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Top 10 Tax Tips about Filing an Amended Tax Return

The following is from a recent IRS Tax Tip regarding amended tax returns.  If you find that you need to amend, give us a call and we can take care of it for you.  Or, if you are unsure and would like to find out more, give us a call.

We all make mistakes so don’t panic if you made one on your tax return.  You can file an amended return if you need to fix an error.  You can also amend your tax return if you forgot to claim a tax credit or deduction.  Here are ten tips from the IRS if you need to amend your federal tax return.

  1. When to amend.  You should amend your tax return if you need to correct your filing status, the number of dependents you claimed, or your total income. You should also amend your return to claim tax deductions or tax credits that you did not claim when you filed your original return.  The instructions for Form 1040X, Amended U.S. Individual Income Tax Return, list more reasons to amend a return.

Note: If, as allowed by recent legislation, you plan to amend your tax year 2014 return to retroactively claim the Health Coverage Tax Credit, see IRS.Gov/HCTC first for more information.

  1. When NOT to amend.  In some cases, you don’t need to amend your tax return. The IRS usually corrects math errors when processing your original return.  If you didn’t include a required form or schedule, the IRS will send you a notice via U.S. mail about the missing item.
  2. Form 1040X.  Use Form 1040X to amend a federal income tax return that you filed before. Make sure you check the box at the top of the form that shows which year you are amending.  Since you can’t e-file an amended return, you’ll need to file your Form 1040X on paper and mail it to the IRS.

Form 1040X has three columns.  Column A shows amounts from the original return.  Column B shows the net increase or decrease for the amounts you are changing.  Column C shows the corrected amounts.  You should explain what you are changing and the reasons why on the back of the form.

  1. More than one year.  If you file an amended return for more than one year, use a separate 1040X for each tax year. Mail them in separate envelopes to the IRS.
  2. Other forms or schedules.  If your changes have to do with other tax forms or schedules, make sure you attach them to Form 1040X when you file the form. If you don’t, this will cause a delay in processing.
  3. Amending to claim an additional refund.  If you are waiting for a refund from your original tax return, don’t file your amended return until after you receive the refund. You may cash the refund check from your original return.  Amended returns take up to 16 weeks to process.  You will receive any additional refund you are owed.
  4. Amending to pay additional tax.  If you’re filing an amended tax return because you owe more tax, you should file Form 1040X and pay the tax as soon as possible. This will limit interest and penalty charges.
  5. Corrected Forms 1095-A.  If you or anyone on your return enrolled in qualifying health care coverage through the Health Insurance Marketplace, you should have received a Form 1095-A, Health Insurance Marketplace Statement. You may have also received a corrected Form 1095-A.  If you filed your tax return based on the original Form 1095-A, you do not need to file an amended return based on a corrected Form 1095-A.  This is true even if you would owe additional taxes based on the new information.  However, you may choose to file an amended return.

In some cases, the information on the new Form 1095-A may lower the amount of taxes you owe or increase your refund.  You may also want to file an amended return if:

  • You filed and incorrectly claimed a premium tax credit, or
  • You filed an income tax return and failed to file Form 8962, Premium Tax Credit, to reconcile your advance payments of the premium tax credit.

Before amending your return, if you received a letter regarding your premium tax credit or Form 8962 you should follow the instructions in the letter.

  1. When to file.  To claim a refund file Form 1040X no more than three years from the date you filed your original tax return. You can also file it no more than two years from the date you paid the tax, if that date is later than the three-year rule.
  2. Track your return.  You can track the status of your amended tax return three weeks after you file with “Where’s My Amended Return?”  This tool is available on IRS.gov or by phone at 866-464-2050.

Job Search Expenses May be Deductible

The following is from a recent IRS Tax Tip on possible tax benefits of changing jobs.  If you have any questions about these or other tax issues, please give us call; we’re always here to help.

