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NOTICE TO RESIDENTS OF MARYLAND

We are NOT affiliated with the State of Maryland. If you are looking for information about Maryland income taxes, please go to www.marylandtaxes.com.


Useful Links:

FindAGoodCPA.com - Not a healthcare professional?  Find a CPA or EA who understands the tax issues specific to you.

Nanny Taxes - Find out what's involved with complying with the Nanny Tax Rules

IRS Web Site - for tax forms, publications, and general tax information.

Exchange Authority - New England's first authority for IRC 1031 Exchanges

Cost Segregation Studies - Accelerate tax depreciation deductions on new and existing buildings through cost segregation studies

Social Security - find out the latest rules or your projected retirement benefit.

The Company Corporation offers fast, reliable & affordable incorporation and LLC services.


MONTHLY TAX NEWSLETTER

April 2015

MY CLIENT DR. JIM IS ELECTRIC

by Andrew D. Schwartz, CPA

My client Dr. Jim is all about being green.  And not only is he doing his part to save our planet, but Dr. Jim is also saving plenty of taxes while he's at it.

Electric Car

Three years ago, Dr. Jim purchased a Tesla.  Boy was ever proud of that electric car.  One big disappointment he had with his Tesla that first year, however, was the time he came to my office for his tax meeting. When he asked if I wanted to test drive his new electric car, I told him that I already driven Dr. Rob's Tesla a few weeks earlier, and passed up on his generous offer. 

(Not to get off topic too much, but based on my conversations with these two clients who own Teslas, there seems to be almost a cult-like fanaticism that goes along with owning these cars, especially during the first few months of getting one.) 

Just as important as saving the environment with his Tesla, Dr. Jim also saved himself $7,500 in federal income taxes the year he purchased that car.  For more information about this tax credit, we wrote an article in our August 2014 newsletter called Electric Car Credit Puts $7,500 In Your Pocket.

If you purchase an electric car, make sure to complete the Form 8936, Qualified Pug-in Electric Drive Motor Vehicle Credit to claim this valuable tax credit as part of your federal tax filing.

Electric Vehicle Charging Station

What would the owner of a Tesla need next?  How about a efficient way to recharge his car in the comfort of his own home of course?

The year after purchasing his Tesla, installing a charging station in his garage was next on Dr' Jim's agenda.  As an incentive to invest in one of these electric vehicle charging stations, the federal government offered a  tax credit of up to $1,000, and Dr. Jim took advantage of this tax break on his 2012 federal income tax return.

To claim this credit, you'll need to complete a Form 8911, Alternative Fuel Vehicle Refueling Property Credit.  Please note that this tax break was set to expire at the end of 2013, and was then extended through December 31, 2014.  Who knows if it will be extended again?

And for whatever it's worth, I was told that Dr. Jim almost burned down his garage thanks to a malfunction with his charging station.  I never did get the whole story, buy my clients who know Dr. Jim have told me enough that I have a sense that it was a very, very close call.

Solar Panels

Now that Dr. Jim had his charging station filling up his Tesla every night, he saw his electric bills skyrocket.  So Dr. Jim decided that the best way around watching his electric bill jump was to produce his own electricity using Solar Panels.  And the federal government was nice enough to chip in 30% of the cost of these solar panels thanks to the Residential Energy Efficient Property Credit.

Anyone who installs systems to harness solar, wind, or geothermal power should file the Form 5695, Residential Energy Credits to get back 30 cents for every dollar spent.

Form over Substance

Here are the forms Dr. Jim filed to save thousands of dollars in federal income taxes through various tax credits available for all green Americans:

If you are thinking about following in Dr. Jim's green footsteps, you can read the most up to date rules about these tax breaks at www.irs.gov or www.energystar.gov,

TOP


BUY YOURSELF 6 MONTHS ON APRIL 15TH

File Something On or Before 4/15

 

If you can't get your tax returns completed by April 15th, make sure to file for an automatic extension.  Filing something on April 15h is the only way to avoid the Failure to File Penalty equal to five percent per month on any federal income taxes due.  Yes, expect the IRS to charge you $50 per month on every $1,000 of taxes owed as of 4/15 if you don't file your tax return or extension request by that date.

 

Filing for an extension is easy.  Simply submit a Form 4868 to the IRS, along with a check made out to the United States Treasury for an estimate of the taxes you might owe, if anything.  Even if you're confident you'll be getting a refund, it's still a smart idea to file for an automatic extension.

