The countdown to April 15 has begun and Moneta Group’s Tax Strategies team has prepared an excellent list of things to expect in 2015. While there were not a lot of changes in 2014, here are a few items to look forward to as you prepare to file this year’s tax returns.
A late start – again
Congress once again waited until late December to pass the “Tax Increase Prevention Act of 2014” which extended certain tax benefits that had expired at the end of 2013. These “tax extenders” were temporarily extended through the end of 2014 and included popular items such as the educator expense and tuition and fees deductions, the state sales tax deduction, credits for energy efficient home improvements and a host of benefits for business.
With these extensions the tax returns will look a lot like 2013, but the IRS expects some delays in opening the tax processing season and a late release of some forms impacted by the passage of the legislation. Processing some refunds will also be slowed due to budget cuts and identity theft (both discussed below).
Additional complexity for most people
One sweeping change that impacts nearly every individual taxpayer is the arrival of the tax provisions of the American Care Act (ACA). ACA requires that all Americans have qualified insurance coverage either through an employer, Medicare, or purchased through one of the exchanges.
Failure to maintain coverage results in a tax that is equal to the greater of two options: $95 or 1% of income for 2014. You can bet that penalties will be even higher in 2015.
Others who received advance premium credits will need to reconcile their eligibility for the assistance based on reported income at time of application with actual income received in 2014. In fact, some taxpayers may have to repay substantial amounts of these credits.
Look for information from your insurance carrier that will be needed to comply with the new reporting rules.
Identity theft will continue to rise.
Unfortunately, you can expect more fraudulent returns, more phishing scams and more phone scams. As previously mentioned, as the IRS attempts to weed out the legitimate returns from the fraudulent return, expect delays in issuing refunds.
Don’t expect much help from the IRS
In light of the recent $346 million cut to the IRS budget as part of the continuing budget resolution, IRS funding for 2015 is actually lower than 2009. That being said, the IRS is devoting more personnel and more dollars to enforce the tax aspects of the ACA and to combat tax related identity theft, which may leave other areas to bear the brunt of the cuts.
The IRS expects to reduce customer service efforts at walk in locations and phone support lines, as well as spend less money in the examination function; they may even furlough employees later in the year.
5500 EZ relief
We do have one piece of good news, if you act promptly. If you have not filed Form 5500-EZ, Annual Return of One-Participant Retirement Plan, you may be eligible for automatic relief from late filing penalties if returns are filed by June 2, 2015.
As a refresher—One Participant Retirement Plans (frequently referred to as Solo 401K or Single K plans) are not required to file a Form 5500 EZ until assets in the plan exceed $250,000. This filing requirement is often missed by tax payers because it sometimes takes several years for plan assets to exceed $250,000. And when this requirement is missed, the penalty is $25 per day not to exceed $15,000—which can add up pretty quickly.
Luckily, penalty relief may be available to those plan sponsors that have not yet been notified by IRS that Form 5500-EZ is delinquent and have not yet been assessed a penalty. Other requirements do apply, so be sure to consult a retirement plan specialist if you need assistance.
All in all, the biggest thing that you can expect is that the new ACA reporting rules will affect nearly everyone. Otherwise, most taxpayers should expect the 2015 tax filing season to be similar to last year.
As always, feel free to reach out to your Moneta Group advisor if you have any questions or concerns—and look forward to next week’s blog on “Gathering All the Right Documents.”