Same-Sex Couples Filing Jointly
A recent article published in Reuters discussed the topic of same-sex couples filing jointly. Although the IRS now permits all same-sex couples to do so, a joint filing status may not necessarily be advantageous. According to the article, "only about 5 percent of married couples file separately because of significant downsides such as limited itemized deductions and a much higher tax bill." Terry Durkin, director of the National Association of Enrolled Agents said,
"[Ironically] Many couples see the pain, going from two singles to married."
In deciding whether or not to file jointly, there a few factors to be taken into consideration first. These considerations apply to couples regardless of gender.
1. Differences in Income
In a situation where one spouse is earning considerably less than another, filing separately is likely the better option. Filing separately would allow both spouses to stay in a lower tax bracket and may also be beneficial in terms of itemized deductions.
2. High Incomes
If both spouses are high earners, filing jointly runs the risk of breaking the $450,000 threshold for paying higher tax rates on things.
3. Liability
Choosing to file jointly means that the IRS will hold both spouses responsible for another's error or previous indiscretions. Filing separately eliminates this risk and the IRS will only hold the individual responsible.
For more information on same-sex joint filing read the full article here.
Source: MaSEA
Important Tax Tips for Homeowners
If you own a home, you'll want to take full advantage of the many tax deductions associated with homeownership.
Many of these tax deductions are very specific and require separate paperwork. It's important to get all the facts on what you are allowed to claim. Working with a certified professional will help to minimize errors and costly mistakes.
The following is a list of important tax tips to keep in mind if you owned a home in 2013:
1. Mortgage Interest
Claiming mortgage interest is one of the most popular deductions for homeowners. There is a $1.1 million dollar cap, so even those with multiple homes can claim interest on both so long as it stays under the cap. There are certain rules that must be followed in order to be allowed this deduction. For example, homeowners should be careful on claiming a mortgage interest deduction on home equity loans. The money must have been used for property improvements, or the deduction is not allowed. Check with a tax professional if you are unsure if you are eligible or not.
2. Private Mortgage Insurance
If you make a private mortgage insurance payment, it's likely able to be deducted on your taxes. Keep in mind that PMI is different from the standard homeowner's insurance. Private mortgage insurance is typically utilized by lower income homeowners who pay a smaller monthly fee instead of a large down payment.
3. Green Deductions
As it stands right now, 2013 is the last year that homeowners will be allowed to claim up to $500 on green energy credits. Unfortunately, if you have already claimed the green energy credit since its release in 2011, you cannot claim it again. Although the $500 is a relatively small amount, if you have made solar energy installations, you can take 30% of the total cost.
There is a lot to consider when it comes to tax deductions for homeowners. For more tips click here
IRS: Bring these items to a tax appointment
The IRS tells taxpayers to bring the following with them to a VITA (Volunteer Tax Assistance) or TCE (Tax Counseling for the Elderly) appointment. Volunteers there can inform taxpayers about special tax credits such as Earned Income Tax Credit, Child Tax Credit and Credit for the Elderly or the Disabled.
- Proof of identification - picture ID
- Social Security Cards for you, your spouse and dependents or a Social Security Number verification letter issued by the Social Security Administration or
- Individual Taxpayer Identification Number (ITIN) assignment letter for you, your spouse and dependents
- Proof of foreign status, if applying for an ITIN
- Birth dates for you, your spouse and dependents on the tax return
- Wage and earning statement(s) Form W-2, W-2G, 1099-R, 1099-Misc from all employers
- Interest and dividend statements from banks (Forms 1099)
- A copy of last year's federal and state returns if available
- Proof of bank account routing numbers and account numbers for Direct Deposit, such as a blank check
- Total paid for daycare provider and the daycare provider's tax identifying number (the provider's Social Security Number or the provider's business Employer Identification Number) if appropriate
- To file taxes electronically on a married-filing-joint tax return, both spouses must be present to sign the required forms.
Smart Ways to Use Your Tax Refund
The average tax refund over the past couple of years for Americans has been around $3,000. This is more than an entire month's pay for many households. While it's tempting to spend the additional income on shopping trips or other expensive items, utilizing your tax refund in a smart way can help improve your financial situation.
