The end of the year will be here before you know it, but there’s still time to take steps that may help reduce your 2014 tax liability. Here are some ideas to consider.
Increase tax-advantaged retirement contributions. If you participate in a workplace retirement plan, the deadline to make 2014 contributions is December 31. Your employer’s plan may allow you to increase or decrease contributions at any time. IRA contributions for 2014 can be made up to the April 15, 2015, tax filing deadline. (See chart for retirement plan contribution limits.)
Consider deferring income. Depending on your situation, consider deferring income (including investment income) to next year. Because the tax rates on income, dividends, and capital gains are permanent, it should be easier to strategize from one year to the next. Keep in mind that if your modified adjusted gross income exceeds $200,000 ($250,000 if filing jointly), you might be affected by the 3.8% unearned income tax on net investment income.
Contribute to charity. Contributions of cash and noncash items to qualified charitable organizations are generally deductible if you itemize deductions. Be sure to keep all receipts and other documents required by the IRS.
Make January payments early. If you itemize, paying your January mortgage payment this year could increase your interest deduction. If possible, consider making other payments before the end of the year, such as business expenses if you are self-employed.
Use your FSA. Although this probably won’t change your tax liability, be sure to use funds from health-care and dependent-care flexible spending accounts (FSAs) by December 31. Depending on how they’re set up, some plans may allow a carryover or grace period to use any leftover funds.
Even if you began tax planning earlier in the year, you may have a clearer picture of your financial situation now, so it might be worthwhile to reexamine your strategy. Before you take any specific action, be sure to consult with us.
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright 2014 Emerald Connect, LLC.
Capital gains are the profits realized from the sale of capital assets such as stocks, bonds, and property. The capital gains tax is triggered only when an asset is sold, not while the asset is held by an investor. However, mutual fund investors could be charged capital gains on investments in the fund that are sold by the fund during the year.
There are two types of capital gains: long term and short term; each is subject to different tax rates. Long-term gains are profits on assets held longer than 12 months before they are sold. The American Taxpayer Relief Act of 2012 instituted a 20% long-term capital gains tax rate for taxpayers in the 39.6% income tax bracket and extended both the 0% capital gains tax rate for individuals in the 10% and 15% tax brackets and the 15% capital gains tax rate for all other tax brackets. Short-term gains (on assets held for 12 months or less) are taxed as ordinary income at the seller’s marginal income tax rate.
The taxable amount of each gain is determined by a “cost basis” — in other words, the original purchase price adjusted for additional improvements or investments, taxes paid on dividends, certain fees, and any depreciation of the assets. In addition, any capital losses incurred in the current tax year or previous years can be used to offset taxes on current-year capital gains. Losses of up to $3,000 a year may be claimed as a tax deduction.
If you have been purchasing shares in a mutual fund over several years and want to sell some holdings, instruct your financial professional to sell shares that you purchased for the highest amount of money, because this will reduce your capital gains. Also, be sure to specify which shares you are selling so that you can take advantage of the lower rate on long-term gains. The IRS may assume that you are selling shares you have held for a shorter time and tax you using short-term rates.
Capital gains distributions for the prior year are reported to you by January 31, and any taxes that must be paid on gains are due on the date of your tax return.
Higher-income taxpayers should be aware that they may be subject to an additional 3.8% Medicare unearned income tax on net investment income (unearned income includes capital gains) if their adjusted gross income exceeds $200,000 (single filers) or $250,000 (married joint filers). This is an outcome of the Patient Protection and Affordable Care Act.
The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. © 2014 Emerald Connect, LLC
How will you position your portfolio for rising interest rates?
• Yields of many traditional fixed-income investments are low and their value could decline as interest rates rise
• Senior secured loans are designed to help address these challenges
In the next month we will be hosting a free informational seminar. Our goal is to help you understand how to find dependable sources of meaningful income in today’s low interest rate environment.
Topic: Protect Against Rising Interest Rates
Date: September 23, 2014, 5:00 p.m.
Location: 4312 Woodman Ave.Ste. 200 Sherman Oaks, CA 91423-5548
Please RSVP as space is limited. You can call the office at (818) 501-7788 or e-mail email@example.com.
In observance of the holiday our office will be closed on July 4th, 2014. We will be open for normal business hours on July 7th, 2014.
For your convenience we have put together a list of other businesses that will not be open on Independence Day:
Banks and Financial markets are closed.
Government offices, including the DMV and libraries will be closed.
Schools are closed.
Have a fun and safe independence day!
Many parents pay for childcare or day camps in the summer while they work. If this applies to you, your costs may qualify for a federal tax credit that can lower your taxes. Here are 10 facts that you should know about the Child and Dependent Care Credit:
1. Your expenses must be for the care of one or more qualifying persons. Your dependent child or children under age 13 usually qualify. For more about this rule see Publication 503, Child and Dependent Care Expenses.
2. Your expenses for care must be work-related. This means that you must pay for the care so you can work or look for work. This rule also applies to your spouse if you file a joint return. Your spouse meets this rule during any month they are a full-time student. They also meet it if they’re physically or mentally incapable of self-care.