People often change their job in the summer.  If you look for a job in the same line of work, you may be able to deduct some of your job search costs.  Here are some key tax facts you should know about if you search for a new job:

  • Same Occupation.  Your expenses must be for a job search in your current line of work.  You can’t deduct expenses for a job search in a new occupation.
  • Résumé Costs.  You can deduct the cost of preparing and mailing your résumé.
  • Travel Expenses.  If you travel to look for a new job, you may be able to deduct the cost of the trip.  To deduct the cost of the travel to and from the area, the trip must be mainly to look for a new job.  You may still be able to deduct some costs if looking for a job is not the main purpose of the trip.
  • Placement Agency.  You can deduct some job placement agency fees you pay to look for a job.
  • First Job.  You can’t deduct job search expenses if you’re looking for a job for the first time.
  • Substantial Job Break.  You can’t deduct job search expenses if there was a long break between the end of your last job and the time you began looking for a new one.
  • Reimbursed Costs.  Reimbursed expenses are not deductible.
  • Schedule A.  You usually deduct your job search expenses on Schedule A, Itemized Deductions.  You’ll claim them as a miscellaneous deduction.  You can deduct the total miscellaneous deductions that are more than two percent of your adjusted gross income.
  • Premium Tax Credit.  If you receive advance payments of the premium tax credit it is important that you report changes in circumstances, such as changes in your income or eligibility for other coverage, to your Health Insurance Marketplace.  Other changes that you should report include changes in your family size or address.  Advance payments of the premium tax credit provide financial assistance to help you pay for the insurance you buy through the Health Insurance Marketplace.  Reporting changes will help you get the proper type and amount of financial assistance so you can avoid getting too much or too little in advance.

Additional IRS Resources:

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Key Tax Tips on the Tax Effects of Divorce or Separation

The following is from a recent IRS Tax Tip regarding the tax impact of a divorce or separation.  Please let us know if you may be facing one of these and we can help you navigate the issues.

Income tax may be the last thing on your mind after a divorce or separation.  However, these events can have a big impact on your taxes.  Alimony and a name change are just a few items you may need to consider.  Here are some key tax tips to keep in mind if you get divorced or separated.

  • Child Support.  If you pay child support, you can’t deduct it on your tax return.  If you receive child support, the amount you receive is not taxable.
  • Alimony Paid.  If you make payments under a divorce or separate maintenance decree or written separation agreement you may be able to deduct them as alimony.  This applies only if the payments qualify as alimony for federal tax purposes.  If the decree or agreement does not require the payments, they do not qualify as alimony.
  • Alimony Received.  If you get alimony from your spouse or former spouse, it is taxable in the year you get it.  Alimony is not subject to tax withholding so you may need to increase the tax you pay during the year to avoid a penalty.  To do this, you can make estimated tax payments or increase the amount of tax withheld from your wages.
  • Spousal IRA.  If you get a final decree of divorce or separate maintenance by the end of your tax year, you can’t deduct contributions you make to your former spouse’s traditional IRA.  You may be able to deduct contributions you make to your own traditional IRA.
  • Name Changes.  If you change your name after your divorce, notify the Social Security Administration of the change.  File Form SS-5, Application for a Social Security Card.  You can get the form on SSA.gov or call 800-772-1213 to order it.  The name on your tax return must match SSA records.  A name mismatch can delay your refund.

Health Care Law Considerations

  • Special Marketplace Enrollment Period.  If you lose your health insurance coverage due to divorce, you are still required to have coverage for every month of the year for yourself and the dependents you can claim on your tax return.  Losing coverage through a divorce is considered a qualifying life event that allows you to enroll in health coverage through the Health Insurance Marketplace during a Special Enrollment Period.
  • Changes in Circumstances.  If you purchase health insurance coverage through the Health Insurance Marketplace, you may get advance payments of the premium tax credit in 2015.  If you do, you should report changes in circumstances to your Marketplace throughout the year.  Changes to report include a change in marital status, a name change, and a change in your income or family size.  By reporting changes, you will help make sure that you get the proper type and amount of financial assistance.  This will also help you avoid getting too much or too little credit in advance.
  • Shared Policy Allocation.  If you divorced or are legally separated during the tax year and are enrolled in the same qualified health plan, you and your former spouse must allocate policy amounts on your separate tax returns to figure your premium tax credit and reconcile any advance payments made on your behalf.  Publication 974, Premium Tax Credit, has more information about the Shared Policy Allocation.

