While the temperatures start to cool off from the highs of the summer, the heat will remain high as elected officials put the finishing touches on new legislation. Included this month are a few of the preliminary tax figures for 2014 that are based on the Consumer Price Index.  There are also articles discussing expiring tax laws, health care, and unwanted cell phone charges.

As always, should you know of someone who may benefit from this information please feel free to forward this newsletter to them.

Preview of  Key 2014 Tax Figures

Employer InvestmentWhile official numbers for 2014 are not yet released by the Internal Revenue Service (IRS), many figures are based on formulas set within the Internal Revenue Code (IRC) and use the Consumer Price Index (CPI) published by the Department of Labor. They are noted here for your planning purposes:

Tax Brackets:  While the actual income brackets for tax rates are not set for 2014, the rate of inflation that impacts the income levels for each tax rate is anticipated to raise the income brackets by approximately 1.7-1.8%.  Please recall that beginning in 2013 there is a new 39.6% income tax rate in addition to a new Medicare surtax.

Personal Exemption: $3,950 in 2014 ($3,900 in 2013)

Standard Deductions:
Tax Year 2014 2013
Single $6,200 $6,100
Head of Household 9,100 8,950
Married filing Joint 12,400 12,200
Married filing separately 6,200 6,100
Dependents 1,000 1000
65 or blind: married Add $1,200 Add $1,200
single Add $1,550 Add $1,500
Other Key figures:
Tax Year 2014 2013
Estate Gift tax exclusion $5.34 million $5.25 million
Annual Gift tax exclusion $14,000 $14,000
Roth and Traditional IRA Contribution limit 5,500 5,500

Caution:  Remember, these are early figures using the recently announced Consumer Price Index.  Official numbers are released by the IRS later this year.

These tax benefits are gone after 2013

Use Them or Lose Them

Creative Summer Jobs
With the massive tax changes made at the beginning of 2013, it is hard to believe that many tax laws are still set to expire at the end of the year unless Congress acts.  As the year winds down, now is a good time to review some of the key expiring tax provisions and take action if you wish to benefit from them.
Button Right Direct charitable contributions from your retirement account. If you are age 70½  or older you can make a direct contribution from your tax-deferred retirement account directly to a qualified charitable organization.
right arrowBenefit: If handled correctly, this pre-tax donation does not have to be reported as income on your tax return.
Button Right Federal tax credit for energy-saving home improvements. This credit for qualified energy-saving home improvements expires in 2013.right arrowBenefit:  $500 credit (this is a lifetime credit, not annual) for energy saving purchases.  The limit is $200 for windows and skylights.
Button Right Optional itemized deduction of sales tax in lieu of state income taxes. In low or no income tax states, you may use a sales tax itemized deduction instead of a state income tax deduction.right arrowBenefit:  If you made major purchases or live in a state with no/low income taxes your itemized deductions could be much higher.
Button Right Itemized deduction of qualified mortgage insurance premiums. Through 2013 you can continue to deduct your qualified mortgage insurance premiums as an itemized deduction.right arrowBenefit:  A meaningful increase in your itemized deductions.
Button Right Qualified higher-education tuition and expense deduction. You can offset the tuition and expense of qualified education using the tuition and fees deduction through 2013.right arrowBenefit: Up to a $4,000 income deduction.  Planning is required as this deduction may not be used in conjunction with many other educational tax benefits.
Button Right Numerous small business tax incentives.  Many small business tax credits and accelerated depreciation incentives are also scheduled to expire after 2013.  These range from bonus depreciation to the expiration of the research and development credit.  If your business anticipates using any credits this year, it is best to review your situation.

The New Cramming

This sneaky fraud could be costing you
Creative Summer Jobs
The art of adding unapproved, deceptive or misleading services to your phone bill is commonly known as cramming.  Historically these charges could be seen within your traditional telephone bill.  With the shift from traditional land-lines to cell phones, a new form of cramming is making its presence felt. Here are some suggestions to help keep you from becoming a victim of this practice:
Shield Check your bill.  Check your cell-phone bill every month and identify all items on your bill.  Call your provider to get an explanation for anything that appears unclear. Look for key words that may be masking the unapproved charges.  Words like:

Check Minimum charge
Check Service fee
Check Other fees
Check Connection fees
Check Or any non-phone related terms like internet or web
Shield Question changes.  Your phone bill should be predictable.  If you see the bill increase from one month to the next, consider it a warning sign.  While the change may not be fraudulent billing, the review could point to a need to change your phone agreement or phone habits.
Shield Know the culprits. Companies that are commonly adding a monthly charge to cell phones include;  gaming companies, sports applications, online entertainment, security services, credit monitoring, wi-fi connection services, and financial services.
Shield Guard your phone number distribution.  To access your cell phone bill the thieves need your phone number.  If you start receiving a number of unwanted calls, it can be a clue that your billing might be compromised in the future.

The problem of cramming has found a new home on cell phone bills in part because many users no longer see a paper statement and are set up for automatic bill payment.  If either of these applies to you, it makes a monthly review of your billing statement that much more important.

If you think you have been a victim of cramming visit the Federal Communications Commission, www.fcc.gov, to learn more and to register a complaint.

Beyond the Noise of Health Care Initiatives

What is happening in October?
A dozen tax planning triggersTax provisions for individuals and families impacted by the Affordable Care Act (also known as Obamacare) will be upon us in 2014.  We are seeing the approach of Obamacare in many forms; by Congress members filibustering, through nightly news reports, constant advertisements, and announcements of businesses migrating away from offering health care insurance for some of their employee groups. How does someone make sense out of all this?

What is happening now

From October 2013 thru March 2014, the open enrollment phase to obtain health insurance through the Health Insurance Marketplace begins.  This Insurance Marketplace is a legal requirement for each state to publish health insurance options and related costs to all residents in their respective state.  So please be prepared to be inundated with commercials from each state promoting their new Health Insurance Marketplace and the need for you to review your health coverage. Remember, unless something changes, those who do not have health insurance in 2014 could face additional federal tax in 2014.

What you need to know

Check Employer-provided insurance. If you currently have health insurance through your employer, the current media storm will, in all likelihood, not apply to you.
Check Sole-proprietors. If you are a sole-proprietor you may wish to review your current insurance coverage with the policies available in the Health Insurance Marketplace.
Check Currently without health insurance. If you do not have health insurance, pay attention.  Not only will the Marketplace be a good resource to shop for a health insurance policy, your income may also qualify you for a federal Premium Tax Credit to lower your health insurance cost.

If you wish to learn more and determine the best course of action for you and your family visit www.healthcare.gov.

As always, should you have any questions or concerns regarding your situation please feel free to call.

Leave a Reply