Top five tax developments of 2014
Posted On: 2-6-2015 | Posted By: Debra Harrington, CPA
2014 is in the history books, but there were some law changes and regulatory updates made last year that affect many taxpayers. We’re highlighting the top five tax developments of 2014 below.
The Affordable Care Act
In many ways, 2014 was a transition year for the Affordable Care Act. One of the most far-reaching requirements, the individual shared responsibility provision, took effect on January 1, 2014. Another key provision, the employer shared responsibility, was delayed (in 2013) to 2015. However, employer reporting under Code Section 6605 was not delayed. The IRS also issued guidance on the Code Section 36B premium assistance tax credit and other provisions of the Affordable Care Act.
Meanwhile, the Supreme Court recently announced it would review a decision by the Fourth Circuit Court of Appeals upholding IRS regulations on the Code Section 36B premium assistance tax credit, a critical component to making the Affordable Care Act viable nationwide.
New regulations relating to tangible property and repairs
This was one of the biggest changes affecting businesses and individuals operating businesses or owning rental real estate. The regulations apply to tax years beginning on or after January 1, 2014 and can be quite overwhelming. Basically, those who are affected are required to file a Form 3115, Application for Change in Accounting Method, for each business entity in order to be in compliance.
There is a “de minimis” rule that provides a safe harbor amount per invoice or item of tangible property purchased. If the taxpayer has a written policy in place for its financial accounting books and records as of the effective date of January 1, 2014, an election can be made on the tax return each year to expense each item up to a specified dollar limit instead of capitalizing it.
More information about tangible property repair regulations is available on our website.
As has been its habit, Congress left the country hanging in limbo in regard to what is known as the “tax extenders”. Various tax provisions expired at the end of 2013, and Congress didn’t act until mid-December 2014 to extend those provisions retroactively to January 1, 2014. Unfortunately, with the end of the year came renewed uncertainty – those provisions expired again on January 1, 2015, and we could be waiting a while to learn whether Congress will extend them for 2015, leaving us again in a guessing game.
Some of the more popular business provisions extended for 2014 include:
- 50% bonus depreciation for assets placed in service in 2014;
- under Section 179, a $500,000 expensing allowance and $2 million phase-out threshold for qualifying assets placed in service during 2014 ;
- research and development credits;
- work opportunity tax credit;
- new markets credits; and
- energy-efficient credit for contractors.
In addition, there was reinstatement of tax extenders affecting individuals:
- tax-free distribution from individual retirement account for taxpayers 70 1/2 or older, made directly to a charitable organization;
- energy-efficient home improvement tax credit; and
- tuition deduction.
Identity theft and phone scams
In 2014, the IRS saw an uptick in identity theft via fraudulent filing of tax returns and other scams. We expect to see this again in 2015, so beware!
Identity theft is an increasing problem and takes considerable time to rectify. The typical scenario is a fraudulent return filed using stolen personal information before the taxpayer has filed their return. The fraudulent return would reflect a refund, which the thief then attempts to collect. This ruse is exposed when the real taxpayer attempts to file his or her return. If the taxpayer is also expecting a refund, it is held up until the situation has been resolved. The IRS has formal procedures for handling identity theft, so it is imperative to contact your WK advisor so we can help you comply with the process as soon as identity theft is suspected.
Remember, the IRS will never initiate contact with taxpayers via telephone call, email or any type of social media. Nor will the IRS ever:
- call to demand immediate payment, or call about taxes owed without first having mailed you a bill;
- demand that you pay taxes without giving you the opportunity to question or appeal the amount they say you owe;
- require you to use a specific payment method for your taxes, such as a prepaid debit card;
- ask for credit or debit card numbers over the phone; or
- threaten to bring in local police or other law-enforcement groups to have you arrested for not paying.
Statement of Specified Foreign Financial Assets
The IRS and Treasury again increased their focus on U.S. taxpayers reporting foreign income and assets under the Foreign Account Tax Compliance Act (FATCA). Form 8938 is now required to be filed with Form 1040 if you are a “specified individual” with an interest in specified foreign financial assets and the value of those assets exceeds the applicable reporting threshold. This form is in addition to the required FBAR Form 114 filing requirement. US citizens and resident aliensare considered specified individuals, and the reporting threshold is assets of at least $75,000 on the last day of the tax year for married couples filing jointly or $50,000 for single taxpayers. There is a stiff $10,000 penalty for not filing the form if required.
We have just touched the surface of the various issues facing taxpayers during this tax filing season and going forward. For further explanation and guidance on any of the above topics, please give us a call at (573) 442-6171 or (573) 635-6196.