Gift Tax Returns Are Due April 15

Gift Tax Returns Are Due April 15

As you finalize your 2013 return, here’s one more thing to remember. If you funded a trust or transferred assets to someone during 2013, you may need to file a return reporting those transactions – and that return, along with any required tax, is due April 15, 2014, just like your regular income tax forms.

Do you have to file? It depends on the type of gifts you made.

Some payments you might consider gifts are not subject to gift taxes or filing requirements. For instance, you can pay tuition directly to a college or other school for any student without having to file a gift tax return. The same is true for unreimbursed, qualified medical expenses you pay directly to the doctor or hospital for the benefit of a family member or stranger.

The amount of your gifts matter, too. Were your total gifts to any one person during the year $14,000 or less? That’s the annual exclusion – the maximum amount you could give anyone during 2013 without having to file a return, as long as the gifts were currently usable by the recipient.

A caution: You may have heard of “gift-splitting,” which is an election you can make when you’re married. Gift-splitting lets you combine your annual exclusion with that of your spouse, resulting in total tax-free gifts of up to $28,000 each year to any one person. However, because gift tax returns are not filed jointly, each of you will generally have to complete Form 709, “United States Gift (and Generation-Skipping Transfer) Tax Return.”

When a return is required, you may not owe gift tax. Under present tax law applicable to 2013 gifts, up to $5,250,000 of gifts made during your lifetime can be shielded from tax. This is in addition to the $14,000 per donee annual exclusion.

Contact us if you made any gifts during 2013. We’ll help you sort out your filing requirements.

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.

Should You Be Making Estimated Tax Payments?

Should You Be Making Estimated Tax Payments?

During the tax year you must prepay a substantial amount of the taxes you’ll owe for that year, or you risk being hit with an underpayment penalty. If you’re an employee, that’s usually not a problem. Your employer will withhold taxes from each paycheck. You can adjust the amount withheld so that it covers your total tax bill, even if you have extra income from moonlighting or investments. But if you’re self-employed or retired, you might need to make estimated tax payments.

To avoid a penalty, the total of your withholding and estimated tax payments must generally be at least 90 percent of your tax liability for the year, or 100 percent of your last year’s tax liability (110 percent of last year's tax liability where AGI exceeds $150,000). There’s no penalty if your underpayment is less than $1,000. Special rules apply to farmers and fishermen.

You pay your estimated taxes by making four payments, due in April, June, and September of the current year, and in January of the next year. You can’t just wait until the last date to pay what you owe. You must start paying estimated taxes as you earn taxable income. You can either pay all the tax you owe on each quarter’s earnings, or you can pay it in installments over the remaining periods. But you must be sure to pay enough to avoid an underpayment penalty for each period. Again, special rules apply to farmers and fishermen.

Please contact our office if you think you might need to make estimated tax payments. The quarterly calculations can be complicated, and we can help you figure out how much you need to pay at each date.

 

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.

Tax Update March 2014

Tax Update March 2014

If you have a flexible spending account (FSA) to set aside pre-tax dollars to pay for out-of-pocket medical expenses, you’ll be interested in this latest FSA change. Employers can modify these plans to allow up to $500 of unused amounts at year-end to be carried over into the following year. Now health FSAs can either have a 2½ month grace period or the $500 carryover to help alleviate the forfeiture of unspent set-asides at year-end.

· A rule affecting the taxation of tips went into effect this year. Restaurants often add an automatic gratuity to the bill for large parties. If these amounts were treated as tips, they would be paid to restaurant workers along with their other tips, and the workers would be responsible for reporting them as income to the IRS. Now the IRS says “automatic gratuities” will be treated as a “service charge” which, like regular wages, will be subject to withholding by the employer.

· In mid-February, the Treasury Department issued rules that delay until 2016 the employer mandate to provide health insurance for employees for companies with 50 to 99 workers. To benefit from this extension, employers must certify that they have not laid off employees in order to come under the 100 employee threshold.

