The 2014 tax filing season is finally over (or at least extended until September/October for some people) and as such, marks the return of Tax Tip Tuesdays. Many people immediately like to forget about taxes right after they have completed their prior year filings, but sometimes the best time to think about the next year’s taxes is right after the filing of the prior year.
Throughout tax season, we saw a few themes common to the returns that we prepared – below are a few of the key lessons and themes we saw throughout tax season. Some of these points will be covered in depth in future installments.
- Identity theft is a real problem, and it can happen to anyone. This year, more so than in years past, we had clients who either received notification from the IRS or had their returns rejected for electronic filing because somebody else filed a return with their Social Security Numbers. Even the most vigilant of clients can have this happen to them, and it is a problem the IRS knows it has and needs to fix before it gets worse.
- The taxman wants a piece of the market gains, too. 2014 saw an impressive year for the stock market, and a lot of our clients saw this reflected in increased dividends, capital gains earned, and distributions. Investments that are not tax deferred in retirement accounts will have these gains and dividends taxed in the current year, which can lead to a sizable tax bill at year-end.
- Simple transactions might not be so simple. Several clients this year either admitted new partners or owners into their businesses or removed partners and owners from their businesses, thinking that the transactions would be simple and straightforward when in fact there could be major tax consequences to the transactions that could have a material effect on the taxpayers’ returns.
- Premium tax credits – friend or foe? A surprising number of clients this year used the online marketplaces for health coverage in order to comply with the individual mandate of “Obamacare.” Most clients were able to properly estimate their AGI’s and other factors and received the proper advance credits; however, there were a few cases where taxpayers overestimated the amount of credit due to them and ended up owing at years end.
The best time to start planning for your 2015 taxes can be right after your 2014 taxes are complete – the lessons are still fresh in your mind and time is still on your side.
Edward McWilliams, CPA
Ed is a Partner in the firm’s tax and business advisory practice focusing on providing services to middle market private companies across different industries as well as to early stage startups. Ed has over a decade of experience providing tax and business consulting services to these companies of different sizes and across different industries, bringing a broad and diverse knowledge base and strategic solutions to the many complex issues that businesses face.