reporting and disclosure rules required by DOL and PBGC. See to read this comprehensive handbook. 

ALIMONY:  A payment to equalize retirement assets in a divorce isn’t deductible alimony, the Tax Court decides. Under the terms of a couple’s divorce agreement, they agreed to divide their respective retirement accounts 50-50. Because his balance was greater than hers, the settlement stipulated for the excess amount to be transferred to her tax-free, pursuant to a qualified domestic relations order. But that didn’t occur. Instead, more than three years later, he paid his ex-wife the money with interest from a nonretirement account. The Court said he can’t deduct the payment as alimony because the language in the settlement agreement imposed a binding obligation on him that would survive the death of his ex-wife (Laremore, TC Summ. Op. 2014-94).

PAYROLL TAXES:  States get a boost in detecting worker misclassification…from the Labor Dept. 19 states have received federal money for their special enforcement programs designed to sniff out firms that artificially lower their states’ unemployment tax bills by wrongly classifying employees as independent contractors. The largest payments went to Md., N.J., Texas and Utah. All received more than $825,000 in federal funds. Smaller amounts went for programs in Calif., Del., Fla., Hawaii, Idaho, Ind., Mass., N.H., N.M., N.Y., Ore., S.D., Tenn., Vt. and Wis. Most of them received $500,000. Remember that most states share worker classification audit results with IRS and the Labor Dept. So firms should pay close attention to the classification rules.

BUSINESS TAXES:  Retaining too much control over a company costs an inventor a tax benefit. Royalties he got from patent transfers don’t qualify for capital gains treatment. Inventors who sell their entire interest in a patent they created to an unrelated person can claim long-term capital gains on the proceeds. For this purpose, a sale to a firm in which you own 25% or more would not qualify. In this case, an inventor sold patents to a firm in which he had a 24% stake. But the Tax Court nixed capital gain treatment because despite his minority interest, the seller actually had control of the company. He alone made all of the firm’s decisions regarding licensing and patent transfers. The other shareholders were friends who didn’t participate (Cooper, 143 TC No. 10).

  An easing for restaurants on capitalizing kitchen labor costs. The IRS says in a memo to field agents that eateries now using the simplified production method to allocate the cost of producing meals can apportion part of their kitchen labor costs to their cost of goods sold, rather than to ending inventory. That cuts taxable income. The issue is arising in a number of restaurant audits. The eateries say it is wrong to allocate kitchen costs to ending inventory, since the food is no longer on hand.

  A tenant’s payment for improvements made by the landlord isn’t taxable, IRS privately rules. Under the terms of the lease, a portion of the rent was intended to cover tenant improvements, but the tenant had to foot the bill for any excess costs the landlord incurred. On audit, an agent said the tenant’s payment of those expenses was rental income to the landlord, but the Service’s lawyers disagreed. In their view, that payment wasn’t intended as a substitute for rent and thus isn’t taxed as income. Instead, the tenant’s payment reduces the landlord’s tax basis in the improvements. 

  A long series of losses won’t always trigger the hobby loss disallowance rules. An artist had losses in 18 out of 20 years. Although she was a full-time art professor, she spent a lot of time on her art career, creating 2,000 pieces of art over 40 years. Some of her works hang in major museums. She acted in a businesslike manner despite the losses, keeping track of her inventory, hiring a gallery to market her art and going to networking events. Recognizing that it takes a long time to achieve success in the arts and that her losses were magnified partly by her claiming personal expenses, the Tax Court said that her art endeavors were not a hobby (Crile, TC Memo. 2014-202).

  Improper use of offshore trusts leads to staggering monetary sanctions for two wealthy brothers. They used the trusts to hide their ownership of securities
in publicly traded corporations. They did so to avoid making required disclosures to the Securities and Exchange Commission and to evade taxes on the stock sales. A jury found them civilly liable for the SEC violations, and a federal court decided that the amount of the penalty should be based on the amount of taxes they evaded, plus interest. The total fine could add up to $400 million (SEC v. Wyly, D.C., N.Y.).

TAX DEBTS:  IRS can have longer than 10 years to collect back taxes in some cases. Installment agreements toll the statute of limitations, a federal court says. The time elapsed while a debtor is repaying a tax debt in installments isn’t counted against the 10 years. And if IRS terminates a payment plan, the statute of limitations for collecting is extended for an additional 30 days (Chelsea Brewing Co., D.C., N.Y.).

