Since 1983

13611 Barrett Office Drive, Suite 202 • Manchester, MO 63021-7802

phone 314.965.1040 • 800.965.0355 • fax 314.965.2110 • email ralph@callier.com • www.callier.com

                                                                                                January 2014

Greetings!

Healthcare ate up Congressional time in 2013, so there is very little new 2014 tax development, which I cover later in this newsletter below.  Knowing that most folks have disdain for all this tax stuff and with little new tax info for me to share with you, let me reprint some pointers from several years ago (2008).    Manic tax attacks are messy; this may help!

Put it in the Bag!

This is a strange title, but a great concept.  Years ago in Week One of military basic training recruits (Me) had to ensure that our duffel bag contained each piece of equipment that the Army intended for us.  We moved about out in rows on a big field, and then we were instructed to dump it all out on the ground.  The drill sergeant yelled out a selected piece of equipment; we examined it, then we lifted it high in the air; and then seeing every hand populated, he bellowed out “Put it in the bag”!  This ritual continued for each item until the bag was full, assuring us that we had accounted for every item.

The gray envelope I provide in your final tax booklet is my “Bag”.  Only when I am fully done with each document does it go into the bag.  Once there, I do not look at it again.  The clutter diminishes with each doc in the bag.   

Don’t let all the tax docs intimidate you: take only one document at a time.  Look it over, record it on the organizer, and then put that document in The Bag – usually the big windowed-envelope I sent containing this newsletter and organizer.  When it is in this envelope, that item is a done deal – no need to look at it again, and now you have one less piece of paper.  Also with it in the bag, you will not be tempted to enter that item and amount a second time on the worksheet (explained below).  If you stop for a couple of days, and come back to your tax docs, don’t be concerned about what is in the bag, because all those items are “complete”.  This mechanism has served me well over the years.  It automatically reduces the clutter, gradually rids you of all the pieces of the puzzle, and brings “closure” to each item. 

Speeding up the Processing of Your Tax Return:

• Record amounts in only one place on the organizer.  I deliberately detail items on the “Detail Worksheets” to jog your/my memory year after year for recurring deductions.  IRS does not see this detail on the e-filed tax return.  Please populate these Detailed Worksheets, and try not to duplicate them elsewhere on the organizer.

Example: there are several places on the worksheet to enter business mileage.  Simply pick one place to enter it (usually where it appeared in the previous year), and I will get it to the correct place on your tax return.  Including business mileage in several places on the organizer creates a lot of unraveling time on my end.

• Try to use the Tax Data Worksheet (Organizer) as the only place you enter data for your tax return.  If you give me additional lists, I will not know which is correct, the organizer or the list.  

• If you cannot live without your own separate list of deductions, that works!  Nevertheless, then leave the organizer blank - please don’t duplicate it on the organizer.  Why?  Invariably one list will be longer and I will have to compare, sort, calculate separate listings, and ask questions etc. on which one is correct.  This really does take a lot of time.

• If you email scanned tax documents to me, please combine all of them in one or two PDF files; I cannot accept more PDFs because there is too much chance of missing the full printing of them.

• Doris is the first to see and key in your tax data.  She alerts me of organizers that appear to be pretty much all in order and complete, and prods me to finalize it and get it out the door: bypassing queue.

New For 2014:

• Health reform change tops the list: Individuals without insurance owe a tax.

Folks must have qualifying coverage for themselves and their dependents to avoid a tax. This includes employer health coverage, coverage purchased through an exchange and federal coverage such as Medicare and Medicaid.  The tax for being uninsured is a penalty of $95 a person ($47.50 for each family member who is under the age of 18), with a ceiling of $285.

• Lawmakers decided to allow dozens of tax breaks to permanently expire after 2013, including the deduction for state sales tax in lieu of income tax (Texas and Florida clients); also the ability of folks 70½ and older to make direct distributions of up to $100,000 annually from their IRAs to charity.

• The Social Security wage base increases this year to $117,000, up $3,300.

• If your W2 or self-employed net income exceeds $200,000, an additional 0.9% Medicare surtax kicks in for singles and couples earning over $250,000.

• Social Security benefits rise just 1.5% in 2014, due to low inflation.  The earnings limits are heading up, too. People who turn 66 this year do not lose any benefits if they make $41,400 or less before they reach that age.  Individuals between ages 62 and 66 by the end of 2014 can make up to $15,480 before they lose benefits. There is no earnings cap once a beneficiary turns 66.

• HSA ceilings rise slightly to $6,550 for account owners with family coverage and to $3,300 for self-only coverage. Folks born before 1960 can put in $1,000 more.

• The adoption credit can be taken on up to $13,190 of costs,

• A new 20% top rate on dividends and long-term gains starts at a higher level for incomes over about $410,000.  The regular 15% maximum rate applies for filers with incomes below these amounts, except that filers in the 10% or 15% income tax bracket still get the special 0% rate.

• The 401(k) limit remains $17,500.  Folks born before 1965 can put in an extra $5,500.

• The odds are increasing for online retailers to collect state sales.

Business – new for 2014:

• The standard mileage rate declines to 56¢ per mile for business driving,  The rate for medical travel and moving also falls, to 23.5¢ a mile and charitable mileage remains at 4¢ a mile.  Users of the standard mileage rate can also claim the cost of parking and tolls.

• The tax credit for small firms that offer health coverage is higher in 2014.  The top credit rises to 50% (35% for tax-exempt groups) of the lesser of what they pay for employee coverage bought via an exchange or the average group-exchange premium for small businesses in their state.  The full credit is available only to firms with 10 or fewer full-time-equivalent employees and average wages of $25,400 or less.

Final Notes:

• Tax-related identity theft continues to plague IRS.  IRS will never email you; delete any IRS emails.

• Medical expenses include educational expenses for treatment of kids with special learning needs and the associated mileage.  (This covers a lot of folks)

• In 2011 (latest data), the highest 5% paid 56.5% of total income tax having income of at least $167,728. The top 10% of filers, those with AGIs of $120,136 or more, bore 68.3% of the total tax burden. 

• Pay down debt a little at a time when you have any amount of spare cash; pay it online to get it done quickly.

• Contest your Real estate valuation; it is not difficult.

We have chatted enough; go fill the bag; tell us how we can help in this tax process. 

Thank you and…

                                                                                       Many Happy Returns,