Top tax tips checklist
As April 15 approaches, here are some individual tax return considerations for 2013 and beyond:
New for 2013:
- Benefits for same-sex married couples: Same-sex married couples may now file jointly and will enjoy equivalent treatment and benefits in all areas of federal income, gift and estate tax law.
- Higher taxes for higher incomes: Higher earning individuals face higher taxes with individuals earning more than $400,000 and couples earning more than $450,000 subject to a 39.6 percent top rate and top capital gains dividend rates increasing from 15 to 20 percent.
- New Medicare tax: Taxpayers are now subject to a 3.8 percent Medicare tax on net investment income.
- Alternative Minimum Tax indexing: Alternative Minimum Tax has been indexed for inflation for the first time.
- Don’t miss the deadline for filing an extension: The filing deadline is Tuesday, April 15, 2014. If you can’t make it by then, filing for an automatic extension with Form 4868 is a painless process that will spare you penalties for missing the deadline. However, remember that this is an extension of time to file, but not an extension of time to pay.
- File electronically to better ensure accuracy. Filing electronically will expedite your refund and, as an additional incentive, the IRS will check your electronic return for commonly made errors. If you did make a mistake, the IRS gives you the chance to correct the problems before it accepts and processes your electronic return.
- Consider contributing to an IRA or converting to a Roth IRA: While the books closed on income, gain and loss at the end of the calendar year, these two options will provide the opportunity to still reduce your tax liability or take advantage of future tax-free investment growth.
- Optimize your deductions: Colorado taxpayers with oil and gas working interest income can optimize intangible drilling cost (“IDC”) deductions by running their return under different scenarios. By doing multi-year planning they can more appropriately determine whether to deduct IDCs or capitalize and amortize these costs.
How to Plan for 2014:
- Take advantage of contribution deductions: Be aware of significant opportunities to contribute to causes that benefit Colorado, which will also include the benefit of a federal deduction and possible credits on the Colorado return.
- Confirm Enterprise Zone status: Check whether your business is in a qualified Enterprise Zone.
- Consider material participation in your business: Materially participate in your business as the 3.8 percent Medicare tax on net investment income is imposed on passive income.
- Review foreign bank account reporting: Understand foreign bank account reporting to avoid penalties for not reporting offshore income or the existence of those accounts and look into the IRS’s voluntary disclosure program, which allows for reduced penalties and no persecution.