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Tax Tip of the Week | No. 295 | A Closer Look at MFS vs. MFJ March 25, 2015

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Tax Tip of the Week | March 25, 2015 | No. 295 | A Closer Look at MFS vs. MFJ

More about how you file…

A few weeks ago we took a look at Married Filing Jointly (MFJ) vs. Married Filing Separate (MFS). This week we are going to take a closer look on how to properly file these returns.  The basic rule of MFS is that both spouses must claim the standard deduction or take itemized deductions on their respective separate returns. In other words, one MFS taxpayer cannot claim the standard deduction and then allow the other spouse to take itemized deductions.

Let’s look at some examples:

Example 1:  The standard deduction for 2014 for a MFJ return is $12,400. If Jack and Jill elect to take the standard deduction, then each will show a $6,200 (12,400/2 = 6,200) deduction on their respective MFS returns.

Example 2:  Jack and Jill have mortgage interest deductions, state and local tax deductions, real estate tax deductions and charitable contributions that equal $20,000.  Since this amount obviously exceeds the $12,400 standard deduction, they will take the itemized deduction on their 2014 tax return. Itemized deductions are then shown on Schedule A of the tax return.  If they decide to file MFS, then their respective Schedule A forms cannot exceed $20,000.

Example 3:  We sometimes see taxpayers try to show a $20,000 itemized deduction on Jack’s return and a $12,400 standard deduction on Jill’s return when they file MFS.  YOU CAN’T DO THAT!

These are the kinds of mistakes we clean up over the summer months for those that try to self-prepare their tax returns.

Don’t be “one of those guys”!

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 294 | Senate Forms Tax Reform Working Groups March 18, 2015

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Tax Tip of the Week | March 18, 2015 | No. 294 | Senate Forms Tax Reform Working Groups

Here is a recent article from accountingtoday….

Leaders of the Senate Finance Committee have formed five bipartisan working groups with the goal of analyzing the tax code and developing policy recommendations for comprehensive tax reform.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, and ranking Democratic member Ron Wyden, D-Ore., announced the launch of the five working groups Thursday. The groups are supposed to analyze the current tax laws and examine the various policy trade-offs and reform options within each topic area.

Each group will be co-chaired by one Republican and one Democratic member.

The policy focus areas for the working groups include: 1) individual income tax; 2) business income tax; 3) savings and investment; 4) international tax; and 5) community development and infrastructure.

“Republicans and Democrats agree the American tax system is too complicated, unfair, and is hurting economic growth,” Hatch said in a statement. “With the launch of these working groups, members will have an opportunity to thoroughly examine the code and put forward smart ideas that will help lay the groundwork for a bipartisan tax overhaul that will provide bigger paychecks, better jobs, and more opportunity for all Americans. I look forward to working with my colleagues on both sides of the aisle as we take on this challenge during the 114th Congress.”

We’ll keep you posted.

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.

 
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 293 | How Long Are You at Risk for an IRS Audit? March 11, 2015

Posted by bradstreetblogger in : General, Tax Deadlines, Tax Tip, Taxes , add a comment

Tax Tip of the Week | March 11, 2015 | No. 293 | How Long Are You at Risk for an IRS Audit?

IRS can audit for three years, six …. or forever.

In most cases, the IRS has three years to audit after you file your tax return.  If the IRS shows up after that, they may be too late. There are special rules, however, that can extend your audit purgatory.

The three years is doubled to six if you omitted more than 25% of your income.  It’s also doubled if you omitted more than $5,000 of foreign income.  Even worse, the IRS has no time limit if you have never filed a tax return.  There is also no time limit to audit your return if fraud is suspected.

So be safe, file your tax returns on-time to get the clock ticking in your favor.

 

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.

Tax Tip of the Week | No. 292 | Inflation Adjustments for Various Tax Benefits March 4, 2015

Posted by bradstreetblogger in : General, Tax Preparation, Tax Tip, Taxes, Taxes , add a comment

Tax Tip of the Week | March 4, 2015 | No. 292 | Inflation Adjustments for Various Tax Benefits

Here are the most common adjustments for 2014 tax returns….

Recently released Revenue Procedure 2014-61 contains annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules and other tax changes.

The tax items for tax year 2015 of greatest interest to most taxpayers include:

•    The standard deduction rises to $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly.
•    The limitation for itemized deductions to be claimed on tax year 2015 returns of individuals begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).
•    The personal exemption for tax year 2015 rises to $4,000, up from the 2014 exemption of $3,950.
•    The annual exclusion for gifts remains at $14,000 for 2015.

More information can also be found in IR-2014-104. http://www.irs.gov/uac/Newsroom/In-2015,-Various-Tax-Benefits-Increase-Due-to-Inflation-Adjustments

 

You can contact us in Dayton at 937-436-3133 and in Xenia at 937-372-3504.  Or visit our website.
Rick Prewitt – the guy behind TTW

…until next week.