The 2015 tax filing season is gearing up to be amongst the most frustrating in years for taxpayers. Here are the challenges when taxpayers file Form 1040 this year:
1. Confusion Over The Health Insurance Mandate
All taxpayers will have to consider the impact of health care reform under the Affordable Care Act (ACA). Many may not be prepared and without a doubt will make a mistake.
A major feature of ACA is a mandate requiring most Americans to carry health insurance. You must state on your return whether you have coverage.
If you did not have coverage in 2014 as required—there is a penalty. You might be able to get the penalty reduced but will have to complete a tedious worksheet to do so.
You may look for relief by filing a new tax form 8692 to receive a tax credit. It contains 36 lines. The instructions are 15 pages long.
You may feel you are entitled to an exemption from the mandate. That means filing a form 8965. This form has up to 78 lines. Instructions are 12 pages long and contain five worksheets!
Even professional tax preparers are confused. Some think it is necessary to have clients complete lengthy checklists. (Kasperek & Co. is not one of them).
DIY (Do It Yourself) has become more in vogue in recent years. If you are one of those DIY’ers, it would be wise to read up on the health insurance mandate. Make sure your tax software will file the mandate correctly.
If you decide to use a professional, make sure the tax preparer can demonstrate he or she is versed in this area. Kasperek & Co., for example, has been taking hours of continuing education for several years to protect our client’s interests.
2. Headaches for Self-Employed, Property Owners, Farmers
IRS has issued rules to clarify when a purchased item can be expensed and when they must be capitalized and depreciated. These regulations have the most impact on taxpayers who buy tangible assets to write off and impose additional administrative requirements.
Generally speaking, self-employed people (including those who run small businesses), owners of rental properties (of all types) and farmers are the most impacted.
Impacted taxpayers really need to consider having a written Repair & Capitalization Policy. Without it, it is possible that ALL expenses will not be able to be written off immediately on the tax return!
The new regulations also require a careful review of ALL items purchased for business use and determine if it can be expensed or capitalized & depreciated on your tax return.
Finally, the new rules may require you to attach a statement or file a complex “change in accounting method” form with your tax return in order to comply.
These new Repair & Capitalization rules and have been overshadowed by all the talk over health care but are nevertheless strict and complex.
DIY’ers, make sure you understand what documents you need to prepare and what the documents are supposed to address. Much of is not boilerplate stuff you’ll find in your tax software! Also make sure your software can generate the proper statements and forms to attach to your return so that you can comply with the new rules.
If you decide to use a tax professional, he or she need to be able to assist you with preparing paperwork that is concise, well written and does the job. Kasperek & Co., for example, has been taking hours of homing over the language of the various policy statements and tax return disclosures to protect our client’s interests.
3. No Help From IRS For Taxpayers
IRS has seen its funding cut by Congress. Tens of thousands of jobs have been slashed. What does this mean to taxpayers?
The IRS budget cut means there are fewer people to help taxpayers with its concerns when filing returns.
If you call the help lines, you may never get through! Even if you do, call center personnel have been trained to answer only ‘basic questions”.
If you go to a help center, expect very long lines to wait for assistance.
Trying to comply with new unprecedented regulations without any resources available from IRS will be a nightmare for taxpayers!
Kasperek & Co. Accountants is not throwing up its hands. Work with us and we lead this way to avoid a nightmare for you.