Additional IRS Resources:

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Determine If You Are Subject to the Individual Shared Responsibility Provision

The following is from a recent IRS Tax Tip outlining who is responsible for the PPACA’s Individual Shared Responsibility payment.  As always, if you have any questions, please don’t hesitate to call or write with your questions.

The Affordable Care Act includes the individual shared responsibility provision that requires all taxpayers, including their spouse and dependents, to have qualifying health insurance for the entire year, report a health coverage exemption, or make a payment when you file.

Who is subject to this provision?

All U.S. citizens living in the United States are subject to the individual shared responsibility provision.

Children are subject to the individual shared responsibility provision.

  • Each child must have minimum essential coverage or qualify for an exemption for each month in the calendar year.  Otherwise, the adult or married couple who can claim the child as a dependent for federal income tax purposes will generally owe a shared responsibility payment for the child.

Senior citizens are subject to the individual shared responsibility provision.

  • Both Medicare Part A and Medicare Part C – also known as Medicare Advantage – qualify as minimum essential coverage.

All permanent residents and all foreign nationals who are in the United States long enough during a calendar year to qualify as resident aliens for tax purposes are subject to the individual shared responsibility provision.

  • Foreign nationals who live in the United States for a short enough period that they do not become resident aliens for federal income tax purposes are not subject to the individual shared responsibility payment even though they may have to file a U.S. income tax return.
  • Individuals who are not U.S. citizens or nationals and are not lawfully present in the United States are exempt from the individual shared responsibility provision.  For this purpose, an immigrant with Deferred Action for Childhood Arrivals status is considered not lawfully present, and therefore is eligible for this exemption even if he or she has a social security number.  Claim coverage exemptions on Form 8965, Health Coverage Exemptions.
  • U.S. citizens living abroad are subject to the individual shared responsibility provision.
  • However, U.S. citizens who are not physically present in the United States for at least 330 full days within a 12-month period are treated as having minimum essential coverage for that 12-month period.  In addition, U.S. citizens who are bona fide residents of a foreign country or countries for an entire taxable year are treated as having minimum essential coverage for that year.
  • All bona fide residents of the United States territories are treated by law as having minimum essential coverage.

Ten Key Tax Facts about Home Sales

The following is from a recent IRS Tax Tip designed to help you with selling your home.  If you have any questions, please feel free to give us a call; we’re always here to help.

In most cases, gains from sales are taxable.  But did you know that if you sell your home, you may not have to pay taxes?  Here are ten facts to keep in mind if you sell your home this year.

  1. Exclusion of Gain.  You may be able to exclude part or all of the gain from the sale of your home.  This rule may apply if you meet the eligibility test.  Parts of the test involve your ownership and use of the home.  You must have owned and used it as your main home for at least two out of the five years before the date of sale.
  2. Exceptions May Apply.  There are exceptions to the ownership, use and other rules.  One exception applies to persons with a disability.  Another applies to certain members of the military.  That rule includes certain government and Peace Corps workers.
  3. Exclusion Limit.  The most gain you can exclude from tax is $250,000.  This limit is $500,000 for joint returns.  The Net Investment Income Tax will not apply to the excluded gain.
  4. May Not Need to Report Sale.  If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.
  5. When You Must Report the Sale.  You must report the sale on your tax return if you can’t exclude all or part of the gain.  You must report the sale if you choose not to claim the exclusion.  That’s also true if you get Form 1099-S, Proceeds from Real Estate Transactions.
  6. Exclusion Frequency Limit.  Generally, you may exclude the gain from the sale of your main home only once every two years.  Some exceptions may apply to this rule.
  7. Only a Main Home Qualifies.  If you own more than one home, you may only exclude the gain on the sale of your main home.  Your main home usually is the home that you live in most of the time.
  8. First-time Homebuyer Credit.  If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale.
  9. Home Sold at a Loss.  If you sell your main home at a loss, you can’t deduct the loss on your tax return.
  10. Report Your Address Change.  After you sell your home and move, update your address with the IRS.  If you purchase health insurance through the Health Insurance Marketplace, you should also notify the Marketplace when you move out of the area covered by your current Marketplace plan.

