The South Bay Tax Report
December 2014
It's early December here in RAINY Hermosa Beach.
The eighty degrees of Thanksgiving have turned into the wet and dreary days of December, but whether it's warm and sunny, or wet and windy, your tax accountants here at
Wayland & Vukadinovich LLP
are madly at work taking courses, devising intricate
tax-savings strategies, and developing methods to save you and everyone in the free-world
(assuming they are our clients)
a few more tax dollars.
It certainly is a tough job, but we accountants took some type of oath -
neither Mike nor Gary remember exactly what the oath was - to promise that we'd work hard to save you tax dollars!
So, grab a blanket, sit down by the fire, perhaps you can enjoy an adult beverage because this is going
to be a long one.
We have lots to talk about, and there's nothing more boring than an accountant with lots to talk about.
Remember, if you don't enjoy adult beverages and
can't stand talkative accountants during the holiday season, you can always UNSUBSCRIBE to this email blast at the bottom of this page.
As always, we find the best way to help is to answer questions you have asked
(or we wished you would have asked).
FAQ #1
I've heard rumors that Obamacare MAY have some impact on my tax return. That can't be true because it's insurance, not tax. Tell me, what impact might Obamacare have on my 2014 tax return?
Okay, well, that's actually not a question, but it's very important. One of our tax law resources has listed eight surprises you could face during tax season
because of Obamacare.
We will, of course, translate as only we can!
- The Affordable Care Act (also known as Obamacare) mandates - and you must report - that you have health care coverage by 2014 or pay a penalty. That reporting AND that penalty are calculated this year on your personal tax return;
- Your spouse and dependents must also be covered. If not, you may pay another penalty, but our government has provided 33 - yes, that's 33 - exemptions from the penalty; we'll need to determine if you qualify under one of the exemptions and report that on your 2014 tax returns;
- Your plan must be a "qualified health plan" that meets the standards set by the government. You can't use "Uncle Vinnie will cover my medical expenses" as your health plan;
- If you received a subsidy or credit to pay your premium this year, you must match the advanced credit to the actual credit based on your actual income to determine whether any of the advanced credit must be repaid. If you are like us, that sentence makes your head hurt (and that's BEFORE we had any adult beverages), but it means your tax return will determine whether you owe money BACK to the government as you earned more than you estimated you would;
- Income for these purposes is your income, your spouse's income and - assuming your twenty-six year old HAS income - your dependent's income;
- If you are an employer and not offering health care coverage, you may be penalized;
- The law imposes a "net investment income tax" of 3.8% on individuals, estates and trusts for which you may be liable. That tax can be paid on your 2014 personal tax return;
- You may also be required to pay an additional 0.9% Medicare Hospital Insurance tax on wages and self-employment income. Once again, this calculation will be made on your 2014 personal tax return.
Okay, it may be time for another adult beverage.
FAQ #2
Wow! Perhaps I should have an appointment this year. When can I make an appointment for 2014 tax preparation interviews?
First, there's no need for appointments for many of you. Information can be easily sent to us via email, mail, or fax.
If you need an appointment, Office Queen Gina will officially open the magical Wayland & Vukadinovich appointment book on December 16th for appointments in February and March. We stop appointments on March 31st.
We have appointments Monday thru Friday.
We don't take appointments Saturday and Sunday, preferring to sit at our desk in a haze catching up on all of the emails and work that we postponed while talking with you Monday thru Friday.
Call our VERY friendly staff early to schedule that appointment as Gary, Mike, and the balance of the tax staff are in much better moods in February than we are in March.
By the way, we'll be happy this year to provide you with electronic copies of your tax returns, eliminating those nasty piles of paper returns. Simply let your tax accountant know you would prefer electronic, not paper.
And remember, Gary, Mike and the tax staff simply want summaries of your deductions.
We don't need all of your bank statements;
We don't need every receipt;
We don't need every credit card statement and copy of every restaurant receipt you had since 2004;
Information regarding how much you spent on your pet,
how much you spent while skiing in Europe,
and how much you spent on that vacation house in Colorado only makes us jealous - it doesn't save you taxes AND it takes us time to review which means we charge more to prepare your taxes.
Total your receipts by category, provide summaries and copies of 1099s, 1098s, and new Obamacare statements like 1095A/B and life will be simpler for all of us.