3. You must have earned income, such as from wages, salaries and tips. It also includes net earnings from self-employment. Your spouse must also have earned income if you file jointly. Your spouse is treated as having earned income for any month that they are a full-time student or incapable of self-care. This rule also applies to you if you file a joint return. Refer to Publication 503 for more details.
4. As a rule, if you’re married you must file a joint return to take the credit. But this rule doesn’t apply if you’re legally separated or if you and your spouse live apart.
5. You may qualify for the credit whether you pay for care at home, at a daycare facility or at a day camp.
6. The credit is a percentage of the qualified expenses you pay. It can be as much as 35 percent of your expenses, depending on your income.
7. The total expense that you can use for the credit in a year is limited. The limit is $3,000 for one qualifying person or $6,000 for two or more.
8. Overnight camp or summer school tutoring costs do not qualify. You can’t include the cost of care provided by your spouse or your child who is under age 19 at the end of the year. You also cannot count the cost of care given by a person you can claim as your dependent. Special rules apply if you get dependent care benefits from your employer.
9. Keep all your receipts and records. Make sure to note the name, address and Social Security number or employer identification number of the care provider. You must report this information when you claim the credit on your tax return.
10. Remember that this credit is not just a summer tax benefit. You may be able to claim it for care you pay for throughout the year.
For more on this topic, see Publication 503 on IRS.gov.
The Internal Revenue Service announced the successful start of its new web-based system — IRS Direct Pay — on IRS.gov, which lets taxpayers pay their tax bills or make estimated tax payments directly from checking or savings accounts without any fees or pre-registration.
“IRS Direct Pay reflects our latest effort to add more online tools to provide additional service options to help taxpayers,” said IRS Commissioner John Koskinen. “IRS Direct Pay simplifies the payment process, and taxpayers can make a payment from the convenience of a home computer.”
To date, more than 150,000 taxpayers have paid more than $340 million in taxes through the new IRS Direct Pay system. With IRS Direct Pay, taxpayers receive instant confirmation that the payment has been submitted, and the system is available 24 hours a day, 7 days a week. Bank account information is not retained in IRS systems after payments are made.
From the “Pay Your Tax Bill” icon at the top of the IRS home page, taxpayers can access IRS Direct Pay, which walks the taxpayer through five simple steps. The steps include providing your tax information, verifying your identity, entering your payment information, reviewing and electronically signing and recording your online confirmation.
IRS Direct Pay offers 30-day advance payment scheduling, payment rescheduling or cancellations, and a payment status search. Future plans include an option for e-mailed payment confirmation, a Spanish version and one-time registration with a login and password to allow quick access on return visits.
For more information, please visit www.irs.gov.
Today is the big [tax deadline] day: April 15th, 2014. If you’re scrambling to get your tax returns or payment vouchers post dated, we have compiled a list of local post offices that will have extended hours just for this event. Please see below…
Three postal centers will be staying open until midnight to collect mail:
Los Angeles main office: 7001 S. Central Ave.
Santa Ana: 3101 W. Sunflower Ave
Santa Clarita: 28201 Franklin Parkway
Last-minute mailers should note that the Los Angeles location will only have retail service available until 10 p.m. Retail sales will stop at the Santa Ana location at 7 p.m., and at 5 p.m. in Santa Clarita.
Six other postal locations will have extended hours:
Airport Station, 9029 Airport Blvd., and the Pasadena Post Office, 600 Lincoln Ave., will be open for retail and collection service until 8 p.m.
Long Beach, 2300 Redondo Ave., will have retail service until 7 p.m. and mail collection until 10 p.m.
Industry center, 15421 E. Gale Ave., will have retail service until 6 p.m. and mail collection until 10 p.m.
Van Nuys, 15701 Sherman Way, will be open for retail service and mail collection until 9 p.m.
B&B Pharmacy contract station in Yorba Linda, 18525 Yorba Linda Blvd., will have retail service and mail collection until 10 p.m.
To find additional locations with extended hours, call 800-ASK-USPS (800-275-9777) or search the U.S. Postal Service website.
In our ongoing efforts to provide you with the best, most efficient service possible, we have implemented a new program called CPA SafeSign. This program utilizes Adobe’s EchoSign technology and allows you to review, sign, and return your annual engagement letter electronically — absolutely no printing, mailing, faxing or other paper products needed! This procedure utilizes encryption techniques to safely guard the email attachments.
We are very enthusiastic about the benefits of this system, especially once we saw how simple and straightforward it is.
This new system provides a huge leap forward in efficiency for us, as well as for you, our valued clients, all while offering the pinnacle of industry standard security. We hope that you find it to be every bit as easy to use as we think you will, and we look forward to your feedback and any questions you may have.
Dennis F. Rose
Dennis F. Rose & Associates
As you approach 65, explore your choices and pay attention to the deadlines.
