CARL WATTS & ASSOCIATES
August 17, 2015
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Washington DC
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tel/fax 202 350-9002 |
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The summer holiday season is for some the best rest and relaxation time of the year. For most people, it is the less likely time of the year to think about taxes. And yet, please relax and read al through the end of this newsletter. It may save you precious time later in the year and it might save you some headaches and money as well.
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So, what could be so important to bother you during your vacation? Here are a few suggestions that may be quite valuable if any applies to you or even to someone close.
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If you have not filed your federal tax return for 2014 yet, this might be the best time to do it … there may be a refund waiting for you after all the holiday expenses. If you know you owe tax money, now is certainly better than later when more penalty and interest will accumulate.
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| If you received advance payments of the premium tax credit in 2014 under the health care law, you should file your 2014 tax return as soon as possible this summer to ensure you can timely receive advance payments next year from your Marketplace. |
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If advance payments of the premium tax credit were paid on behalf of you or an individual in your family in 2014, and you do not file a 2014 tax return, you will not be eligible for advance payments of the premium tax credit or cost-sharing reductions to help pay for your Marketplace health insurance coverage in 2016. This means you will be responsible for the full cost of your monthly premiums and all covered services. In addition, you may have to pay back some or all of the 2014 advance payments of the premium tax credit. |
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Because Marketplaces will determine eligibility for advance tax credit payments and cost-sharing reductions for the 2016 coverage year this fall, it will substantially increase your chances of avoiding a gap in receiving this help if you file your 2014 tax return with Form 8962 as soon as possible. |
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If you are one of the nearly 13 million taxpayers who asked for an extension to file your federal tax return this year, you don’t need to wait until October 15 extension deadline to file your return if you have all your required tax documents. If you are entitled to a refund, why wait any longer? |
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If you are unable to pay all taxes due, you are encouraged to pay as much as possible. By paying as much as possible, the amount of interest and penalties owed will be lessened.
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Based on the circumstances, you could qualify for an extension of time to pay, an Installment Agreement, temporary delay, or Offer in Compromise.
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If you earn income that is not subject to withholding, you may need to pay estimated tax. This may include income such as self-employment, interest, dividends or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay it four times a year. Use the worksheet in Form 1040-ES, Estimated Tax for Individuals, to figure the tax.
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| If you start a new job, you must fill out a Form W-4, Employee's Withholding Allowance Certificate and give it to your employer. Your employer will use the form to figure the amount of federal income tax to withhold from your pay. |
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You might also need to change your Form W-4 or change the amount of estimated tax you pay when certain life events take place. A change in your marital status, the birth of a child or buying a new home can change the amount of taxes you owe. In most cases, you can submit a new Form W–4 to your employer anytime. |
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If you got married recently, do not forget that, along with name changes you may need to complete with all governmental agencies to prevent errors in processing your tax returns. |
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| There are tax consequences as well. It would be a great idea to review your financial circumstances, tax withholdings, medical insurance, and tax credit eligibility to properly plan for your first joint tax return, or married filing separately tax return. |
| If you have insurance through the Health Insurance Marketplace and are getting advance payments of the premium tax credit remember that changes in your income or family size may affect your premium tax credit as well. If your circumstances have changed, now is the right time for a checkup to see if you need to adjust the premium assistance you are receiving. You should report changes that have occurred since you signed up for your health insurance plan to your Marketplace as they occur. |
| Changes in circumstances that you should report to the Marketplace include: |
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| Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit. Getting too much means you may owe additional money or get a smaller refund when you file your taxes. Getting too little could mean missing out on premium assistance to reduce your monthly premiums. |
| Repayments of excess premium assistance may be limited to an amount between $300 and $2,500 depending on your income and filing status. However, if advance payments of the premium tax credit were made, but your income for the year turns out to be too high to receive the premium tax credit, you will have to repay all of the payments that were made on your behalf, with no limitation. Therefore, it is important that you report changes in circumstances that may have occurred since you signed up for your plan. |
| Changes in circumstances also may qualify you for a special enrollment period to change or get insurance through the Marketplace. In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances. You can find Information about special enrollment at https://www.healthcare.gov/. |
| An increase in your income may allows you to contribute part of your cash wages to a retirement plan on a pretax basis. These deferred wages are not subject to state or IRS tax withholding and are not reported on Form 1040. |
| Your summertime vacation may tempt you to take part into all sorts of charitable events. If so, try to keep better records of the items you donate to charity this year, so you can get the biggest write-off possible at tax time. |
Noting every item you donate (instead of "one bag of clothing," for example) may seem like a lot of work, but it will pay off at tax time by giving you the biggest IRS tax deduction possible.
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| Some good tax planning should be taken into consideration all year round, not just on April 14. A little foresight now can put you in a much better position when tax time comes around again. And, of course, advice from a tax professional may prove invaluable in all your dealings with the IRS. |
