For those people who choose to strike out on their own and build a business from the ground up, the business can become a part of who they are and how they define themselves as a person. This has the great advantage of brining their passion and all their energy to the business, but has the unfortunate tendency to result in them micro-managing everything that happens in an ordinary day.
For those with the vision to start and build their own business, allowing someone else to manage part, or all, of the daily operations can be exceptionally hard. This article from Inc. Magazine has some great words of wisdom for those looking to lead their business, rather than manage it.
The IRS released its list of updated 2014 deductions and limitations, which are adjusted annually for inflation.
- Standard deductions
- Married Filing Joint: $12,400
- Single and Married Filing Separately: $6,200
- Head of Household: $9,100
- Personal exemption: $3,950
- Maximum 401(K) deferral: $17,500 or $23,000 if over age 50 (same as 2013)
- Maximum combined employer and employee contribution to a 401(K) plan: $52,000
- The maximum wages subject to Social Security Taxes is $117,000.
In addition, the IRS relaxed it’s “use it or lose it” rules for Flexible Spending Accounts. If employers make the change to their plan, employees will be able to carry over up to $500 to cover expenses in the next year. This is a great change that can allow some flexibility for employees who won’t need to scramble to use their funds by year’s end.
Now that the Federal government shutdown is over, the IRS is back to work, and has come out with a few things to be aware of for the upcoming filing season.
First, the IRS announced that the start of filing season will be delayed by 2 weeks due to the shutdown. The time the service was shutdown delayed the programming and testing of its computer systems so the IRS will begin accepting individual tax returns between January 28th and February 4th. There has been no word on any delays for corporate tax returns.
Also, there are a number of tax deductions and credits that are set to expire at the end of 2013. These items will apply to 2013 tax returns, but will be unavailable for future returns.
- Option to deduct sales tax instead of state income taxes paid, which mostly effects those in states with no income tax.
- Deduction for tuition and fees of either $2,000 or $4,000. Many taxpayers pass on this item and instead get a better deal by taking one of the credits for college tuition, which will stay in place.
- Exclusion of cancelled mortgage debt from income. This applies to people facing foreclosure on their primary residence.
- The ability to deduct mortgage insurance premiums.
As 2013 draws to a close and we move through 2014, we may see some or all of these items extended by Congress.
Extended individual tax returns are due a week from tomorrow, so if you are one of the few that we’ve not seen yet, we look forward to seeing you soon.
The effects of the Federal government shutdown are broad reaching, but as they relate to taxes the answer is a little murky. The IRS is technically closed, so phones are not staffed, IRS offices are closed and any audits in progress are suspended until the government reopens.
That said, all filing and payment deadlines remain in effect, so all taxes need to be filed and paid as if the government was up and running. All paper tax returns and payments made by check will be considered on time if postmarked by the due date.
The IRS will not, however, be issuing refund checks of any kind during the shutdown.
The system that sends out automated notices will also continue to run during the shutdown, so people may be put in the odd place of getting a notice but not being able to call the IRS and figure out how to resolve it.
We’ll keep track of what’s happening in Washington and bring you the tax related news as it becomes available.
As fall continues, things continue to pick up around the office. Here are a few of the things we’re working on that might be of note for you.
- October 15th is the deadline for extended individual tax returns, which is just more than two weeks away.
- This is an excellent time to do some tax planning for the end of the year to allow any tax-reducing strategies time to work.
- There are a couple of new taxes to keep in mind as we bring the year to a close, especially if you are a higher-than-average income earner.
- An additional .9% tax on wages over $200,000 for a single person or $250,000 for those married filing jointly. (Note, for MFJ filers, the $250,000 is the combined amount of both spouses salaries)
- An additional 3.8% tax on the net investment income of those with adjusted gross income of more than $200,000 single or $250,000 MFJ.
- Minnesota’s new 9.85% tax bracket on taxable income over $150,000 single or $250,000 MFJ.
With all the new tax rates and a fairly short time before the end of the year is here, now is a great time to speak with your tax professional and make sure you know what to expect come next April 15.