It’s everyone’s favorite time of the year.
It’s tax season.
Joe Kolarik’s life is about to get really busy, too. He has been the tax director of SFC Asset Management, in State College, for seven years. Kolarik said tax filings can change a lot year-to-year, mostly due to politics, and that people should pay attention to changes this year.
Q: What are common questions people have when they seek assistance from a tax professional?
A: The first question that most individuals, business owners and business managers ask when seeking assistance from a tax accountant is the accountant’s familiarity with the particular issue that they are dealing with. When they are comfortable that the accountant can assist them they inquire about the scope and timing of the service requested and, naturally, the fee for providing the service.
Taxpayers are concerned about the status of federal and state tax legislation for 2015 and beyond. There appears to be no clear view on whether Congress and the administration will extend the favorable individual and business tax rates and provisions that have been in place through 2014, and client questions are centered on tax planning in this uncertain environment.
Q: Is there anything people can expect to be different when filing their taxes this year?
A: The Tax Increase Prevention Act of 2014 was signed into law in December. The act served to extend most of the tax favorable provisions that expired after 2013, and most taxpayers will not have significant differences in preparing their 2014 federal income tax returns.
The Affordable Care Act provisions, however, require certain disclosures in the 2014 individual returns, and provide for certain additional taxes and credits. These and other changes include:
Taxpayers need to indicate that they, their spouse (if filing jointly), and their dependents had health care coverage throughout 2014, or claim an exemption from the health care coverage requirement for some or all of 2014.
If taxpayers did not maintain health care coverage, they are likely to have to make a shared responsibility payment for any month in 2014 that they did not have coverage for themselves or family members.
Taxpayers may be eligible to claim the premium tax credit if they, their spouse or a dependent enrolled in health insurance through the Health Insurance Marketplace.
If a taxpayer received advance payments of the premium tax credit from a health insurer to help pay for the insurance coverage of them or their family, they are required to file Form 8962 and a 2014 tax return. If the credit payments received exceed certain thresholds, taxpayers are required to repay the excess advance payments.
If a taxpayer enrolled in health insurance through the Marketplace, they should have received Form(s) 1095-A. Taxpayers should save the Form and use it to calculate their premium tax credit. If a Form 1095-A was not received, they should contact the marketplace.
If a taxpayer received certain payments under a Medicaid waiver program for caring for someone who lives in your home with you, you may be able to exclude these payments from your income.
Q: What are the negatives in using a file-your-own tax program?
A: The software available for individuals to prepare their income tax returns has its place. The problems encountered by users are not necessarily related to the software, but the individual’s understanding of tax law in answering the questions. Individuals with common sources of income and itemized deductions may do fine using the software.
Use of the software by taxpayers with more complex tax issues requires an understanding of the complexities inherent in the deduction and credit limitation provisions, the alternative minimum tax nuances, and the net investment tax rules. A tax return is an end product, hopefully reflective of sound tax planning. Not having an understanding of these and other nuances usually limits a taxpayer’s ability to do effective tax planning.
Q: What are some deducThe last tions people usually miss or don’t think about when filing their taxes?
A: Taxpayers generally have to be advised on what is not deductible. Having said that, SF & Company, like many accounting firms, provides our client with a questionnaire to complete and return with their tax return information. The questionnaire is quite comprehensive and serves to raise income, tax deduction and tax credit issues for clients.
The much publicized Final Repair and Capitalization Regulations are required to be adopted by business entities for tax years beginning January 1, 2014. Many business taxpayers view the regulations as providing additional limitations on the timing and deductibility of the cost of certain materials and supplies acquired for use in their business operations or in the acquisition of real or tangible property. Although the Regulations do provide for limitations, they also contain provisions which are favorable to business owners with respect to the timing and deduction of these costs. The favorable tax provisions are not as obvious as the more known limitation provisions and could be missed.
Q: Do people often come to you at the last minute and does that force you to turn some away?
A: Yes, I have them. We have them. We are in the trust and service profession and make every effort to accommodate late arrivals. If filing the return is not practical or advisable due to tax issues or incomplete information, we prepare tax liability estimates for the client and file extensions. I cannot recall not offering assistance to a late, desperate individual. They are usually pleased to know that their returns are extended and that they have another six months to procrastinate.
Q: Got any funny stories about an experience with a client?
A: How many do you want?
My favorite story goes like this:
I had a multiple entity client who was always last minute in providing tax information and insisted on never filing for an extension or ever filing a return late. Never. March14, 9 p.m., the last bit of information arrives, returns due next day, client 200 miles away from the office. We work all night to complete the eleven returns due and to figure out how we were going to get the returns to them to sign, cut checks and mail timely. This was before the push the button and send days.
March 15, late a.m., the returns were done too late for express delivery and too late to drive the returns there. I contact a local air carrier, Response: Yes, we have a flight in an hour to that town. The client knows the arrangement and approves it. I drive like a maniac to the airport and get the returns on the flight, and the company courier is waiting at the other airport. All is well and everybody’s happy.
Sometime in August I get a call from the comptroller asking what the consequences are for filing returns late. Which returns I ask?
Guess which ones?