These days, turning 65 doesn’t have to mean hanging up your career. But it does represent one big milestone: Medicare eligibility. In most cases, signing up for Medicare Part A is a no-brainer. This coverage pays for in-patient care in the hospital. There’s generally no premium, although you do pay a deductible and share other costs.
You can sign up as early as three months before the month in which you turn 65 and as late as three months after your 65th-birthday month. To avoid any delay in coverage, enroll before you turn 65, says Joe Baker, of the Medicare Rights Center.
At the same time, you can also enroll in Medicare Part B, which covers doctors’ visits and outpatient care. This coverage exacts a monthly premium ($104.90 for most people in 2013), plus a deductible and coinsurance. (If you’re collecting Social Security when you turn 65, you will automatically be enrolled in Part A and Part B, and the Part B premium will be deducted from your benefits.) If you still have health coverage through work or are covered by your spouse’s employer, you may be better off keeping that coverage and delaying Part B. Ask your employer for help deciding, or call Social Security at 800-772-1213.
Once you lose employer coverage, you have eight months in which to sign up for Part B (you should do so because both retiree health benefits and coverage through COBRA are secondary to Medicare as soon as you’re eligible, whether you sign up or not). If you don’t sign up for Part B within that window, you’ll have to wait until the next open-enrollment period (January 1 to March 31), and your monthly premium will permanently increase by 10% for each 12-month period you delay.
Fill in the gaps. Also consider Medicare supplement coverage, also known as medigap. These plans cover part or all of the costs you would otherwise pay under parts A and B, including deductibles and co-pays. The ten plans are labeled by letter; benefits for each are standardized, but insurers set their own premiums. The six-month initial enrollment period starts on the first day of the month in which you are 65 or older and are enrolled in Medicare Part B. During that window, you can’t be turned away by insurers because of a preexisting condition. Miss the deadline and you could end up paying more or be denied coverage altogether. The Obamacare ban on denying coverage based on preexisting conditions does not apply to Medicare.
Medicare Part D, offered through private insurers, covers prescription drugs. You pay a monthly premium and co-pays or coinsurance, and some plans also have a deductible. The plans cover you up to a certain amount each year, after which you pay a much higher share of the cost—a gap in coverage known as the doughnut hole. Once you’ve hit the maximum out-of-pocket cost for the year, your share goes way down until year-end.
You can join a Medicare drug plan during your Medicare initial enrollment period. If you don’t, and you go 63 days or more without “creditable” coverage (such as through an employer), you will pay a penalty based on the national base premium and on how long you delayed before you enrolled.
Another option: a Medicare Advantage plan, which combines medical and prescription-drug coverage and other benefits, such as coverage for vision and hearing care. These plans, offered through private insurers, generally limit your choice of providers and require more cost sharing than Part D and medigap, but premiums tend to be lower. You can enroll in a plan during your initial enrollment period or during open enrollment (October 15 to December 7). To find medigap, Part D or Medicare Advantage plans in your area and compare premiums, go to www.medicare.gov/find-a-plan.
To read read more click here.
Source: Kiplinger’s Personal Finance, December 2013
The information in this article is not intended as tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor. The content is derived from sources believed to be accurate. Neither the information presented nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. This material was written and prepared by Emerald. Copyright © 2014 Emerald Connect, LLC.
The new federal budget legislation did not include any new tax provisions – or extenders to expiring tax breaks. So, even though the IRS won’t be ready for prime time until January 31, 2014, we can finalize our tax planning.
Here’s what you can still do to take advantage of expiring tax breaks:
•The $250 above-the-line deduction for school teachers – no doubt, by now, you’ve already spent more than this for your classroom and students. In fact, you probably have excess costs which you will report as itemized deductions.
•In 2013, we have a $4,000 above-the-line deduction for certain education expenses.
•The deduction for state and local sales taxes was a boon for folks living in states without an income tax. It leveled the deduction playing field with residents of states with income taxes. With this benefit about to expire, this month is a good time to buy high-ticket items that you were going to buy anyway. Like what? Buy a new car, boat or big-screen television or monitor after the Christmas rush. You’ll get a good deal (especially on last year’s models or dealer’s loaners).
•The deduction for mortgage insurance is disappearing next year. There’s not much you can do about this, except to make the January payment in December. You’ll get one final bite at that apple.
•Seniors who face the required minimum distribution rules have benefited from a special deal which has been extended repeatedly for the last couple of years. You could draw up to $100,000 from your IRA account and donate the funds directly to your favorite charity. This draw would benefit you in several ways:
- You would not have to pay taxes on the amount withdrawn.
- It would qualify as your required minimum distribution (RMD) for the year – if the amount drawn was higher than the RMD.
- It would reduce the amount in your IRA so your heirs would face somewhat less in taxes upon your death.
- Folks who normally tithe to their preferred charities could use IRA monies to fund their tithes.
- The one drawback is, there is no charitable deduction for these donations.
•Suggestion for people who don’t have a specific charity to which you’d like to make a big donation: Set up a donor-advised fund to receive the money this year. Next year, you can determine the charity or charities of your choice.
For more information on this topic you can read the full article here.