October 31, 2014
Additional information about 2014 tax planning from Sechrest

We recently sent out our standard year-end tax planning letter to you via e-mail.  However, in this most unusual tax season of 2015, almost all Americans will likely be seeing changes on their tax returns.  Congress continues to discuss last minute income tax bills as of the date of this letter, and you can be assured we stay abreast of all the latest changes as they occur!   Our standard year-end planning letter that we sent out (as well as the 2014 Tax Organizer we'll be sending you in January) may not be enough and we wanted to reach out to you with the information below as well.

Affordable Care Act
All Americans will be affected in some manner by the Affordable Care Act from 2010 (some people call it 'Obamacare').  5 new tax forms were released by the IRS as a result of this act for 2014.  If you receive(d) a Form 1095 from any issuer or agency, we MUST have all copies to prepare your tax return.  If you did not receive a 1095, we must ask you a number of additional questions about insurance coverage so that we can help you avoid any penalties for failure to have health insurance.  The new 5 forms will likely add additional costs to this year's tax preparation bill, courtesy of the Affordable Care Act and the estimated additional time on our part to get things right.

Health Care Deductions
Last year's tax bill reduced your deduction for medical costs, including health insurance for 2014.  We will see very few deductions available for medical costs now unless you have substantial bills.  The amount of your medical expenses in many cases must now be more than 10% of your income before we can deduct anything, so please weigh carefully whether to go to the trouble of summarizing these costs.  If you're self-employed, we still need to know how much you paid for health insurance.

ALL deductions of any amount must have a receipt.  Any individual contribution over $250 must also have an acknowledgement letter from the charity, and the letter must be dated by the date we file your return. The letter should show the date and amount of any individual contribution over $250 and should also state that no goods or services were received in return for the contribution.

Foreign Accounts
If you've read any news in the last year, you likely know that the IRS is looking closely for offshore accounts.  If you have an account, retirement account, or business interest with a value over $10,000 in a foreign country, or a foreign business ownership (not through a mutual fund), please let us know as some special rules will apply to you.  There are substantial penalties for failure to disclose these items.

Mortgage Interest
We must obtain Form 1098 from you when you pay mortgage interest. Additionally we must obtain refinancing closing statements, and if you drew money out on a home mortgage or refinancing we must have general information on the use of the money according to the IRS.

Children/Student Tax Returns
Under absolutely no circumstances should you allow your dependent children or college students to file their own returns this year.  We strongly recommend that we file their return because of the Affordable Car Act.  Allowing a child to file their own return, particularly a student, can cost the child and parent literally thousands of dollars in Health Care penalties and/or credits.

Rental Property
If you own rental property, this year the IRS has demanded substantially more information.  We now need, FOR EACH PROPERTY SEPARATELY, the physical location, the type of property (single-family, duplex, etc), and Forms 1099-K received, and a record, by property, of the number of days rented and the number of days used for personal purposes.

Roth IRA Conversions
You'll likely continue to hear from lots of "experts" this year that you need to convert your retirement accounts to Roth IRAs.  While there are a number of advantages to conversions, there are an equal number of disadvantages that carry some major tax consequences.  Please do not convert your accounts in 2014 without coming in to see us for an appointment to discuss both the positives and negatives. All conversions for 2014 must be completed by December 31, 2014.

Gift Changes
Effective 1/1/2013, the amount you may give to one person in one year without any return filing requirements was increased to $14,000.  Fewer Americans need to worry about Federal estate taxes because of changes in the estate tax limit at the Federal level (although each State has its own estate tax rules to be aware of).   If you have questions about this, please let us know.

If you're in what the press has called the '2% club' (i.e., the top 2% of income earners in America), be aware that the rest of America will soon be joining you!  When the surtaxes on this group of Americans were passed, Congress purposefully did not adjust the thresholds for inflation, and in 6 years, over 50% of all Americans will pay these surtaxes based on estimated inflation rates.  Begin planning now whether you're a 2% club member or not by considering the following (likely in this order) - maximizing 401(k) contributions; utilizing employer-sponsored cafeteria plans to their fullest limit; investigating and using employer sponsored fringe benefits such as child care and education; turn in job expenses for reimbursement; and consider your marital status as your income increases because of the incredible marital penalty built in to the surtaxes.

Tax Planning
There's still time to setup an appointment for year-end tax planning by December 31.  We recommend a meeting if you've had any major changes during 2014 or are expecting major financial changes in 2014 or 2015, such as retirement, inheritances, etc.

Future Income Tax Rates & Other
We highly recommend that when you're getting your information to us for preparing your 2014 Federal tax return, you also set an appointment for an after tax season "Tax Tune Up" to examine tax and estate planning strategies.  If your income is over $200,000, it's almost mandatory that we meet for future tax planning because of surtaxes.

If you receive any Form 1099-Ks, please be sure to bring them to us. They may have a direct impact on your return.

There are literally hundreds of other changes, extensions and deletions that we will consider this year while preparing your return. Because of these changes, we're requesting everyone to try to have their tax information in to us as soon as possible.  Please rest assured that we will utilize our best resources to once again provide you with timely, complete and accurate service while keeping your tax burden to the lowest legal amount.