By submitting an extension request (Form 4868) prior to the tax return due date, the Failure to File penalty of five percent per month is replaced with a much more reasonable Failure to Pay penalty of one-half percent per month.  That's a pretty good return on your $.49 stamp used to mail the one-page automatic extension request, Form 4868, to the IRS.

Plus, if you end up owing the IRS no more than the greater of 10% of your total federal tax liability or $1,000, you should not be assessed any penalties at all, as long as you file your federal tax return by October 15th.  In this case, you'll only owe interest to the IRS on your balance due at a very very low rate.

And While You're At It, Fund Your IRAs

When it comes to your IRAs, the deadline to put away money for 2014 is April 15, 2015, even if you file an extension.  This deadline applies for traditional IRAs and Roth IRAs. 

For 2014, you can contribute up to $5,500 into an IRA.  Anyone 50 or older as of December 31, 2014 can put away an extra $1,000.  If you're married, both spouses can contribute to an IRA provided one spouse has earned income during the year in excess of the total amount to be contributed.

One great reason to contribute to an IRA this year is to take advantage of the rule allowing all taxpayers to convert their IRAs to a Roth IRA regardless of their income.  Prior to January 1, 2010, only taxpayers earning less than $100,000 could convert their retirement accounts to a Roth IRA.  And based on some of the news coming out of Washington, doing away with this Roth Conversion strategy for high-income taxpayers has been discussed.

Remember, there is also a relatively modest income limitation for Roth contributions.  If your 2014 AGI exceeds $129k if single or $191k if married, you aren't allowed to contribute any money directly into a Roth IRA.

Buy Six Months to Fund Your Self-Employed Retirement Account

Are you self-employed?  If so, filing an extension might make a lot of sense since it buys you an additional six months to establish and fund your SEP IRA for 2014.  It's not uncommon for self-employed individuals to pay all of their taxes due with an extension, and then fund their SEP IRA, SIMPLE IRA, or Solo 401k, as well as submit their tax forms, by October 15th.

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TAX AND FINANCIAL PLANNING CALENDAR FOR APRIL 2015

Month

Income Taxes

Saving and Investing

 

 

April

  • Due date for funding your 2014 Roth or Traditional IRA, or Education Savings Account (ESA) is 4/15/15
  • Due date for self-employed individuals to fund their retirement plans is 4/15/15
  • Self-employed individuals who need additional time to fund a retirement plan should file a Form 4868 with the IRS by 4/15/15

 TOP


2014 & 2015 TAX FACTS

  • For 2014, the standard deduction for a single individual is $6,200 and for a married couple is $12,400. A person will benefit by itemizing once allowable deductions exceed the applicable standard deduction. Itemized deductions include state and local income taxes (or sales taxes), real estate taxes, mortgage interest, charitable contributions, and unreimbursed employee business expenses.
  • For 2014, the personal exemption is $3,950. Individuals will claim a personal deduction for themselves, their spouse, and their dependents. 
  • The maximum earnings subject to social security taxes is $118,500 for 2015, up from $117,000 in 2014.
  • The standard mileage rate is $.575 per business mile as of January 1, 2015, up from $.56 for 2014.
  • The maximum annual salary deferral into a 401(k) plan or a 403(b) plan is $18,000 in 2015, up from $17.5k in 2014.  And if you'll be 50 or older by December 31st, you can contribute an extra $6,000 into your 401(k) or 403(b) account this year, up from $5,500 last year.
  • The maximum annual contribution to your IRA is $5,500 for 2014 and 2015.  And if you turn 50 by December 31st, you can contribute an extra $1,000 that year.  You have until April 15, 2015 to make your 2014 IRA contributions.

TOP

Need Help With Your Nanny Payroll?
 

This Month's Topics

My Client Dr. Jim is Electric

Buy Yourself 6 Months on April 15th

The FICA Refund for Medical Residents 

2014 & 2015 Tax Facts

Tax and Financial Planning Calendar for April 2015

 

NEWSLETTER ARCHIVES
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WHAT'S NEW WITH THE FICA REFUND?

In a shocking development, the IRS recently announced that they will be honoring the FICA tax refunds submitted by residency programs and individual doctors.  The catch is that only FICA taxes paid prior to 4/1/05 qualify.

For more information, go to our April 2010 Newsletter, our January 2009 Newsletter, or our February 2001 Newsletter or read through the IRS' Chief Counsel Advice Memorandum on this issue.

Let's work together to keep current on this hugely valuable tax break.  Please post whatever you read or hear regarding this FICA issue on our new Message Board we set up just for this topic.

 

 
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