FARM TAXES:  Livestock operators in 30 states get additional time to defer gain on sales because of severe drought. Farmers in counties that are on IRS’s list of areas that are still suffering from drought have until at least the end of 2015 to defer gain by buying replacement livestock, even if the normal four-year period for deferral of gains from drought-related sales has lapsed. The time period will run until the close of the filer’s first tax year after the county drops off the IRS list. See Notice 2014-60 for full details. Farmers can also check the National Drought Mitigation Center’s maps.

ENFORCEMENT:  The Service will tighten up a relief program for firms that misclassify workers. Businesses that treated employees as contractors and gave them 1099 forms for the past three years can voluntarily correct those errors and pay a low penalty. Treasury inspectors note that companies needn’t identify the misclassified workers, so IRS can’t monitor whether firms were eligible for the relief and whether the workers were treated as employees in subsequent years. IRS will start asking for that data.

  IRS is too quick to write off tax debts, according to Treasury inspectors. They studied a number of cases in which collection staff couldn’t contact or find debtors
who owed $10,000 or more in back taxes. In over half the cases, the workers failed to follow all the required procedures…using postal tracers, searching databases of court and motor vehicle records and the like…to get leads on debtors’ whereabouts. And, in 7% of cases, agents failed to file tax liens to protect the Service’s interest. IRS says it is putting controls in place to make sure cases aren’t closed prematurely.

PREPARERS:  IRS continues to scrutinize preparers of earned income credit returns. It will mail warnings to those suspected of making errors on 2013 returns
that claimed the credit. Preparers who fail to comply with the due diligence rules for the credit can be hit with stiff penalties: $500 for failing to attach Form 8867
and a minimum of $1,000 if a client’s tax bill is understated because the preparer took an unreasonable position. For willful misconduct, the minimum fine is $5,000.

  But the Service is dropping the ball on investigating problem preparers, Treasury inspectors say. IRS failed to investigate more than one-third of preparers
who were referred to area offices for possible malfeasance. Inspectors took a look at those who fell through the cracks and found many instances in which preparers had greatly overstated deductions and credits or had filed bogus Schedule Cs to inflate the amount of refundable tax credits, such as the earned income credit. Others looked to be committing identity theft. IRS will try to weed out more bad apples.

  The Service is trumpeting its voluntary credential for unenrolled preparers. The agency will send out e-mails to 400,000 preparers who aren’t attorneys, CPAs
or enrolled agents. The notice will tout the benefits of participating in the program, such as inclusion in the database of preparers that IRS expects to launch in Jan. 2015. Participants must take continuing education courses and pass a 100-question quiz with a score of 70% or higher. Unenrolled preparers who passed IRS’s competency test are exempt from the quiz, as are preparers who are credentialed in Calif. and Ore.,
along with those certified by the Accreditation Council for Accountancy and Taxation.

  Renewals of preparer ID numbers for 2015 are beginning. The fee is $63… $64.25 for first-time applicants. Some folks who regularly renew their PTINs early
have been invited to renew before the Oct. 16 official starting date so IRS computers aren’t overloaded. Preparers can do this online at or file Form W-12.

  Long wait times on IRS’ tax practitioner phone line are frustrating tax pros. Many claim they’ve had to wait for an hour or more before speaking with a live person on the agency’s practitioner priority service toll-free line, which handles questions on issues about clients’ accounts. But with Congress holding the reins on IRS’s budget, it’s extremely unlikely that the hold times will subside any time in the near future.

Yours very truly,

Tax Deduction Audit Risk

Posted in Facts On Tax  on June 5th, 2014  by msheriff -  link

When is an itemized deduction high enough to catch the attention of IRS auditors? The tables below give you an idea.

Many things can make a tax return look suspicious, but outsized deductions are easy for a computer to catch. The tables show the average deductions claimed by taxpayers. A deduction that is well above the normal for a given income level is a red flag.

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Technology Has Redefined the Accounting Firm

Posted in Facts On Tax  on June 5th, 2014  by msheriff -  link

Technology has led to the evolution of many industries. However, the accounting industry has always been slow to adopt change.

I’m sure when most think of an accountant, there is still a stereotypical image of an elderly individual with a calculator on their desk and papers shuffled up in piles throughout the office.

This stereotype is probably derived from the fact that accounting practices have been run in a similar fashion for the last twenty years with only minor innovations in the operations of the day to day practice.

There is now a new breed of accounting firms that leverage technology to make the lives of their clients simpler. I believe that the evolution of the modern day firm extends beyond the improvements in technology. There has been a dramatic shift in the relationships between clients and business owners.

In the past, accountants served merely as compliance officers to ensure tax filings were processed in a timely manner, however the new breed of accountant offers value added services to simplify the lives of business owners. As technology has been at the forefront of this evolution, here are some of the major changes that have taken place.

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