I hope that you and your business are starting off 2014 with a strong start. Now that we are a month in and inching close to the April 15th tax deadline, here is a quick rundown of several tax developments that have taken place in the last few months.
2014 Tax Filing Season Delayed
Start Date Late in 2013, the IRS announced that the start date for the 2014 tax season would be Jan. 31, 2014. That means the IRS will not be processing any individual returns before that date. Be aware that the Apr. 15, 2014 due date is not extended. You will still need to file an extension if your individual return is not filed by the April 15th deadline.
Guidance on the New 3.8% Surtax on Net Investment Income
The IRS issued final and proposed regulations on the new 3.8% surtax on net investment income (NII) that first went into effect in 2013. The surtax is 3.8% of the lesser of: (1) NII, or (2) the excess of modified adjusted gross income (MAGI) over an unindexed threshold amount ($250,000 for joint filers or surviving spouses, $125,000 for a married individual filing a separate return, and $200,000 in any other case). So in a nutshell, if you come in above these threshold amounts, this most likely means that your interest, dividends, and other investment income may be subject to an additional 3.8% tax.
Guidance on the New Additional Medicare Tax
The IRS has issued final regulations on the new additional 0.9% Medicare tax that first applies for tax years beginning after 2012. This tax applies to individuals receiving wages with respect to employment and/or self-employment income in excess of $200,000 ($250,000 for married couples filing jointly and $125,000 for married couples filing separately). So if you come in above these threshold amounts, you will have to file a new Form 8959 and additional tax computations. This will result in additional tax for those above the threshold amounts—although taxpayers receiving wages above $200,000 will have additional amounts withheld by their employer.
Standard Mileage Rates Down
The optional mileage allowance for owned or leased autos (including vans, pickups or panel trucks) has decreased by 0.5¢ to 56¢ per mile for business travel after 2013. The rate for using a car to get medical care or in connection with a move that qualifies for the moving expense also has decreased by 0.5¢ to 23.5¢ per mile for 2014. This means that if you use the standard mileage rates to calculate your auto expenses and your miles are about the same each year, your 2014 auto expenses will probably be less than the 2013 amount.
This news probably is not what you want to hear, but at least you can start planning for it. To sum it up, this year many taxpayers will be looking at additional taxes due to the 3.8% surtax on net investment income, the additional .9% Medicare tax on wages and self-employment above the limits, and the reduced standard mileage rates. Talk with your CPA early this tax season and prepare you checkbook.
If you have any additional questions or concerns, feel free to reach out to me.
Laura Torgesen, CPA, MAcc, is a Senior Tax Manager at Milam, Knecht & Warner, LLP. Her professional background includes experience at the international CPA firm KPMG Peat Marwick and as a Director of Taxation for a large, publicly traded financial company.