Tax laws change every year. Often many of the changes affect every taxpayer while others only affect small businesses or high-income taxpayers.
Flexible Spending Accounts (FSAs) is where you can save pretax dollars to pay for health care expenses, or dependent care expenses. Typically they have had a “use it or lose it” within the year restriction. As of 2013 taxpayers are allowed to roll over $500 into the new year. However, beware that if you have an FSA this year and you elect to carry over $500 into 2015, you will be ineligible to participate in a Health Savings Account (HSA) in 2015. This just applies to general FSAs, not those which are used for dependent care or dental expenses. You may need to plan ahead based on this restriction. If you really need to have an HSA for 2015 you may not want to carry over unused FSA amount, even it if means you can lose them.
FICA and Medicare Taxes This last year many taxpayers noticed a startling decrease in their pay checks due to the FICA tax increase. The Federal Insurance Contribution Act (FICA), includes both Social Security and Medicare Taxes. Currently the FICA rate is 7.65% of your income. For single taxpayers that earn more than $200,000 and married filing joint taxpayer that earn more than $250,000, may have an additional 0.9% FICA tax increase. As for self-employed taxpayers they are paying the full amount of 15.3% since they do not share the cost with an employer. There will be no tax increase this year related to FICA, but the wage base is proposed to increase for 2014 from $113,700 in 2013 to $115,500 for 2014.
Bitcoins the virtual currency that is becoming more popular and used to pay for items and pay for services. If you received Bitcoins as payment this year you need to include the fair market value to you annual income. And, of course it is considered taxable income. There are some provisions in calculating if you invested in the virtual currency or received it as compensation for services.
Inflation The tax code is designed to adjust with inflation. The standard deduction amounts have also increased which may help taxpayers reduce their taxable total.
- Single or Married Filing Separately is now $6200 – a $100 increase
- Head of Household is now 9100 – a $150 increase
- Married Filing Jointly or Qualifying Widow(er) is now $12,400 – a $200 increase.
- Exemptions claimed in 2014 is now $3950 – a $50 increase.
The Affordable Care Act is the biggest change in taxes in 2014. Employers with more than 50 full-time employees will be facing a tax penalty if they failed to provide affordable health coverage to their employees. As for individuals who failed to purchase coverage may also be subject to penalty. The penalty for uninsured children will be $47.40 per child and $95 for adults. This penalty will increase each year, by 2016 the penalty will be $695 per adult or 2.5% of the total taxable income or whichever is greater.