Tax year 2014 is almost over and the tax filing season is just around the corner. IRS Spokesman Mark S. Green offers free helpful year-end tax tips for you to consider:
“Taxpayers should review and gather documents now as part of their year-end tax planning. The important deadline of Dec. 31 is fast approaching and a little advance planning could save taxpayers time, stress and perhaps even money,” said Green.
Gifts to Charities – Many people give to charity each year during the holiday season. “Remember, if you want to claim a tax deduction for your gifts, you must itemize your deductions,” said Green. There are several tax rules that you should know about before you give.
Qualified charities. You can only deduct gifts you give to qualified charities. Use the IRS Select Check tool to see if the group you give to is qualified. Remember that you can deduct donations you give to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.
Monetary donations. Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift.
Year-end gifts. You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2014. This is true even if you don’t pay the credit card bill until 2015. Also, a check will count for 2014 as long as you mail it in 2014.
Records required. You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.
Special rules apply to several types of donated items, including clothing or household items, cars and boats.
Annual Gift Tax Exclusion You can give as much as you can afford to anyone even if they are not related to you. In 2014, you generally could give up to $14,000 to anyone and the gift will not be taxable. If you are married, both you and your spouse could have separately given gifts valued up to $14,000 to the same person without making a taxable gift.
In addition, generally Tuition or medical expenses paid directly to an educational or medical institution for someone else are not considered taxable gifts. The Lifetime Gift Exclusion is $5.34 million.
Do you have a record keeping system? You can avoid headaches at tax time by keeping track of your receipts and other records throughout the year. If you don’t have a record keeping system, now is a good time to start one for tax year 2014. It can be as simple as file folders or a shoebox. Just put everything that relates to taxes in one place. However, the more organized your records are, the easier it will be to complete your tax return next year. There is no substitute for good records. A good record keeping system can help ensure that you don’t miss out on any credits or deductions when you file your tax return.
Business Miles deduction – The rates for miles driven between Jan. 1 and Dec. 31, 2014 are:
- 56 cents a mile for business mileage.
- 23.5 cents a mile for medical or moving mileage.
- 14 cents per mile for providing services for charitable organizations. This amount is set by statute.
Get the Most Out of Your Retirement Accounts — Are you maximizing your contributions to your retirement accounts? This year, you can contribute up to $5,500 in an IRA, as well as another $17,500 to a 401(k) employee plan. If you’re 50 or older, those numbers go up to $6,500 and $23,000 (Catch-up contribution) respectively.
The most that you can contribute to your IRA, as a general rule, is the smaller of the maximum amount for your age or your taxable compensation (the amount you earn from working).
Saver’s Credit –The Saver’s Credit helps low- and moderate-income workers save for retirement and earn a special tax credit up to $2,000 for married couples. Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2014 tax return.
Eligible workers who contribute to individual retirement arrangement (IRAs), 401(k)s or similar workplace retirement plans can get a tax credit on their federal tax return. You need to contribute to your 401(k) or similar retirement plan by Dec. 31 to count for 2014. You have until April 15, 2015, to set up a new IRA or add money to an existing IRA and still have it count for 2014.
AGI threshold for medical expense deduction increased – The threshold taxpayers must meet before they can claim an itemized deduction for their unreimbursed medical & dental expenses increased to 10% of their AGI (the AGI threshold is still 7.5% if a taxpayer or spouse is age 65 or older).
Get Information on Updating Your Name and Social Security Number — If you are married or divorced in 2014, make sure you report any name change to the Social Security Administration before you file your tax return. If your name doesn’t match your social security number, your refund can be delayed. To get more information about updating your name change visit the SSA Website at www.socialsecurity.gov or call 800-772-1213. And, report any address change to the Postal Service, your employer and the IRS to make sure you get tax-related items.
Planning Your Income — Some taxpayers, such as the self-employed, may have some discretion regarding when they receive income. Properly deferring income until next year can lower your taxable income and tax bill this year. This strategy, however, will raise your tax bill next year. Publication 334, Tax Guide for Small Business, may be of help. And many taxpayers also have some control over their income via the sale of investments to incur a gain or loss. This is generally a key area of decision-making for investors. These decisions must be made and executed by Dec. 31 to be counted on a 2014 tax return. Publication 550, Investment Income and Expenses, explains the rules.
Moving Expense — Your moving expenses may be deductible on your federal tax return if you meet certain tests relating to all three of the following requirements: (except member of the armed forces)
- Your move is closely related to the start of work at a new job location;
- You meet the distance test; (at least 50 miles) and
- You meet the time test (least 39 weeks during the first 12 months).
However, if your employer reimburses you for the cost of the move, you may have to include some of the reimbursement in income. Check out Publication 521, Moving Expenses.
Itemizers — should save proof of mortgage interest and real estate taxes paid (Form 1098) plus private mortgage insurance premiums paid, unreimbursed medical and dental expenses, casualty losses and certain miscellaneous expenses listed at IRS.gov.
You should keep any and all documents that many have an impact on your tax return. Generally, tax records should be kept for three years, but some documents, for example, records relating to a home purchase or sale, stock transactions, IRAs, rental property or a business, should be kept longer. For more information see IRS Publication 552, Recordkeeping for Individuals.
Watch Out for Tax Scams – The IRS warns consumers not to fall for bogus charity scams. Also the IRS is warning the public about a phone scam that targets people across the nation, including recent immigrants. Callers claiming to be from the IRS tell intended victims they owe taxes and must pay using a pre-paid debit card or wire transfer. The scammers threaten those who refuse to pay with arrest, deportation or loss of a business or driver’s license.
Be alert for phone and email scams that use the IRS name. The IRS will never request personal or financial information by email, texting or any social media. You should forward scam emails to phishing@irs.gov. Don’t open any attachments or click on any links in those emails.
Last Pay Check Stub – “IRS Spokesman Mark Green encourages taxpayers to wait for their W-2s to file their tax return after the tax season opens.” “If you are expecting a refund, we encourage you not to file early before the tax season begins by using your last pay check stub. This can cost you stress, time and money, said Green.” Generally employers will send W-2s by Jan. 31.
IRS.gov Web site — You can find more information about these credits and deductions on IRS.gov.
- Tax information, forms and publications are available through the IRS Web site 24 hours a day at www.irs.gov.
- If you don’t have access to the Internet or want to speak with an IRS representative, you may call the IRS toll-free at 1-800-829-1040 for tax information. To order forms or publications, call the IRS at 1-800-829-3676.
Taxpayers should consider seeking out additional information either through IRS.gov or a tax professional.
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