Tax Traps to Beware of in 2014

TaxesWhen Americans all across the country rang in the New Year, many breathed a sigh of relief for more than a few reasons. First of all, taxpayers no longer have to wait for Congress to finish constituting the tax laws that impact their 2013 returns and, secondly, the American Taxpayer Relief Act — which went into effect last spring —  will extend many advantageous provisions for recently filed returns. As significant as these adjustments may be, there are still a few important points you should be aware of this coming year.

Delayed Processing Times  

Most of us are aware that the federal government shut down for 16 days in October, but what a large number of Americans fail to realize is that this had a consequential effect on tax return processing times. As of now, the IRS is sticking to January 31st as the earliest date. Officials, however, are speculating that it might be even later—pushed to February 4th in order to get everything in order. The agency is encouraging individuals to use e-file or Free File to receive refunds faster. If you plan to submit it via mail, then it’s wise to hold off until January 28 or later.

Added Taxes for the Affluent

The 2012 Taxpayer Relief Act comes packed with many perks for low to middle-income Americans but this isn’t the case for all earners. The wealthy, in particular, or those earning more than $400,000 are being hit the hardest by the rates stipulated. If you’re a single filer, and your taxable income surpasses $400,000 not only do you have to pay the ordinary 39.6 percent since you fall in the highest tax bracket but you may also qualify for additional taxes. The one raising the most eyebrows is the Medicare surtax (3.8 percent) which is applied to health programs for aging Americans. Depending on which one’s lower, the tax applies to either your adjusted gross income or net investment income if you make more than $200,000 as a single earner. Finally, you’ll see a reduction in your number of personal exemptions and deductions if you make in excess of $250,000 (as a single earner). Within the U.S., Levy & Associates offers IRS tax help if you’re unsure which exemptions you’re eligible to receive or if you need assistance with any other tax related problem.

Medical Coverage

Come this year, Uncle Sam has got your back in the event of an emergency, but it won’t come cheap. The uninsured will be facing a number of tax implications with the unveiling of the Affordable Care Act (Obamacare) throughout 2014. Enrollment for the program is open until March 31st and if you don’t purchase some type of plan, you will face a penalty of either 1 percent of your household’s income or $95 per adult—whichever is higher. In all, families could face up to $285 out-of-pocket costs. So what if you are insured for only a fraction of the year? Well, your penalty will be prorated when you file for taxes next year (2015).

Navigating through the rules let alone the jargon of taxes can be troubling. Keep in mind these three points to get ahead of the game in 2014 and consult a professional agency for any IRS tax help.