Additional IRS Resources:

  • Publication 5152: Report changes to the Marketplace as they happen – English | Spanish

IRS YouTube Videos:

IRS Podcasts:

Overview of the Employer Shared Responsibility Provisions

The Affordable Care Act contains specific responsibilities for employers.  The size and structure of your workforce – small, large, or part of a group – helps determine what applies to you.  Employers with 50 or more full-time equivalent employees will need to file an annual information return reporting whether and what health insurance they offered employees. In addition, they are subject to the Employer Shared Responsibility provisions. All employers that are applicable large employers are subject to the Employer Shared Responsibility provisions, including federal, state, local, and Indian tribal government employers.

An employer’s size is determined by the number of its employees.  Generally, if your organization has 50 or more full-time or full-time equivalent employees, you will be considered a large employer.  For purposes of this provision, a full-time employee is an individual employed on average at least 30 hours of service per week.

Under the Employer Shared Responsibility provisions, if an applicable large employer does not offer affordable health coverage that provides a minimum level of coverage to their full-time employees and their dependents, the employer may be subject to an Employer Shared Responsibility payment.  They must make this payment if at least one of its full-time employees receives a premium tax credit for purchasing individual coverage through the Health Insurance Marketplace.

The Employer Shared Responsibility provisions generally are effective at the beginning of this year.  Employers will use information about the number of employees they have and those employees’ hours of service during 2014 to determine if they are an applicable large employer for 2015.

If you are a self-insured employer – that is, an employer who sponsors self-insured group health plans – you are subject to the information reporting requirements for providers of minimum essential coverage whether or not you are an applicable large employer under the employer shared responsibility provisions.

It’s Time for a Mid-Year Premium Tax Credit Checkup

If you have insurance through the Health Insurance Marketplace, you may be getting advance payments of the premium tax credit. These are paid directly to your insurance company to lower your monthly premium.  Changes in your income or family size may affect your premium tax credit.  If your circumstances have changed, the time is right for a mid-year checkup to see if you need to adjust the premium assistance, you are receiving.  You should report changes that have occurred since you signed up for your health insurance plan to your Marketplace as they occur.

Changes in circumstances that you should report to the Marketplace include:

  • an increase or decrease in your income
  • marriage or divorce
  • the birth or adoption of a child
  • starting a job with health insurance
  • gaining or losing your eligibility for other health care coverage
  • changing your residence

Reporting the changes will help you avoid getting too much or too little advance payment of the premium tax credit.  Getting too much means you may owe additional money or get a smaller refund when you file your taxes.  Getting too little could mean missing out on premium assistance to reduce your monthly premiums.

Repayments of excess premium assistance may be limited to an amount between $300 and $2,500 depending on your income and filing status.  However, if advance payments of the premium tax credit were made, but your income for the year turns out to be too high to receive the premium tax credit, you will have to repay all of the payments that were made on your behalf, with no limitation.  Therefore, it is important that you report changes in circumstances that may have occurred since you signed up for your plan.

Changes in circumstances also may qualify you for a special enrollment period to change or get insurance through the Marketplace.  In most cases, if you qualify for the special enrollment period, you will have sixty days to enroll following the change in circumstances.  You can find Information about special enrollment at HealthCare.gov.

