Wondering how the health insurance laws will affect your 2014 individual income tax return? Here are two new items you may need to include on this year’s Form 1040.
- Penalty for not having health insurance. You may owe a penalty if you were uninsured for more than three months during 2014 or if you had health insurance that failed to meet minimum requirements. For your 2014 return, the penalty, also called the shared responsibility payment, is calculated either as a percentage of your household income or as a flat fee of up to $285 per family.
If you qualify for an exemption from the penalty, you’ll need to file Form 8965 indicating what exemption applies. For 2014, exemptions include unaffordable coverage, a short gap in coverage, and various hardships such as foreclosure, bankruptcy, or medical expenses that resulted in substantial debt.
In some cases, you will need an application from the government health insurance website to claim an exemption.
- Premium tax credit. Did you purchase health insurance on the government marketplace website? If you meet other requirements such as specific income limits, you may be eligible for the premium tax credit. This federal income tax credit will reduce your tax dollar-for-dollar and could result in a refund.
When you completed your health insurance application, you may have elected to receive the premium tax credit throughout 2014 in the form of reduced premiums. If so, you’ll need to fill out a new tax form (Form 8962) to reconcile the amount you received during the year with the amount you’re eligible to claim.
We’re ready to help you navigate the new rules. Give us a call.
Tax law changes put in place by the 2010 health insurance laws are still taking effect. The changes include two new forms that may be part of your 2014 federal income tax return.
Please call Carl Heinemann, your Chattanooga CPA, so we can help make sure you have all the information necessary to complete these forms accurately.
To prepare your 2014 federal income tax return, you must determine which one of five filing status options fits your situation.
Here’s an overview.
- Single. You’re considered single if you’re unmarried, divorced, or legally separated as of the last day of the tax year.
- Married filing jointly. When you’re legally married under the laws of your state, you can elect to combine your income with that of your spouse and file a joint return.
- Married filing separately. Separating your tax liability from that of your spouse can be beneficial in some situations. Be aware that certain breaks, such as the child and dependent care credit, may not be available if you chose this filing status.
- Head of household. This is the filing status to use if you’re single and provide more than half the cost of maintaining a household for a dependent who lives with you. Head of household tax brackets are more generous than those for single filers, but less broad than the brackets for married filers who complete a joint return.
- Qualifying widow or widower. You may be able to benefit from the favorable tax rates of joint filers and claim the highest standard deduction for up to two years after the death of your spouse if you remain unmarried during that time. To qualify, you must maintain a household for a dependent child who lives with you.
Your filing status affects many tax calculations, including deductions, credits, and tax due. Please call Carl Heinemann, your Chattanooga CPA, if you’re not sure which status is right for you. We’re here to help.
The new year offers fresh opportunities for getting your tax and financial planning underway. Here are three suggestions for starting 2015 in the right direction.
- Check your health flexible spending account (FSA) rules. Your employer may offer a “run-out” period, a grace period, or the ability to carry over unused funds in your FSA. Understanding which features are part of your plan can prevent lost benefits.
A “run-out” period is the number of days you can continue to submit claims for last year’s eligible expenses. The number of days can vary, but generally you’ll want to take advantage of the run-out period during January.
A grace period typically lasts until March 15, and is an extension of time that allows you to incur medical expenses and use last year’s leftover FSA funds to pay them.
A carryover feature means you can bring a portion of last year’s FSA contribution — up to a maximum of $500 — into the current year. The carryover does not change the amount you can deposit in your FSA during the current year.
What to watch out for: Grace periods and carryover features may restrict your ability to fund a health savings account for 2015.
Please call Carl Heinemann, your Chattanooga CPA, for more tax and financial planning advice. We’re happy to answer your questions.
Planning for emergencies is like buying insurance: you pay into an account, and hope you’ll never have to use it. But life happens. Cars break down. Roofs leak. Kids break arms. Having money in the bank to cover those unexpected expenses can reduce stress and keep you from relying on credit cards and loans to make ends meet.
Here are four easy and effective ways to establish and maintain an emergency fund.
- Start small. Many financial planners advise setting aside enough money to cover at least six months of expenses. That’s a worthy goal. But for many people it’s also a daunting task, an objective that will take years — not months — to achieve. So be realistic. Set a realistic and achievable amount for your emergency fund, then get in the habit of contributing regularly, even if it’s only a small amount each week. Then don’t touch the account except for real emergencies. Leave it alone and it will grow.
- Pump it up. When you get a bonus, cost-of-living adjustment, tax refund, or windfall, consider using a portion of that money to bolster your emergency account. Fight the temptation to increase spending with every new dollar that comes along.
- Make it automatic. With online banking, it’s easy to set up routine transfers from your regular checking account to a separate savings account. If allowed by your employer, allocate a portion of each paycheck to an emergency fund. Consider establishing the account at a financial institution other than your regular bank. As the saying goes, “Out of sight, out of mind.” If the money never shows up in your regular checking account, you’ll be less likely to use it for everyday spending.
- Sell stuff and slash expenses. Yard sales, online auctions, consignment shops — selling items via such venues can generate cash to bolster your emergency fund. Take a hard look at your budget and consider everything fair game: expensive dinners, vacations, cable television, and so on. You may find that a surprising number of dollars can be freed up and stashed away in savings. The key, of course, is to direct those savings — immediately, if possible — away from regular spending and into your emergency account.
When facing life’s inevitable bumps in the road, an emergency fund is essential to maintaining financial security. If you’d like more ideas for setting financial goals or building up an emergency fund, give Carl Heinemann, your Chattanooga CPA, a call.
Taking a systematic look at your operations and finances — sometimes called an internal audit — is often the best way to improve your company’s efficiency and effectiveness. Though small companies rarely have an internal audit division, business managers can perform many of the same types of reviews as their larger counterparts, and reap many of the same benefits. Here’s how to get started.
- Make a plan. The beginning of a new year or the start of a new business cycle is often an ideal time to plan your internal audit. You’ll want to brainstorm with managers and staff about your business’s greatest risks, and consider operational areas where you’ll gain the greatest “bang for the buck.” In other words, don’t approach the review haphazardly. Perhaps inventory is a significant line item on your balance sheet. Ask how you might decrease holding times by doing a better job of forecasting demand. Consider controls over inventory. Are they functioning as intended? Once you’ve made a list of your priorities — in terms of both risk and efficiency — develop audit procedures to address those areas.
- Perform the audit. Audit procedures don’t need to be overly complicated, especially if your business has only a few major operational cycles. Let’s say, for example, that you purchase goods at wholesale and resell them. You’ll want to make sure that purchase orders are processed correctly, goods are inspected when received, invoices are properly entered into your accounting system, and vendors are paid in a timely manner. Each of these areas can be audited by selecting a few transactions and following them through the process, looking for proper authorization, accurate accounting, and timely payments. Focus on a different cycle or a different aspect of the same cycle every few months.
- Review the results. Your internal audit might identify controls that aren’t functioning as intended or areas where controls need to be added or strengthened. For example, is inventory protected from intentional and unintentional errors? Or you might discover inefficiencies that can be corrected without much additional effort. When your review is complete, take time to analyze the results and make appropriate changes. Then restart the process.
If you’d like more suggestions for auditing your company’s operations and finances, give Carl Heinemann, your Chattanooga CPA, a call.