You can treat amounts you paid during 2013 for qualified mortgage insurance as home mortgage interest. The insurance must be in connection with home acquisition debt, and the insurance contract must have been issued after 2006.

Qualified mortgage insurance.   Qualified mortgage insurance is mortgage insurance provided by the Department of Veterans Affairs, the Federal Housing Administration, or the Rural Housing Service, and private mortgage insurance (as defined in section 2 of the Homeowners Protection Act of 1998 as in effect on December 20, 2006).

  Mortgage insurance provided by the Department of Veterans Affairs is commonly known as a funding fee. If provided by the Rural Housing Service, it is commonly known as a guarantee fee. The funding fee and guarantee fee can either be included in the amount of the loan or paid in full at the time of closing. These fees can be deducted fully in 2013 if the mortgage insurance contract was issued in 2013. Contact the mortgage insurance issuer to determine the deductible amount if it is not reported in box 4 of Form 1098.

Special rules for prepaid mortgage insurance.   Generally, if you paid premiums for qualified mortgage insurance that are properly allocable to periods after the close of the tax year, such premiums are treated as paid in the period to which they are allocated. You must allocate the premiums over the shorter of the stated term of the mortgage or 84 months, beginning with the month the insurance was obtained. No deduction is allowed for the unamortized balance if the mortgage is satisfied before its term. This paragraph does not apply to qualified mortgage insurance provided by the Department of Veterans Affairs or the Rural Housing Service.

Example.

Ryan purchased a home in May of 2012 and financed the home with a 15-year mortgage. Ryan also prepaid all of the $9,240 in private mortgage insurance required at the time of closing in May. Since the $9,240 in private mortgage insurance is allocable to periods after 2012, Ryan must allocate the $9,240 over the shorter of the life of the mortgage or 84 months. Ryan’s adjusted gross income (AGI) for 2012 is $76,000. Ryan can deduct $880 ($9,240 ÷ 84 x 8 months) for qualified mortgage insurance premiums in 2012. For 2013, Ryan can deduct $1,320 ($9,240 ÷ 84 x 12 months) if his AGI is $100,000 or less.

In this example, the mortgage insurance premiums are allocated over 84 months, which is shorter than the life of the mortgage of 15 years (180 months).

Limit on deduction.   If your adjusted gross income on Form 1040, line 38, is more than $100,000 ($50,000 if your filing status is married filing separately), the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated. SeeLine 13 in the instructions for Schedule A (Form 1040) and complete the Mortgage Insurance Premiums Deduction Worksheet to figure the amount you can deduct. If your adjusted gross income is more than $109,000 ($54,500 if married filing separately), you cannot deduct your mortgage insurance premiums.

Form 1098.   The mortgage interest statement you receive should show not only the total interest paid during the year, but also your mortgage insurance premiums paid during the year, which may qualify to be treated as deductible mortgage interest. See Form 1098, Mortgage Interest Statement, next.

Many people hire a professional when it’s time to file their tax return. If you pay someone to prepare your federal income tax return, the IRS urges you to choose that person wisely. Even if you don’t prepare your own return, you’re still legally responsible for what is on it.

Here are ten tips to keep in mind when choosing a tax preparer:

1. Check the preparer’s qualifications.  All paid tax preparers are required to have a Preparer Tax Identification Number or PTIN. In addition to making sure they have a PTIN, ask the preparer if they belong to a professional organization and attend continuing education classes.

2. Check the preparer’s history.  Check with the Better Business Bureau to see if the preparer has a questionable history. Check for disciplinary actions and for the status of their licenses. For certified public accountants, check with the state board of accountancy. For attorneys, check with the state bar association. For enrolled agents, check with the IRS Office of Enrollment.

3. Ask about service fees.  Avoid preparers who base their fee on a percentage of your refund or those who say they can get larger refunds than others can. Always make sure any refund due is sent to you or deposited into your bank account. Taxpayers should not deposit their refund into a preparer’s bank account.

4. Ask to e-file your return.  Make sure your preparer offers IRS e-file. Any paid preparer who prepares and files more than 10 returns for clients generally must file the returns electronically. IRS has safely processed more than 1.2 billion e-filed tax returns.

5. Make sure the preparer is available.  Make sure you’ll be able to contact the tax preparer after you file your return – even after the April 15due date. This may be helpful in the event questions come up about your tax return.

6. Provide records and receipts.  Good preparers will ask to see your records and receipts. They’ll ask you questions to determine your total income, deductions, tax credits and other items. Do not use a preparer who is willing to e-file your return using your last pay stub instead of your Form W-2. This is against IRS e-file rules.

