tax tips

Details of the President’s State of the Union Tax Proposals

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

President Barack Obama used Tuesday’s State of the Union address to announce that he will propose tax increases for higher-income individuals and provide tax relief for middle-class taxpayers. Ahead of the speech, the White House provided details of what the president plans to propose, which it characterized as simplifying the Internal Revenue Code, eliminating loopholes, and helping “middle class families get ahead and grow the economy.”

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Specific proposals on the president’s wish list include:

  • Eliminate the step-up in basis for assets that are transferred at death, treating transfers at death as realization events for capital gains tax purposes;
  • Raise the top tax rate on capital gains and dividends to 28%, which would be imposed on taxpayers with incomes over about $500,000;
  • Impose a 7-basis-point fee on the liabilities of large financial institutions to discourage “excessive borrowing”;
  • Create a $500 second-earner tax credit for families in which both spouses work (5% of the first $10,000 of the lower-earning spouse’s income; credit would phase out for couples with incomes between $120,000 and $210,000);
  • Modify various child care tax incentives, including increasing the earned income tax credit (EITC) for childless taxpayers, increasing the EITC phaseout level, making permanent EITC increases that are scheduled to expire after 2017, tripling the maximum child and dependent care credit and making the income cutoff $120,000, and eliminating child care flexible spending accounts;
  • Consolidate and expand education tax benefits, including making the American opportunity tax credit permanent and folding the lifetime learning credit into it, increase the refundable portion to $1,500, and make it available to more students; and
  • Reform retirement tax incentives, including automatically enrolling workers in IRAs, requiring employers to allow more part-time workers to participate in their retirement plans, and providing a cap of about $3.4 million in an IRA.

The White House did not provide a timeline for when legislation embodying these proposals would be introduced. Since both houses of Congress are now controlled by Republicans, any proposal by the president will face a steep uphill climb.

Article: The Tax Advisor

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Tax Calendar Q1 2015

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

Your 2015 Tax Calendar Is Here.

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January 15

• Individual taxpayers’ final 2014 estimated tax payment is due unless Form 1040 is filed by February 2, 2015, and any tax due is paid with the return.

February 2

• Most employers must file Form 941 (“Employer’s Quarterly Federal Tax Return”) to report Medicare, Social Security, and income taxes withheld in the fourth quarter of 2014. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 10 to file the return.

• Employers who have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944 (“Employer’s Annual Federal Tax Return”).

• Give your employees their copies of Form W-2 for 2014. If an employee agreed to receive Form W-2 electronically, have it posted on the website and notify the employee.

• Give annual information statements to recipients of certain payments you made during 2014. You can use the appropriate version of Form 1099 or other information return. Form 1099 can be filed electronically with the consent of the recipient.

• File Form 940 (“Employer’s Annual Federal Unemployment (FUTA) Tax Return”) for 2014. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it is more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 10 to file the return.

• File Form 945 (“Annual Return of Withheld Federal Income Tax”) for 2014 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, etc. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 11 to file the return.

• File Form 943 (“Employer’s Annual Federal Tax Return for Agricultural Employees”) to report Social Security and Medicare taxes and withheld income tax for 2014. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 10 to file the return.

March 2

• The government’s copy of Form 1099 series returns (along with the appropriate transmittal form) should be sent in by today. However, if these forms will be filed electronically, the due date is extended to March 31.

• The government’s copy of Form W-2 series returns (along with the appropriate transmittal Form W-3) should be sent in by today. However, if these forms will be filed electronically, the due date is extended to March 31.

March 16

• 2014 income tax returns must be filed or extended for calendar-year corporations. If the return is not extended, this is also the last day for calendar-year corporations to make 2014 contributions to pension and profit-sharing plans.

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

New Law Creates Tax-Favored Savings Accounts for Disabled Taxpayers

Westchester NY accountant Paul Herman of Herman & Company CPA’s is here for all your financial needs. Please contact us if you have questions, and to receive your free personal finance consultation! 

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As part of the larger tax extender legislation passed on Tuesday, Congress approved the Achieving a Better Life Experience (ABLE) Act of 2014 (H.R. 647), which will allow disabled individuals to save money to pay for their disability expenses in tax-favored accounts, called ABLE accounts. The House of Representatives passed the measure on Dec. 3, by a vote of 404–17, and it now goes to President Barack Obama for his signature.

The purpose of the bill is “[t]o encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life” and “[t]o provide secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance,” Medicaid, and other sources (H.R. 647, §101).

The bill adds a new Sec. 529A to the Code, under which a qualified ABLE program will be exempt from taxation (except for unrelated business income tax). A qualified ABLE program is a program run by a state that allows a person to make contributions for a tax year, for the benefit of an eligible individual, to an ABLE account established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account. A state’s ABLE program must limit designated beneficiaries to one account and must allow accounts to be opened only for residents of that state or a contracting state.

Eligible individuals must file a disability certification with the IRS or meet certain criteria for blindness or disability under the Social Security Act (42 U.S.C. §1382).

Contributions must be made in cash, and the program must limit annual contributions to the amount of the annual gift tax exclusion in effect for that tax year.

The ABLE program must provide separate accounting for each designated beneficiary, and designated beneficiaries and contributors must not be able to direct the investment of contributions or earnings in the account.

Distributions from the account will not be included in the designated beneficiary’s gross income as long as they do not exceed the beneficiary’s qualified disability expenses. If they do exceed the beneficiary’s qualified disability expenses, the amount otherwise includible in gross income will be reduced by an amount bearing the same ratio to that amount as the expenses bear to the distributions.

Funds in ABLE accounts will also be disregarded for purposes of various federal means-tested programs.

Once signed by the president, the bill will take effect for tax years beginning after Dec. 31, 2014

Herman and Company CPA’s proudly serves Bedford Hills NY, Chappaqua NY, Harrison NY, Scarsdale NY, White Plains NY, Mt. Kisco NY, Pound Ridge NY, Greenwich CT and beyond.

Any U.S. tax advice contained in the body of this website is not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.