· Partnerships and other “pass-through” entities should be ready for increased scrutiny by the IRS this year. According to the IRS, the increasing number and complexity of pass-through entities makes these business forms candidates for audit focus in 2014.

· The IRS is again issuing warnings about tax scams. In the latest phone scam, the caller claims to be from the IRS reporting taxes due which must be paid immediately with a pre-paid debit card or wire transfer. Individuals who don’t pay up are threatened with arrest or loss of driving or business licenses. Don’t respond in any way to these scams; instead forward the e-mail to phishing@irs.gov.

 

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.

 

Tax Numbers for 2014 and 2013 – Part 2

Tax Numbers for 2014 and 2013 – Part 2

 

 

The numbers for 2013 in the chart below apply to your 2013 returns, and the numbers for 2014 should be used in your 2014 tax planning.

 

                                                                        2014                        2013

Income (AGI) phase-out for personal

exemption and itemized deductions

* Single                                                          Starts at $254,200          Starts at $250,000

* Joint returns and surviving spouses             Starts at $305,050          Starts at $300,000

* Married filing separately                              Starts at $152,525          Starts at $150,000

* Head of household                                      Starts at $279,650          Starts at $275,000

 

Health savings account contribution limit

* Individual                                                                     $3,300                            $3,250

* Family                                                                           $6,550                            $6,450

* Additional for 55 & older                                             $1,000                            $1,000

 

Automobile standard mileage rate

* Business                                                                             56¢                              56.5¢

* Medical/moving expense                                                23.5¢                                 24¢

* Charitable work                                                                 14¢                                 14¢

 

Estate tax top rate                                                               40%                                40%

Estate tax exclusion                                                  $5,340,000                     $5,250,000

Annual gift tax exclusion (per donee)                            $14,000                          $14,000

 

Alternative minimum tax exemption

* Single                                                                          $52,800                          $51,900

* Married, joint                                                              $82,100                          $80,800

* Married, separate                                                        $41,050                          $40,400

Section 179 deduction limit                                       $    25,000                     $   500,000

Section 179 purchase limit                                        $  200,000                     $2,000,000

 

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.

Tax Numbers for 2014 and 2013 – Part 1

 

Tax Numbers for 2014 and 2013 – Part 1

 

The numbers for 2013 in the chart below apply to your 2013 returns, and the numbers for 2014 should be used in your 2014 tax planning.

 

                                                                        2014                        2013

Standard deduction

* Single                                                        $  6,200                   $  6,100

* Joint returns and surviving spouses             $12,400                    $12,200

* Married filing separately                             $  6,200                   $  6,100

* Head of household                                    $  9,100                   $  8,950

* Additional for elderly or blind (married)     $  1,200                   $  1,200

* Additional for elderly or blind (single)        $  1,550                   $  1,500

 

Personal exemption                                      $  3,950                   $  3,900

“Kiddie tax” threshold                                 $  2,000                   $  2,000

“Nanny tax” threshold                                 $  1,900                   $  1,800

 

Social security tax wage base                       $117,000                  $113,700

Medicare tax wage base                               No limit                   No limit

Social security earnings limit

* Below full retirement age                            $15,480                    $15,120

* Full retirement age                                    No limit                   No limit

 

Maximum retirement plan contributions

* IRA for those under age 50                        $  5,500                   $  5,500

* IRA for those 50 and over                         $  6,500                   $  6,500

* SIMPLE plan for those under age 50         $12,000                    $12,000

* SIMPLE plan for those 50 and over           $14,500                    $14,500

* 401(k) plan for those under age 50             $17,500                    $17,500

* 401(k) plan for those 50 and over               $23,000                     $23,000

 

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com.

Additional Limits in 2014

Additional Limits in 2014

 

Retirement Plans:  Elective deferral limits for retirement plans remain unchanged at $17,500 for 2014.  These plans include Section 401(k)-type plans, Section 403(b) plans and Section 457 plans.  The catch up contribution limits for those age 50 and older remains at $5,500.