1. Pay credit card debt.
Paying down high interest credit card debt can help you tremendously in the long run. The average interest rate for credit cards is around 12%. Instead of using the money on superfluous items, put the money towards your credit cards. If you can pay off the balance you'll be able to close the card and avoid fees.
2. Add to your retirement savings.
You can contribute up to $5,500 to an individual retirement account for 2013 (or $6,500 if you're 50 or older). If your modified adjusted gross income is $127,000 or less if you're single, or $188,000 or less if you're married filing jointly, then you can contribute to a Roth IRA, which lets you withdraw the money tax-free in retirement. If you earn too much for a Roth, you can contribute to a nondeductible traditional IRA, then convert it to a Roth.
3. Invest in your child's college savings.
If you're already contributing a substantial amount to your retirement savings, you might also consider investing in a 529 account for your child. You'll be able to use the money saved tax free on college bills and possibly receive a state income tax deduction for your contribution as well.
4. Take a course.
Job security is hard to come by in recent years, so why not work to improve your appeal to potential employers by taking a course to improve skills or learn something new. You don't have to be in pursuance of a degree, either. Many cities offer night classes, or adult education courses that you can choose from.
5. Start or add to an emergency savings account.
Life is full of many unexpected occurrences, and it's never a bad idea to have an extra financial pad. Unfortunately, many people are unprepared for emergencies and resort to paying high interest rates on credit cards or take penalties on 401k's to fund their expenses at the time. Instead of spending your refund unnecessarily, creating an emergency fund could be of great benefit to you in the future.
Courtesy: Massachusetts Society of Enrolled Agents (MaSEA)
New FinCEN Form 114 replaces FBAR Form TD F 90-22.1
- If you have a financial interest in or signature authority over foreign financial account(s), individually or in total which are $10,000 or more at any time during the calendar year, the Bank Secrecy Act (BSA) requires you to report the account to the Internal Revenue Service.
- On September 30th, 2013, the Financial Crimes Enforcement Network (FinCEN) made a very important change to the FBAR form which will effect it's filing for 2014.
- Attach Form 8938 Statement of Specified Foreign Financial Assets to Form 1040 if max value of account(s) exceeds $50,000.
New Reporting Requirements by U.S. Taxpayers Holding Foreign Financial Assets (Form 8938)
- Taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. File Form 8938 if max value of account(s) exceeds $50,000 at any point during the year. Must use US Treasury FMS website Treasury Reporting Rates of Exchange to calculate foreign currency exchange rate.
- The new Form 8938 filing requirement does not replace or otherwise affect a taxpayers requirement to file FBAR. A chart providing a comparison of Form 8938 and FBAR requirements, and other information to help taxpayers determine if they are required to file Form 8938, may be accessed from the IRS Foreign Account Tax Compliance Act Web page.
Offshore Voluntary Disclosure Program
- On Jan 9, 2012, the IRS reopened the Offshore Voluntary Disclosure Program following continued interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. This program will be open for an indefinite period until otherwise announced.
Here Are The Changes:
- The FinCEN Form 114 supersedes TD F 90-22.1 as the official FBAR form.
- The new FinCEN Form 114 is only available online on BSA E-Filing System.
- A paper copy of the FinCEN Form 114 will not be accepted.
- The system allows the filer to enter the calender reported, including past years on the online form.
- The online form offers an option to explain a late filing.
- It also lets you indicate if a filing is being made in conjunction with an IRS compliance program.
- If you are filing FBAR with your spouse jointly or if you wish to have a third party preparer file your FBARs on your behalf, you can use the new FinCEN Form 114a. This form is not filed with the Form 114 but maintained with the FBAR records by the filer.
BSA E-Filing System website
- The taxpayer has to go on the website and can download an Adobe PDF version of the FBAR, fill out the report, sign and save a copy, then submit the FBAR on the BSA Website.
- Or the taxpayer can designate their EA, CPA or attorney to file on the BSA website on their behalf.
Becoming a BSA Filer:
- An Enrolled Agent, CPA or Attorney can become a designated third-party filer.
- The EA, CPA or attorney must make sure they have documented authority from the tax payers required to file to sign and submit FBARs on their behalf through the BSA E-Filing System.
- If such authority has been provided, the EA, CPA or attorney can file the FBARs through the single BSA account established for them.
