Understanding 2013 trends will help us prepare today for April 15, 2015.
For many of you, 2013 tax returns are a distant memory – or maybe a nightmare. Refund checks, although smaller than in previous years, have been put to good use on home improvements, vacations, and credit card bills. For a few of you, last-minute extensions mean that you still have some work to do on your taxes before October 15.
The rules changed (literally) in 2014
To date, Bach, James, Mansour & Company has prepared somewhere in the vicinity of 10,000 2013 tax forms this year for families and small businesses. This gives us some unique insight into tax and reporting trends. We want to share these so that you can avoid potential issues and heartburn in 2015.
Here are the top 5 tax reporting trends that we observed in 2014. If you see something that has impacted you, or may impact your 2014 tax return next year, please give us a call to review in more detail.
- Most clients paid more taxes. We’ve been discussing the impacts of the Affordable Care Act all year, but it still came as a shock to many when their taxes increased. The additional Medicare Payroll Tax was a major cause of the additional tax burden. Many clients with more investment income, thanks to stock market and other investment improvements, also paid incremental taxes due to the Net Investment Income Tax.
- Not enough payroll taxes were withheld. In addition to the dividend example mentioned above, many clients thought that the Medicare payroll tax was based on their taxable wages, Box 1 on the W-2. That’s not correct. Medicare wages (Box 3) were used, often resulting in reduced refunds or larger checks written to the IRS.
- More extensions were filed. This year, we filed extensions for about 30% of our clients. Some extensions were due to pure exasperation with the tax reporting process. K-1s (Partnership reporting) and 1099s seemed to be mailed later than ever, with more updates delaying the tax preparation process even further.
- Tax preparation time increased. It took us more time than ever before to prepare the average tax return. As an example of the increased complexity, there are now six different ways to report capital gains. Please thank the IRS if your tax preparation bill was slightly higher this year.
- Attitudes were unchanged. Even with all of the additional complexity, stress, and taxes, your attitude toward the tax preparation process was the normal love/hate relationship between clients and CPAs. Even though we’re just the messenger, we would have understood if there was more negativity. Thank you for your patience and understanding!
Assess your financial health
Similar to seeing your doctor for your annual wellness exam, it’s also a good idea to conduct a more in-depth assessment of your financial health with your CPA at least once per year. By analyzing your current financial situation, we can help you make a variety of adjustments today to ensure that you’re in better shape for April 15, 2015 and beyond. Please contact one of the experienced CPAs at Bach, James, Mansour & Company to schedule a financial health review.
Neal Bach, CPA