2015 Tax Season Commences January 20
By Rafique S.M. Ahmed
H.R. 5771, the "Tax Increase Prevention Act (TIPA) of 2014" was signed into law by President Obama on December 19, 2014 extending more than fifty already expired or expiring individual, business and energy tax breaks for another year. This also paved the way for the Internal Revenue Service to do the necessary programming to accommodate the changes resulted from the TIPA without further delay.
The IRS is confident of making all required changes within thirty days and has recently announced the commencement of 2015 tax season on January 20, 2015 which will also be the first day of electronic filing and processing tax returns for the IRS.
The US Congress cut the IRS budget by $346 million for the budget year that ends in September 2015 making the IRS Commissioner, John Koskinen very upset and extremely concerned since the budget cuts would have an adverse affect on the quality of service. The IRS Commissioner recently said," Budget cuts at the IRS could delay tax refunds, reduce taxpayer services and hurt enforcement efforts. About half the people who would call the IRS for assistance this filing season won't be able to get through to a person, and once returns are filed, there will be fewer agents to audit them." Over all, the quality of service at the IRS would be drastically compromised and would also have a negative impact on its ability to collect delinquent taxes.
The US government broke all previous records and brought in $3.02 trillion in tax and other revenues in fiscal 2014. $1.39 trillion came from individual income taxes; $320.7 billion from corporate income taxes; and #1.03 trillion from social insurance and retirement receipts.
The following are the other significant changes in the tax landscape of 2014 which may affect your tax returns:
- Same-sex legally married couples will be recognized as married when filing their 2014 Federal income tax returns. They will be required to file as married filing jointly or married filing separately. The ruling does not apply to registered domestic partners, civil unions, or other relationships recognized by state law. Same-sex couples are also allowed to amend the previously filed Federal tax returns that are still open under the statute of limitations, namely 2011, 2012 and 2013.
- The adoption credit in 2014 has increased to $13,190 of total costs. Form 8839 must be completed. The adoption credit is completely phased out if the taxpayer's modified AGI is in excess of $237,800.
- Personal and Dependent Exemption amount increased to $3,950 and is subject to phase-out if income exceeds specified amounts.
- Social Security Tax will be withheld by employers at 6.2% up to a maximum wage limit of $117,000.
- Standard Deduction for each filing status also increased for 2014.
- Foreign earned income exclusion increased to $99,200 for 2014.
- The tax rate of 39.6 percent affects Singles with income exceeding $ 406,750 and Married filing jointly with income in excess of $ 457,600.
- The exemption amounts for the Alternative Minimum Tax for 2014 are $52,800 for single individuals and heads of household and $80,800 for married couples filing a joint return and surviving spouses.
- Standard mileage rates for business use of vehicle and also for medical care or move of residence decreased to 56 cents per mile and 23.5 cents per mile respectively. No change in 14 cents per mile for charitable use.
- Mortgage Forgiveness Debt Act of 2007 for short sales, foreclosures and loan modification of principal residence up to the maximum amount of debt of $2 million was extended through December 31, 2014.
- Certain teaching expenses up to $250 for elementary and secondary school teachers were extended through 2014.
- Mortgage insurance premiums deduction treated as mortgage interest extended through 2014 and is subject to phase-out for taxpayers with AGI of $100,000 or more.
- Deduction of State and local general sales taxes also extended through 2014.
- Tax-free distribution from individual retirement plans for charitable purposes extended through 2014.
- The R&D credit of 20 percent for qualified research expenses or a 14 percent alternative simplified credit also extended through 2014.
- 50 percent Bonus Depreciation for certain property acquired and placed in service during 2014 with a longer production period extended through 2014.
- Credit for qualified energy improvements up to $500 extended through 20014.
- Credit for energy-efficient new homes extended through 2014.
- Above-the-line deduction for qualified tuition and related expenses for higher education extended through 2014.
( Rafique S.M. Ahmed is a professional Tax Accountant and has been providing accounting and tax services in California for more than thirty-five years. He is also an Authorized IRS Electronic Filing Provider. His office, Automated Tax and Financial Services is located at 1109 Via Verde, San Dimas, California 91773. He can be reached at (909) 599-1412 or (909) 599-1414.)