Key Tax Changes for 2015

Since 2001, we’ve seen more than 5,000 changes to the Tax Code. That’s nearly a change for every day gone by since 2001. It’s complicated and this doesn’t even factor in inflation-adjusted changes the IRS implements yearly. The tax code now is almost 4 million words long, and keeping up with the changes each year can be a back breaker, especially if you choose to pass on do-it-yourself tax software or tax professionals.

The upcoming change of the calendar from 2014 to 2015 brings a number of key tax changes consumers need to be aware of if they wish to maximize their income and minimize their liability. The 113th Congress is on track to pass fewer bills than the last Congress and we thought they were unproductive, having passed the fewest number of bills since 1973.

As unproductive as they were, they still managed to make some significant changes to the Tax Code. So, let’s take a look at the key tax changes for 2015 and consider how they might affect you.
Rollover Limits for IRAs

Probably the most significant change to the code are the modifications being made to individual retirement account rollovers in 2015.

Till the end of 2014, you can roll over a tax-advantaged IRA such as a SEP IRA, SIMPLE IRA, Roth or other traditional IRA, and hold the money for up to 60 days. As long as you redeposit the money into a new IRA, you will suffer no taxes or penalties. The rule changes in 2015. Taxpayers will be limited to one IRA rollover per year. All of the IRAs previously mentioned count as a single plan. So, if you have both a SEP IRA and a Roth IRA and wish to roll them both over into a different IRA, you would have to choose between one or the other, or pay a 10% penalty if it was an early withdrawal (before age 59-1/2), plus a potential 6% excise tax if the rollover amount exceeds your annual allowable IRA contribution. If you’re considering multiple IRA rollover moves, do it before 2015.

This rule only applies to distributions where you receive a check from the IRA custodian. It does not apply to transfers that go directly from one IRA custodian to another. There is no limit on the number of such transfers that can be made each year. So, if you want to transfer money from one IRA to another, you should instruct your IRA custodian to directly transfer it to the new IRA, without you actually receiving the money.

Flexible Spending Account Changes

Healthcare costs continue to rise. Many taxpayers utilize tax-advantaged health spending accounts offered through their employers that allow them to leverage pretax income to help cover medical expenses.

FSAs have a maximum annual contribution limit of $2,550 as of 2015. Prior to 2013, the unused balance was not allowed to be rolled over into the next year. This forced a “use it or lose it” clause regarding FSAs. After 2013, the IRS allowed employers to offer a carryover of up to $500 or a two-and-a-half month grace period stretching into the next year, to use the funds from the previous year. FSAs cannot have both a carryover and a grace period – and employers are not required to offer either.

Rapidly gaining popularity, HSAs (Health Savings Accounts) offer a contribution limit of $3,350 per year as of 2015. Also, the funds can roll over and be used in subsequent years. Better still, your employer can add money to your HSA in the same way they add to your 401(k).
The main caveat here is if you roll over the maximum of $500 from 2014 into 2015 in an FSA, you won’t be able to participate in an HSA in 2015. You will have to consider whether it is better to lose whatever is leftover in your FSA in exchange for the opportunity to participate in a more flexible HSA in 2015.

The End of Tax Extenders

There are 55 different tax extenders that Congress agreed to pass retroactively for 2014 @ https://www.fool.com/personal-finance/taxes/2014/12/13/congress-wants-to-give-you-a-big-tax-break-but-the.aspx that will expire on Dec. 31, 2014.

These tax extenders total $41.6 billion, with 20% of the breaks going to individuals. Two key tax deductions consumers will lose are debt forgiveness related to short-sales and state and local sales tax write-offs.

If you were underwater on your home and negotiated a short-sale with your lender, you would normally pay taxes on the difference between the negotiated sale price and your remaining mortgage. The current tax break allows the debt to be forgiven, so short-sellers aren’t paying a huge tax bill.
If you live in a state with no income tax, such as Washington or Nevada, you have the option of writing off a portion of your sales tax paid as an itemized deduction. This will not be the case in 2015.

On the other hand, businesses stand to lose research credits, credits for hiring disadvantaged workers, and alternative-energy credits. Between lowered gasoline prices and uncertainty surrounding tax extenders in 2015, it could be a rough year for alternative-energy.

Then again, these tax extenders could be reinstated next year, but at the moment we have to plan as if they will not be.

Tax Help MD Can Help

Are you confused by all the changes to the tax code? Overwhelmed by how complicated the process has become? Or are you intimidated by the IRS and facing some kind of legal action? We are here 24/7, waiting to help you with your tax problems.

Tax Help MD is your cure for tax problems.
Call Tax Help MD now, at 888-632-4506.

Call 888-557-4020 or contact us online at https://www.mytaxhelpmd.com/contact-us/

By |2014-12-23T14:21:05+00:00December 23rd, 2014|Blog|0 Comments

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