FAQ # 3
Has anything changed from last year?
Good question!
Mike is better looking and Gary runs MUCH faster.
Oh, you mean has anything REGARDING TAXES
changed this year?
Many personal and business tax deductions and credits expired on January 1, 2014, but those noble members of Congress have promised to ride to the rescue by MAYBE passing an "extender" bill that would re-instate those credits retroactively to January 1, 2014.
As Mike and Gary sit here today at our incredibly high-tech desks, no progress has been made, but we're confident that our beloved Congress will enact those extenders prior to leaving for New Year's celebrations on December 31st.
Alas, we must also say that increased complexity in your annual tax returns due to Obamacare and a whole host of other changes these last two years will mean that
Gary and Mike will raise tax preparation fees this year.
Yes, we know times are tough.
Yes, we understand you have choices about who does your tax work, but we here at
Wayland &Vukadinovich LLP
believe we offer a great service at a price that is often at, or below, fair-market rates.
Many of you will be receiving letters in the next two weeks outlining our new fee structure.
We thank you for understanding.
FAQ #4
So, now you have scared me about Obamacare,
you have raised your fees,
and I'm still not sure what I can or should do by December 31st?
Can you help?
We hope so......
Perhaps you can.....
- Prepay your April 2015 property taxes - this works well if you are not in the dreaded Alternative Minimum Tax;
- If you believe you will owe tax to California (or whatever state you may hang around in), consider prepaying the balance due by December 31st. Again, make sure you are NOT in Alternative Minimum Tax - world;
- Consider donating to your favorite charity BEFORE December 31st;
- Make that Roth, IRA, SEP-IRA, 401-K contribution;
- Consider paying outstanding medical bills. That strategy only works if you have had a significant amount of medical expenses this year. Of course, we here at Wayland & Vukadinoivch LLP rarely get ill as we must remain ever vigilant for ways to save you tax dollars;
- Consider taking losses in your stock portfolio. This works well if you can use the losses to offset gains you have already realized. It doesn't work well if you only have losses in that stock portfolio. If that's the case, a good tax strategy would be to find a new investment advisor;
- If you own a business, you'll want to review your year-to-date income with thoughts of making year-end business purchases; remember, charging something on your credit card in December and paying that credit card in January (or February or March or...) is deductible THIS year, not in the year you pay it;
- Install new solar panels, purchase a new alternate-fuel car that has tax incentives, or consider making gifts to children or grandchildren (or your favorite accountants).
- Depending on your income level this year and your anticipated income in later years, it may be wise to convert some of your IRA or 401k balances to a Roth.
- Make sure you are optimizing (that word sounds so tax-efficient!) your contributions to employer provided flexible spending accounts (FSAs) or Health Savings Accounts (HSAs).
- Be sure that you have taken any required minimum distributions ("RMDs") before December 31st. RMDs must be taken from your traditional IRA, SEP or 401k if you reached age 70 1/2 during the tax year.
FAQ #5
I received an IRA distribution this year;
I paid no taxes.
I received a large bonus at work;
I told my employer to take no taxes out.
My broker and I invested in a number of great stocks that made lots of money;
No one took taxes on those gains.
I won $50,000 on a game show;
No one took taxes from those funds.
What shall I do?
Well, first, you and your tax accountant should take a tax planning celebration trip to some exotic location and spend some of the money.
Okay, we guess that's not an option, so more importantly, you likely will owe tax at April 15th and it's imperative you review your estimated tax payment requirements BEFORE year-end to determine whether you should make an estimated tax payment by January 15th, the date the 4th and last estimated tax payments are due.
Remember, the IRS and CA Franchise Tax Board require that you pay as you earn; in other words, they want taxes paid during the year and will charge penalties and interest if you don't make those payments on a timely basis.
There are "safe harbor" provisions which can guide you in estimate determination.
Contact us if you have questions.
Well, that's it.
You can stow the blanket, turn off the fireplace, and put a cork in the wine bottle.
Call us if you have questions, spend the balance of December ORGANIZING and SUMMARIZING those tax receipts, consider setting up your appointment earlier than later this tax season, and most certainly,
HAVE A JOYOUS HOLIDAY SEASON AND
A VERY HAPPY NEW YEAR.
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