Maintaining Health Insurance Coverage Documentation for the Tax Filing Season

The following is from a recent IRS release.  We encourage you consider what it says and will inquire of you as to whether you have been covered.

Gathering documents and maintaining well-organized records make it easier to prepare a tax return. They can also help provide answers if the IRS needs to follow-up with you for more information.

You will not need to send the IRS proof of your health coverage. However, you should keep any documentation with your other tax records. This includes records of your family’s employer-provided coverage, premiums paid, and type of coverage. You should keep these – as you do other tax records – generally for three years after you file your tax return.

When preparing 2014 tax returns, most people will simply have to check a box to indicate they and everyone on their tax return had health care coverage for the entire year. You will not need to file any additional forms, unless you are claiming the premium tax credit or a coverage exemption.

You will attach Form 8965, Health Coverage Exemptions to your tax return to claim a coverage exemption. Do not attach supporting documentation to the tax return. If you applied for an exemption from the Marketplace and received an Exemption Certificate Number, or you have other documentation to support your exemption claim, keep these with your tax records.

The Individual Shared Responsibility Provision – The Basics

Also from a recent IRS Newsletter, this provides additional useful information on the ACA and how it affects your taxes.

The individual shared responsibility provision requires that you and each member of your family have qualifying health insurance, a health coverage exemption, or make a payment when you file. If you, your spouse and dependents had health insurance coverage all year, you will indicate this by simply checking a box on your tax return.

Here are some basic facts about the individual shared responsibility provision.

What is the individual shared responsibility provision?

Starting in 2014 the individual shared responsibility provision calls for each individual to have qualifying health care coverage – known as minimum essential coverage – for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return.

Who is subject to the individual shared responsibility provision?

The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.

When does the individual shared responsibility provision go into effect?

The provision went into effect on Jan. 1, 2014. It applies to each month in the calendar year.

What do I need to do if I am required to make a payment with my tax return?

If you have to make an individual shared responsibility payment, you will use the worksheets located in the instructions to Form 8965, Health Coverage Exemptions, to figure the shared responsibility payment amount due.

What happens if I owe an individual shared responsibility payment, but I cannot afford to make the payment when filing my tax return?

The IRS routinely works with taxpayers who owe amounts they cannot afford to pay. The law prohibits the IRS from using liens or levies to collect any individual shared responsibility payment. However, if you owe a shared responsibility payment, the IRS may offset that liability against any tax refund that may be due to you.

For more information about the Affordable Care Act and your income tax return, visit IRS.gov/aca.

The Individual Shared Responsibility Provision brings changes to 2014 Income Tax Returns

From a recent IRS Newsletter on the Affordable Care Act.  Whether you come in for an appointment, or simply drop your information off, we will make sure to talk with you about this.

When filing your 2014 federal income tax return, you will notice some changes related to the individual shared responsibility provision of the Affordable Care Act.

The individual shared responsibility provision in the Affordable Care Act calls for you to have qualifying health care coverage for each month of the year, qualify for a health coverage exemption, or make an Individual Shared Responsibility Payment when filing your federal income tax return. Individuals are responsible for themselves and anyone they can claim as a dependent.  Taxpayers who have coverage for the entire year will simply check a box on their tax return and won’t need to do anything else when they file.

However, if you don’t have qualifying health care coverage and you meet certain criteria, you might be eligible for an exemption from coverage. Most exemptions are available on your tax return, but some must be claimed through the Marketplace. If you or any of your dependents are exempt from the requirement to have health coverage, you will complete the new IRS Form 8965, Health Coverage Exemptions and submit it with your tax return.

If you could have afforded coverage for yourself or any of your dependents but chose not to get it and you do not qualify for an exemption, you must make a payment called the individual shared responsibility payment. You calculate the shared responsibility payment using a worksheet included in the instructions for Form 8965 and enter your payment amount on your tax return.

For more information about the Affordable Care Act and filing your 2014 income tax return, visit IRS.gov/aca.