7. Never sign a blank return.  Don’t use a tax preparer that asks you to sign a blank tax form.

8. Review your return before signing.  Before you sign your tax return, review it and ask questions if something is not clear. Make sure you’re comfortable with the accuracy of the return before you sign it.

9. Ensure the preparer signs and includes their PTIN.  Paid preparers must sign returns and include their PTIN as required by law. The preparer must also give you a copy of the return.

10. Report abusive tax preparers to the IRS.  You can report abusive tax preparers and suspected tax fraud to the IRS. Use Form 14157, Complaint: Tax Return Preparer. If you suspect a return preparer filed or changed the return without your consent, you should also file Form 14157-A, Return Preparer Fraud or Misconduct Affidavit. You can get these forms at IRS.gov or by calling 800-TAX-FORM (800-829-3676).

Do you need to file a federal tax return this year? Perhaps. The amount of your income, filing status, age and other factors determine if you must file.

Even if you don’t have to file a tax return, there are times when you should. Here are five good reasons why you should file a return, even if you’re not required to do so:

1. Tax Withheld or Paid.  Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund. But you have to file a tax return to get it.

2. Earned Income Tax Credit.  Did you work and earn less than $51,567 last year? You could receive EITC as a tax refund if you qualify. Families with qualifying children may be eligible for up to $6,044. Use theEITC Assistant tool on IRS.gov to find out if you qualify. If you do, file a tax return and claim it.

3. Additional Child Tax Credit.  Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit. To claim it, you need to file Schedule 8812, Child Tax Credit, with your tax return.

4. American Opportunity Credit.  Are you a student or do you support a student? If so, you may be eligible for this credit. Students in their first four years of higher education may qualify for as much as $2,500. Even those who owe no tax may get up to $1,000 of the credit refunded per eligible student. You must file Form 8863, Education Credits, with your tax return to claim this credit.

5. Health Coverage Tax Credit.  Did you receive Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation? If so, you may qualify for the Health Coverage Tax Credit. The HCTC helps make health insurance more affordable for you and your family. This credit pays 72.5 percent of qualified health insurance premiums. Visit IRS.gov for more on this credit.

To sum it all up, check to see if you would benefit from filing a federal tax return. You may qualify for a tax refund even if you don’t have to file. And remember, if you do qualify for a refund, you must file a return to claim it.

Why do you need a CPA?

Certified Public Accountants (CPAs) act as advisers to individuals, businesses, financial institutions, nonprofit organizations and government agencies on a wide range of financial matters. Today, many individuals and businesses turn to CPAs for help with tax preparation, personal financial planning, auditing services, and advice on developing effective accounting systems.

What can a CPA do for you?

CPAs are no longer just number crunchers and tax preparers. They are business and financial strategists who help chart the paths of businesses and individuals. Individuals turn to their CPAs for tax and financial planning services, investment advice, estate planning, and more.

Businesses are tapping CPAs to not only manage finances and taxes, but also to determine profitable new product lines, help diversify investments, and provide a variety of other consulting and business services.

CPA vs. non-CPA

Many people do not know how a CPA is different from a bookkeeper or tax preparer. The CPA designation is one of the most widely recognized and highly trusted professional designations in the business world. CPAs are distinguished from other finance professionals by stringent qualification and licensing requirements.

Individuals have worked hard to obtain the CPA designation, and they are committed to working even harder to deliver the value that it conveys.

What qualifications should you look for when choosing a CPA?

Before you select a CPA, make sure you consider the following questions:

• Does the individual hold an active CPA license?
• Are your needs compatible with the CPA’s personality and communication style?
• Does the CPA have the experience you need?

It’s important to establish a practitioner’s credentials before you retain his or her services. You need to feel that this person has integrity and honesty before you will trust him or her with your financial information. Be aware that fee structures vary and that different types of practitioners have different levels of training and experience.

Keep in mind that you are looking to establish a long-term relationship. You want someone who will learn your business inside and out, and who will become a trusted advisor on major business and financial decisions and transactions. Look not only for technical competence but also for interpersonal and communication skills.

Membership in a professional association is also an important qualification. Members of the Texas Society of CPAs are governed by a stringent code of professional ethics. Also, all CPA firms in Texas must undergo a comprehensive review of their accounting and auditing practice every three years.

Defining your objectives and expectations will help you ask the kind of specific questions necessary for finding the CPA best suited to your needs. Think about the services you will need not just today but further down the road.

How do I choose a CPA?

