Each year, the IRS publishes its list of the “Dirty Dozen”, the top tax scams that criminals seek to carry out. Criminals carry out the scams by taking advantage of people’s fears or misunderstanding of the tax law.
As each of us grows older and moves into retirement, we will not only earn less income, we may also find that our retirement savings are not going to stretch as far as we thought they might. Therefore, it is important to be frugal when it comes to expenses in retirement, including paying income tax.
As you gather W-2 forms, mortgage statements, and other materials to prepare your income tax return for 2014, there are certain rights afforded to every taxpayer by the IRS that you should know beforehand. The IRS formally adopted these rights, known as the Taxpayer Bill of Rights, in June 2014.
The IRS requires that certain taxpayers take mandatory distributions from their individual retirement accounts (IRAs) before the end of each calendar year. If you are not sure who must take IRA distributions before December 31 of this year, read on to learn more.
In the last few weeks of the year, you may be considering final charitable giving contributions. Such year-end giving make sense, because there are many more giving options highlighted during the holidays to which one can make a qualifying charitable contributions and because it is the last chance during which you can give and have the gift count as a deduction on your 2014 income tax return.
If you are planning to make a year-end charitable contribution, there are several tax law changes you should keep in mind to be sure you are able to take full advantage of your gift from a tax standpoint.
Charitable donations are deductible in the year in which they are made. Therefore, in order for a charitable gift to be deductible from a taxpayer’s 2014 income tax, the donation must be made by December 31, 2014.
The date of a charitable gift is when the funds leave your possession, which is either the date the funds are mailed or the date the funds are charged to your credit card or removed from your bank account.
Charitable Contributions of Non-Monetary Household Items, Including Clothing
When you make a donation of non-monetary household items or clothing, including furniture, electronics, appliances, and other similar items, the items must be in good condition to qualify as a deduction for income tax purposes. If the items are not in working conditions or are damaged, you cannot claim a charitable deduction.
However, if the item is worth $500 or more, the item does not have to be in good or working condition if you obtain an appraisal that supports the value of the item. In addition, if the items are worth more than $250, the taxpayer must obtain a written receipt from the charity that describes the items donated.
Charitable Contributions of Money
For any charitable donation of money, the taxpayer must obtain a bank record or other written statement with the amount contributed, the name of the charity, and the date of the contribution. This requirement applies for any monetary donation, regardless of how small.
Charitable monetary contributions include those made by cash, check, electronic fund transfers, credit card charges, and payroll deductions. Documents that suffice as proof of a donation of money include canceled checks, bank statements, and credit card statements.
In addition, for monetary contributions of $250 or more, the taxpayer must obtain a written acknowledgement from the charity.
Only certain entities are eligible for a taxpayer to deduct any contribution from their income tax. The IRS maintains on their web site the Exempt Organizations Select Check, which is a list of entities that qualify for charitable giving. In addition, any churches or government entities are considered qualified charities even if they do not appear on the IRS’ web site of exempt organizations.
Only taxpayers who itemize their deductions can deduct a charitable contribution from their income tax. A deduction for charitable contributions is not permitted for taxpayers who use the standard deduction.
Taxpayers should always review their standard deduction and all their possible itemized deduction as calculated using Form 1040 Schedule A to determine whether the standard or itemized deduction provide them the most favorable tax position.
How can I get more help with charitable giving as it relates to my income tax return?
You can speak with a tax attorney to get help with charitable contributions for your individual situation. A tax attorney will be able to help make sure any contributions you give qualify as a deduction on your income tax return.
You can speak with a tax attorney by call the phone number at the top of this web site or by completing the form below. The first consultation with a tax attorney is free of charge, so you have every reason to get help today before time runs out.
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With just over a month remaining before the end of the year, 2014 will soon be behind us. Come the start of the new year on January 1, the IRS will usher in various tax changes that taxpayers need to be aware of.
Following are a few of the main tax changes you should keep in mind as we move into 2015.