Defined contribution plans under Section 415(c)(1)(A) see their limits rise to $52,000 in 2014.  The wage threshold for the general definition of a highly compensated employee remains at $115,000.  The wage threshold for the definition of a key employee in a top heavy plan increases to $170,000 in 2014.  The general annual qualified plan compensation limit rises to $260,000 in 2014.

Transportation:  The monthly limitation amount for transportation in a commuter highway vehicle and any transit pass is $130 in 2014, under the aggregate fringe benefit exclusion in Section 132(f)(2)(A).  The monthly limitation amount for qualified parking is $250 in 2014, under Section 132(f)(2)(B).

Foreign Earned Income Exclusion:  The foreign earned income exclusion amount increases in 2014 to $99,200.

Adoption Assistance:  The adoption assistance credit in 2014 is $13,190.

Year-End Tax Cutting Suggestions for Businesses

It’s not too late to make moves to reduce your 2013 taxes if you are a business owner.

· Use the new “streamlined” home-office rules. Many self-employed taxpayers declined to claim the home-office deduction because it was so complicated to compute. For 2013, the deduction is streamlined, allowing for a deduction of $5 per square foot, up to a maximum of 300 square feet or $1,500.

· Create a retirement plan. It’s not too late to create a retirement plan for yourself and your employees if you have them. The plans can be simple to set up and administer, such as a Simplified Employee Pension (SEP) plan. A 401(k) plan could be established even for a one-person business. While some of these plans must be established by the end of the year, most can be funded up to the extended due date of the tax return.

· Purchase business equipment. Up to $500,000 (scheduled to be reduced significantly to $25,000 in 2014) in business equipment purchases can be expensed this year, rather than being expensed over a number of years. Additionally, there is also a 50% bonus depreciation allowance (that will not be available in 2014) if your purchases exceed the $500,000 limit. 2013 might be the last year to maximize your equipment purchase deductions to such an extent.

· Deduct health insurance. If you are self-employed, you are allowed to claim 100% of the amount paid for health insurance for yourself, your spouse, and your dependents as long as you follow certain conditions.

· Consider credit card purchases. If you want to purchase equipment or supplies for your business before the end of the year, but you are cash-strapped, consider using your credit card. Your deduction occurs this year when the purchase is made, not next year when the credit card charges are paid.

For guidance with year-end tax planning for your business, contact our office.

 

Call us at (219) 769-3616 with your questions, or email them to tlynch@swartz-retson.com

Year End Tax Savings for Individuals

 

 

It’s not too late to consider tax moves that could reduce your 2013 taxes and

get you in a better tax position for 2014.

• Be aware of higher tax rates. In 2013 the top tax rate has been increased to 39.6%
for top bracket taxpayers (with taxable income over $400,000 for singles,

$450,000 for married taxpayers).
In addition, singles with income greater than $200,000 (or $250,000 for married
taxpayers) will be subject to the new 3.8% surtax on net investment income.

If you believe that you will be close to this limitation,

 consider making moves that will defer income into 2014.

• Take advantage of tax-deferred accounts. All of the new tax rates and phase-outs
are based upon adjusted gross income or taxable income.

The most efficient way to reduce both of those items is to maximize contributions
to tax-deferred retirement plans.

 If your employer offers such a plan, make maximum use of it
(such as a deferred compensation plan). If not, see if you are
eligible for your own deductible IRA.

• Consider a health savings account (HSA). Investing in an HSA gives you a current-
year tax deduction, while providing a savings account to use to pay

 out-of-pocket medical expenses currently or in the future.

 An HSA is not a “use it or lose it” plan. Any funds in the plan can be
used in future years. And be aware that you can fully fund your HSA

up to April 15th of the following year.

• Make charitable gifts from your IRA. Seniors age 70½ and older can make
charitable contributions directly from their IRA.

 While this won’t be deductible, it can apply against your annual required minimum
   distribution (RMD), thereby lowering your adjusted gross income
.

For guidance with your year-end tax planning, contact our office.
Call us at (219) 769-3616 with your questions, or email them to

 tlynch@swartz-retson.com.