When looking for a CPA, consider the following:

• Ask your lawyer, banker, insurance agent, or investment advisor for recommendations. Speak with colleagues in your field of business about CPAs they know and trust.
• Develop some of your own plans and objectives before you talk with a CPA. Gather information about business and personal financial decisions under consideration so you can ask specific questions.
• Make sure the CPA is licensed to practice in Texas.
• Ask what professional organizations the CPA belongs to and how active he or she is in those organizations. Many of these organizations require adherence to technical and professional standards, thereby helping to ensure the quality of a CPA’s services.

How can you get the most value from a CPA’s services?

When it comes to working with a CPA, you are in control. There are a variety of things you can do to get the most value out of your time and money spent with a CPA.

Before you even contact a CPA, be prepared with your goals and objectives of what you want the CPA to do for you. Have a list of questions and a clear idea of what you want to accomplish.

Before you meet with a CPA, gather all the documents and information you think you may need – past tax returns, financial statements, investment documents, business plans – and take this information with you to the first meeting.

Keep your CPA up-to-date on what’s happening in your life. Are you getting married, divorced, having children, needing to plan for your child’s college education, expanding a business, or giving the business to an heir? You’d be surprised what life experiences can have a significant impact on your tax liability and personal financial goals.

From: http://www.valueyourmoney.org/need-a-cpa2.asp

Question and Answer:

1. When do changes to the itemized deduction for medical expenses take effect?

The rules are changing if you plan to itemize medical deductions on your 2013 federal tax return that you will file in 2014. The change will not affect income tax returns for the 2012 taxable year that will be filed in 2013.

2. What amount of my medical expenses can I deduct beginning Jan. 1, 2013?

If you and your spouse are both under age 65, on your 2013 tax return that you will file in 2014, you can deduct on Schedule A, Itemized Deductions (Form 1040) only the amount of your unreimbursed allowable medical and dental expenses that is more than 10 percent of your adjusted gross income (AGI) from  Form 1040, line 38.

If you or your spouse is 65 or over, you are temporarily exempt from the increase. The exemption applies to any tax year beginning after December 31, 2012, and ending before January 1, 2017, if you or your spouse attained age 65 during or before the tax year.

3. If I turn 65 in 2014, what threshold percentage should I use?

You will file your 2013 tax return – which you will file in 2014 – using the 10 percent threshold of your adjusted gross income. When you turn 65 in 2014, you will file your 2014 tax return in 2015 and will use the 7.5 percent threshold of your adjusted gross income. Beginning with your 2017 tax return (filing in 2018), and thereafter, you will use the 10 percent threshold of your adjusted gross income.

4. Whose medical expenses can I include?

You can generally include medical expenses you pay for yourself, your spouse, and your dependents. IRS Publication 502, Medical and Dental Expenses, contains additional information on medical expenses including how you figure and report the deduction on your return.

5. How do I figure the deduction if I am under 65?

To figure your medical and dental expense deduction on your 2013 tax return that you will file in 2014, follow the instructions to complete lines 1 through 4 of Schedule A, Form 1040.

IRS Publication 502, Medical and Dental Expenses, contains additional information on medical expenses including how you figure and report the deduction on your return.

6. How do I figure the deduction if I am over 65?

To figure your medical and dental expense deduction on your 2013 tax return that you will file in 2014, follow the instructions to complete lines 1 through 4 of Schedule A, Form 1040.

IRS Publication 502, Medical and Dental Expenses, and Pub 554, Tax Guide for Seniors, contain additional information on medical expenses including how you figure and report the deduction on your return.

7. What records should I keep for each medical expense?

For each medical expense, you should keep a record of:

• The name and address of each medical care provider you paid, and
• The amount and date of each payment.

You should also keep a statement or itemized invoice showing the following:

• A description of the medical care received
• Who received the care
• The nature and purpose of the medical expenses.

Do not send these records with your return. IRS Publication 502, Medical and Dental Expenses, contains additional information on medical expenses including how you figure and report the deduction on your return.

For additional information, see changes to the itemized deduction for 2013 medical expenses.

1.  Don’t forget to note your year end mileage on your vehicles for 2013.

2.  Be sure that all 1099 info is up-to-date for all vendors.  This information includes:

• Name
• Fed Tax ID#
• Address

On August 15 I wrote about the lawsuit Tax Analysts had just filed under the Freedom of Information Act against the IRS, seeking all documents used since 2009 to train IRS personnel in the exempt organizations determinations office in Cincinnati. We were trying to get to the bottom of what the agency did to get it to the point of being forced to admit last May that it had inappropriately targeted some conservative organizations that were seeking tax exemption under section 501(c)(4) of the tax law.

