2013 saw three significant new taxes arrive on the scene, and while 2014 may not have been as momentous, there were still important changes that took place. To be honest, the scale and pace of changes the IRS has had to handle the last few years has put a great strain on their ability to adapt and enforce — my feel is that it will take time for the governmental, business, practitioner, and individual communities to adapt to all these new requirements.
But onward to this year’s filings — here’s some highlights impacting 2014 tax returns:

• Required individual health insurance coverage. 2014 is the first year we’ll see individuals required to have health insurance, and be assessed a penalty if they don’t. The penalty (technically a “tax“) is $95 per adult this year, $325 next, and $695 the year after that (1/2 that for children). There are a few exceptions, including low income, unaffordable coverage, or a hardship that took place. You should be receiving a new tax form this year along with the others you’re used to: Form 1095-A/B/C — you’ll need this to demonstrate you were covered, so you don’t have to pay the additional tax. For more information, check out the IRS’ page on “The Individual Shared Responsibility Provision“.

• Last-minute tax benefits extended. On December 19, the President signed into law a tax bill from Congress that extended a number of key provisions, including: (a) debt cancelled on your principal home will generally not be taxed for one more year — normally any type of debt that’s cancelled/forgiven is considered taxable income to you, (b) educators will continue to be able to deduct up to $250 of out-of-pocket expenses for one more year, (c) if you pay mortgage insurance on a primary or secondary home, it’ll generally be deductible for one more year, and (d) energy efficient improvements to your home, such as windows and insulation, will continue to receive a credit capped at $500 for one more year.

• More payment options. The IRS is making it a little easier to pay taxes electronically with a new web payment system called DirectPay — from the site you’re able to easily send tax payments on up to the last twenty years from your bank account, as well as estimated tax payments or extension tax payments for the current tax year. This expands on the existing abilities to setup IRS installment agreements online, as well as recurring account access through the EFTPS website.

• “Repair” versus “capital improvements” guidance. Businesses are finally receiving guidance from the IRS on which costs it can deduct right away as “repairs”, versus which costs which will need to be “capitalized” and deducted over future years as depreciation. Generally, for smaller businesses, costs under $500 can be deducted right away as repairs, while costs over that amount should be evaluated for being capitalized and depreciated. Buildings are also now separated into eight different component types (e.g., HVAC, electrical, plumbing, etc.) with different depreciable lives. There’s actually a whole lot more to this area than be covered here, and if you’re interested to read further, I recommend the discussion in the IRS’ own Capitalization v Repair Audit Technique Guide.

• Healthcare law impact for businesses. This is a complex and continuously unfolding part of the law, and there’s even rumors the Congress that was just seated on January 6 may be taking action to undo part of the law. Generally speaking, employers with 50 or more employees have more stringent requirements in the form of what benefits need to be made available to employees, and what needs to be reported to the government. And there’s also a tax credit available for employers who have less than 25 employees and provide health coverage. More information can be found on pages at the IRS’ site, the Small Business Administration’s site (some good summaries by business size), and the Health and Human Services’ site.

So those are some of the big changes afoot this year — as always, don’t hesitate to give us a ring with any questions, and here’s to a smooth filing season!