2014 Tax Changes You Need to Know About

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Every year there are changes in the tax laws. This year is no exception. Although the final changes are never completely known until the end of the year, here are some things we do know. As the year comes to a close it’s important to consider how these changes will affect your tax strategy.

  1. The biggest change will be the health care reform. We have covered this in previous posts. We encourage you to check them out and check with your tax advisor as to how it personally affects you.
  2. Social Security wage base increases this year. This is the maximum amount you can make and still have to pay Social Security tax. The new limit is $117,000 up $3,300 from last year.
  3. The amount you can contribute to a HSA (Health Savings Account) has gone up slightly for 2014 you can contribute $6,550 for family coverage and $3,300 for self coverage. People born before 1960 can contribute and extra $1,000.
  4. US taxpayers working abroad have a slightly larger exclusion. They can exclude up to $99,200 of their income while working abroad as long as they have been working out of the country for one year.
  5. Student loan interest will be limited for tax payers whose AGI exceeds $130,000 for couples and $65,000 for singles.
  6. The Lifetime Learning Credit begins to phase out at higher income levels. For singles it starts at $54,000 of income and for couples, $108,000.
  7. The adoption credit can be taken on up to $13,190 of costs, a boost of $220. However the full credit is available for special needs adoptions, even if the cost is less.
  8. The 2014 income tax brackets are a tad wider than those of 2013. This means that taxpayers can earn a little more before they bump up to a higher tax bracket.
  9. The standard deduction is up $200. Personal exemptions are up $50 per person.
  10. The gift tax exclusion (how much you can gift a person) stays the same at $14,000 per gift. Remember gifts are not tax deductible to the person giving the gift and not taxable to the recipient.
  11. The standard mileage rate has gone down to 56 cents per mile for business driving. Medical mileage and moving mileage is at 23.5 cents per mile and charitable mileage is still 14 cents per mile.

Things that have expired, but are anticipated to be reinstated are:

  1. The amount of business assets that can be deducted changed. It was $500,000 and now is $250,000.
  2. The 50% bonus depreciation has expired.
  3. Several business tax breaks are gone such as the R&D tax credit, 15% depreciation for restaurant renovations and the work opportunity tax credit for hiring disadvantages workers.
  4. The ability for taxpayers 70 ½ and older to make charitable contributions of $100,000 per year from their IRAs also expired.

These are the changes that affect the majority of people. Look for future posts as we solidify these changes.

If you have any questions about how these changes will affect your taxes next year, contact us!

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Update to the iPhone 6 and Save by Deducting it on Your Taxes

iphone-5s-laying-on-mac

Photo provided by flickr.com

Every business, today, must have a phone and the Internet to operate. Smart phones are becoming an integral part of every entrepreneur’s life. They keep us organized, allow us to answer emails on the go, allow us to take notes, allow us to checkup on the competition, and basically look up anything and everything we might need to know. And with cell phone companies constantly releasing newer and better technology, it’s tempting to always want the latest and greatest phone. However, updating to the newest cell phone isn’t cheap. If you don’t have an upgrade system with your carrier you could be paying $500 for that new phone.

Use Taxes to Pay for My Phone?

But what if there was a way to alleviate some of that cost using something you already pay? Like lets say your taxes? And we’re not talking using your precious tax refund in January. We are talking about leveraging your deductions. Because so many people use their cell phone as their primary phone for personal and business use, the IRS has changed the rules for how you can deduct phone usage on your taxes.

There are 3 basic ways to deduct phones:

  1. Using a Phone for a Business: If your business (Corporation or LLC) pays for your cell phone, you can deduct the entire bill and the cost of the phone off your taxes. That doesn’t mean you save dollar for dollar. But you can save in taxes between 22% and 50% of the cost of your phone. So, lets say you purchase a new phone for $299 and your monthly bill is $70.00, you could save as much as $569.00 per year (About the cost of a new phone without an upgrade!). That is cash in your pocket. If you need a new phone (or want the latest phone) and you operate a business, it will definitely save you money.
  2. Using a Personal Phone for Business: If you use your personal phone for business, the IRS will require you to look at your bill and divide the personal calls from the business calls. They will also require you to determine how much of the internet and other services are for business vs. personal. This is still a savings, but more like 10% to 25%.
  3. Using a Personal Phone but Not Self-employed: If you use your personal phone for your W2 job, you can only deduct the portion you use for business as in example 2. Plus, you will need to have something in writing, such as company policy, that says you are required to use your cell phone for your job and that you do not get reimbursed. If your employer doesn’t require you to have a cell phone then you cannot deduct any portion of it.

Phones are an ordinary and necessary part of doing business. Be sure to set up your phone so that you can deduct the most of your phone expense as possible.

Have questions? Contact us at soulence.com.

IRS Scams Update

man sitting in a chair talking on the phone looking a bit sketchy

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As tax preparers, it is our responsibility to keep current with all the IRS changes. In order to do that we subscribe to a newsletter published by the IRS. Here is one we received this week and we feel it is important to share it with you.


 

Scam Phone Calls Continue; IRS Identifies Five Easy Ways to Spot Suspicious Calls

WASHINGTON — The Internal Revenue Service issued a consumer alert today providing taxpayers with additional tips to protect themselves from telephone scam artists calling and pretending to be with the IRS.

These callers may demand money or may say you have a refund due and try to trick you into sharing private information. These con artists can sound convincing when they call. They may know a lot about you, and they usually alter the caller ID to make it look like the IRS is calling. They use fake names and bogus IRS identification badge numbers. If you don’t answer, they often leave an “urgent” callback request.

“These telephone scams are being seen in every part of the country, and we urge people not to be deceived by these threatening phone calls,” IRS Commissioner John Koskinen said. “We have formal processes in place for people with tax issues. The IRS respects taxpayer rights, and these angry, shake-down calls are not how we do business.”

The IRS reminds people that they can know pretty easily when a supposed IRS caller is a fake. Here are five things the scammers often do but the IRS will not do. Any one of these five things is a tell-tale sign of a scam. The IRS will never:

  1. Call you about taxes you owe without first mailing you an official notice.
  2.  Demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe.
  3. Require you to use a specific payment method for your taxes, such as a prepaid debit card.
  4. Ask for credit or debit card numbers over the phone.
  5. Threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.

If you get a phone call from someone claiming to be from the IRS and asking for money, here’s what you should do:

  • If you know you owe taxes or think you might owe, call the IRS at 1.800.829.1040. The IRS workers can help you with a payment issue.
  • If you know you don’t owe taxes or have no reason to believe that you do, report the incident to the Treasury Inspector General for Tax Administration (TIGTA) at 1.800.366.4484 or at www.tigta.gov.
  • If you’ve been targeted by this scam, also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov. Please add “IRS Telephone Scam” to the comments of your complaint.

Remember, too, the IRS does not use email, text messages or any social media to discuss your personal tax issue. For more information on reporting tax scams, go to www.irs.gov and type “scam” in the search box.


 

If you have received communication from the IRS or someone posing as the IRS but are not sure, feel free to contact us at soulence.com.