Well, earlier this week, the IRS released more than 1,500 pages of documents that it says provide the bulk of what we asked for. It’s still too early to ascertain exactly what these records say or what the meaning of “bulk” is, as we are still combing through the documents. However, it’s news in itself that the IRS actually released something. And maybe, just maybe, that’s a good sign. We’ll certainly let you know.

This “scandal” was not the IRS’s finest moment. By its own admission, it applied the law inappropriately – which means it applied the law unfairly. By the assessment of many, including me, at the very least it also performed stupidly – which means it performed incompetently. That brings me to the government’s implementation of the Affordable Care Act – or, as the president calls it, Obamacare. Its rollout has been nothing less than an embarrassment and a glaring example of government incompetence at its worst.

And what lies ahead? The perfect storm: The IRS and the ACA brought together by a hapless Congress that tasked the nation’s tax collector with administering portions of our new healthcare system.

The ACA contains 47 tax provisions with effective dates through 2018. These provisions cover things like the individual mandate and section 1441 of the tax law, which imposes a 3.8 percent tax on the net investment income of some taxpayers and estates and trusts. The IRS has already received more than 1 million requests from new health care exchanges to determine if taxpayers are eligible for the health insurance premium tax credit under section 36B of the tax law. Another ACA provision, not in the tax code but to be administered by the IRS, is a health insurance provider fee that a Treasury official describes as being “complicated” to administer – in this case, I’d bet complicated is a synonym for nightmare.

I can see a day coming when a taxpayer gets a letter from her insurance provider canceling her healthcare coverage and then a letter from the IRS informing her that she owes additional taxes under the ACA. Apparently our government thinks that two nightmare bureaucracies must be better for us than one.

By: Christopher Bergin

The IRS has finally announced an official start date for the 2014 filing season: It will start accepting returns on Jan. 31. This date is 10 days later than the originally planned starting date of Jan. 21. “The late January opening gives us enough time to get things right with our programming, testing, and systems validation,” said Acting IRS Commissioner Danny Werfel in a press release. This process involves programming, testing, and deploying the more than 50 IRS systems that are needed to handle nearly 150 million tax returns.     

In October, shortly after the federal government reopened following a 16-day partial shutdown, the IRS announced that the shutdown had slowed its preparations for the upcoming filing season and that it would start accepting returns no earlier than Jan. 28, but no later than Feb. 4. When the IRS announced the delay, it said it hoped to shorten it, but obviously was not successful.

So taxpayers can receive their refunds as quickly as possible, the IRS is encouraging the use of e-file or Free File with direct deposit. The IRS noted that it expects many software companies will begin accepting returns in January and hold them for filing later. It stated that filing a paper return early will not result in as fast a refund because the IRS will not be processing any returns before Jan. 31.

The IRS also explained that the April 15 tax return filing and payment deadline will not be changing because it is mandated by statute, and the Service cannot postpone it, but that six-month extensions to file can be obtained by filing Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, electronically or on paper.

The State of South Carolina has partnered with CSID to provide eligible South Carolina taxpayers and businesses up to one year of CSID Identity Protection services for free beginning October 24, 2013. The deadline for enrollment is October 1, 2014.

Individual taxpayers, their dependents, and businesses who filed an electronic South Carolina tax returns between 1998 and 2012 may be eligible for CSID Identity Protection services.

There are two ways to enroll in CSID’s Identity Protection services:

Option One: Enroll online.

• Go to www.scidprotection.com. If you enroll online, all future notices from CSID will be sent to you by email.

Option Two: Call CSID’s call center.

• Call 855-880-2743 toll free to enroll with a CSID specialist. All future notices from CSID will be sent to you by postal mail.

Visit www.scidprotection.com or call 855-880-2743 for more information and to enroll now in CSID’s Identity Protection services.

WASHINGTON — For tax year 2014, the Internal Revenue Service announced today annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2013-35 provides details about these annual adjustments.

The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.

• The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
• The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
• The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
• The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly.)
• The Alternative Minimum Tax exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly). The 2013 exemption amount was $51,900 ($80,800 for married couples filing jointly).
• The maximum Earned Income Credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,044 for tax year 2013. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
• Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.
• The annual exclusion for gifts remains at $14,000 for 2014.
• The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.
• The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.
• The small employer health insurance credit provides that the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,400 for tax year 2014, up from $25,000 for 2013.