The IRS is reminding taxpayers how certain taxpayers can save for retirement and receive a special tax credit known as the saver’s credit for the 2014 tax year and years going forward. Since this is a tax credit, the saver’s credit can be used to reduce the amount of tax owed or to increase the amount of a refund received.
The IRS has announced a series of cost of living adjustments for 2015 related to pension plan and 401k contribution limits for federal income tax purposes. This article provides a summary of what changes were made and why the IRS made these changes.
Why did the IRS make these cost of living adjustments for pension plans and 401k contributions?
Section 415 of the Internal Revenue Code requires that the Secretary of Treasury review the pension plan and 401k contribution limits allowed for federal income tax purposes. Section 415 defines the existing thresholds allowed for these contributions and the points at which adjustments will be triggered. In addition, Section 415 requires that this review occur annually to address any cost of living increases.
Because Section 415 defines individual thresholds for each of the many types of contributions, only those contribution types that reach the criteria defined for them will be adjusted in any given year.
When do these changes go into effect?
The changes go into effect on January 1, 2015. This means that taxpayers can first take advantage of the tax savings related to making increased contributions on their tax returns due April 30, 2016.
What cost of living adjustments did the IRS make for pension plan and 401k contribution limits in 2015?
The IRS has made the following adjustments to pension plan and 401k contribution limits.
Employer Retirement Plan Contribution Limits
The elective annual contribution limit for employees who participate in an employer retirement plan has been increased from $17,500 to $18,000. This contribution increase applies to 401k, 403b, 457, and Thrift Savings Plans.
Catch-Up Contribution Limit
The catch-up contribution limit for employees who are 50 years old or older who participate in an employer retirement plan has been increased from $5,500 to $6,000. This contribution increase applies to 401k, 403b, 457, and Thrift Savings Plans.
Traditional IRA Contribution Phase Out
The thresholds have been increased for the phase out of deductions allowed for contributions to traditional IRA plans. For those filing as single or head of household, the phase out that previously occurred between $60,000 and $70,000 in adjusted gross income has been increased to between $61,000 and $71,000.
For those filing as married filing jointly, the phase out that previously occurred between $96,000 and $116,000 in adjusted gross income has been increased to between $98,000 and $118,000 for those whose spouse is covered by a workplace retirement plan when the spouse is making the contribution. For IRA contributors who are not covered by a workplace retirement plan but is married to someone who is covered, the deduction is phased out between $183,000 and $183,000 rather than between $181,000 and $191,000.
Roth IRA Contribution Phase Out
The thresholds have been increased for the phase out of deductions allowed for contributions to Roth IRA plans. For those filing as single or head of household, the phase out that previously occurred between $114,000 and $129,000 in adjusted gross income has been increased to between $116,000 and $131,000. For those filing as married filing jointly, the phase out has been increase from between $181,000 and $191,000 to between $183,000 and $193,000.
Retirement Savings Contribution Credit
The adjusted gross income limit for the retirement savings contribution credit has been increased from $60,000 to $61,000 for those filing married filing jointly, from $45,000 to $45,750 for those filing head of household, and from $30,000 to $30,500 for those filing married filing separately.
How will these pension plan and 401k contribution limits affect me?
How these changes will affect you will depend on your individual circumstances, as the affect varies on your filing status, level of income, and the types of plans made available to you by your employer. To get help, you need to speak with a tax attorney.
A tax attorney will have the education and experience to apply these tax law changes to your situation. By completing the form below or call the number located at the top of this web site, you can get the help you need to make sure you maximize your tax savings based on these changes. Since the initial consultation is free of charge, you have every reason to make the call today.
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The Taxpayer Advocate Service, or TAS, is an independent organization within the IRS. The goal of the Taxpayer Advocate Service is to help make sure that when taxpayers raise issues to the IRS, the IRS hears those issues clearly and addresses them fully.
The Affordable Health Care Act, otherwise known as ObamaCare, is designed to make sure every patient has an opportunity to buy insurance that is affordable based on his or her level of income. Beginning with the 2014 tax year—that is, tax returns that taxpayers must file by April 15, 2015—ObamaCare will begin to affect the income tax owed on each taxpayer’s federal income tax return.