Many people pay to have their taxes prepared. You need to be careful when you pick a preparer to do your taxes. You are legally responsible for all the information on the tax return even if someone else prepares it. Here are 10 IRS tax tips to help you choose a tax preparer:

1. Check the preparer’s qualifications. All paid tax preparers are required to have a Preparer Tax Identification Number or PTIN. The IRS will soon offer a new Directory of Federal Tax Return Preparers with Credentials and Select Qualifications on IRS.gov. You will be able to use this tool to help you find a tax return preparer with the qualifications that you prefer. The Directory will be a searchable and sortable listing of certain preparers with a valid PTIN for 2015. It will include the name, city, state and zip code of:

• Attorneys.
• CPAs.
• Enrolled Agents.
• Enrolled Retirement Plan Agents.
• Enrolled Actuaries.
• Annual Filing Season Program participants.

2. Check the preparer’s history. You can check with the Better Business Bureau to find out if a preparer has a questionable history. Check for disciplinary actions and the license status for credentialed preparers. For CPAs, check with the State Board of Accountancy. For attorneys, check with the State Bar Association. For Enrolled Agents, go to IRS.gov and search for “verify enrolled agent status.”

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. You should not have your refund deposited 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 generally must e-file their clients’ returns. The IRS has safely processed more than 1.3 billion e-filed tax returns.

5. Make sure the preparer is available. You need to ensure that you can contact the tax preparer after you file your return. That’s true even after the April 15 due date. You may need to contact the preparer if questions come up about your tax return at a later time.

6. Provide tax records. A good preparer will ask to see your records and receipts. They ask you questions to report your total income and the tax benefits you’re entitled to claim. These may include tax 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 tax return. Do not use a tax preparer who asks you to sign a blank tax form.

8. Review your return before signing. Before you sign your tax return, review it thoroughly. Ask questions if something is not clear to you. Make sure you’re comfortable with the information on the return before you sign it.

9. Preparer must sign and include 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 download and print these forms on IRS.gov. If you need a paper form by mail go to IRS.gov/orderforms to place an order.

When filing your 2014 federal income tax return, you will see some changes related to the Affordable Care Act. Millions of people who purchased their coverage through a health insurance Marketplace are eligible for premium assistance through the new premium tax credit, which individuals chose to either have paid upfront to their insurers to lower their monthly premiums, or receive when they file their taxes. When you bought your insurance, if you chose to have advance payments of the premium tax credit, the Marketplace estimated the amount based on information you provided about your expected household income and family size for the year.

If you received the benefit of advance credit payments, you must file a federal tax return and reconcile the advance credit payments with the actual premium tax credit you are eligible to claim on your return. You will use IRS Form 8962, Premium Tax Credit (PTC) to make this comparison and to claim the credit. If your advance credit payments are in excess of the amount of the premium tax credit you are eligible for, based on your actual income, you must repay some or all of the excess when you file your return, subject to certain caps.
If you purchased your coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace. You should receive this form by early February.

Form 1095-A will provide the information you need to file your taxes, including the name of your insurance company, dates of coverage, amount of monthly insurance premiums for the plan you and other members of your family enrolled in, amount of any advance payments of the premium tax credit for the year, and other information needed need to compute the premium tax credit.

Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. Electronic filing options include IRS Free File for taxpayers who qualify, free volunteer assistance, commercial software, and professional assistance.
For more information about the Affordable Care Act and filing your 2014 income tax return, visit IRS.gov/aca.

Nearly everyone can claim an exemption on their tax return. It usually lowers your taxable income. In most cases, that reduces the amount of tax you owe for the year. Here are the top 10 tax facts about exemptions to help you file your tax return.

1. E-file your tax return. Filing electronically is the easiest way to file a complete and accurate tax return. The software that you use to e-file will help you determine the number of exemptions that you can claim. E-file options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.

2. Exemptions cut income. There are two types of exemptions. The first type is a personal exemption. The second type is an exemption for a dependent. You can usually deduct $3,950 for each exemption you claim on your 2014 tax return.

3. Personal exemptions. You can usually claim an exemption for yourself. If you’re married and file a joint return, you can claim one for your spouse, too. If you file a separate return, you can claim an exemption for your spouse only if your spouse:

• had no gross income,

• is not filing a tax return, and

• was not the dependent of another taxpayer.

4. Exemptions for dependents. You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative who meets a set of tests. You can’t claim your spouse as a dependent. You must list the Social Security number of each dependent you claim on your tax return. For more on these rules, see IRS Publication 501, Exemptions, Standard Deduction, and Filing Information. You can get Publication 501 on IRS.gov. Just click on the “Forms & Pubs” tab on the home page.

5. Report health care coverage. The health care law requires you to report certain health insurance information for you and your family. The individual shared responsibility provision requires you and each member of your family to either:

• Have qualifying health insurance, called minimum essential coverage, or

• Have an exemption from this coverage requirement, or

• Make a shared responsibility payment when you file your 2014 tax return.

Visit IRS.gov/ACA for more on these rules.

6. Some people don’t qualify. You normally may not claim married persons as dependents if they file a joint return with their spouse. There are some exceptions to this rule.

7. Dependents may have to file. A person who you can claim as your dependent may have to file their own tax return. This depends on certain factors, like the amount of their income, whether they are married and if they owe certain taxes.

8. No exemption on dependent’s return. If you can claim a person as a dependent, that person can’t claim a personal exemption on his or her own tax return. This is true even if you don’t actually claim that person on your tax return. This rule applies because you can claim that person is your dependent.

9. Exemption phase-out. The $3,950 per exemption is subject to income limits. This rule may reduce or eliminate the amount you can claim based on the amount of your income. See Publication 501 for details.

10. Try the IRS online tool. Use the Interactive Tax Assistant tool on IRS.gov to see if a person qualifies as your dependent.

It’s always a good idea to prepare early to file your federal income tax return.  Certain provisions of the Affordable Care Act – also known as the Health Care Law – will probably affect your federal income tax return when you file this year.

You or your tax professional should consider preparing and filing your tax return electronically.  Using tax preparation software is the easiest way to file a complete and accurate tax return. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify,commercial software, and professional assistance.

Here are five things you should know about the health care law that will help you get ready to file your tax return.

Coverage requirements

The Affordable Care Act requires that you and each member of your family havequalifying health insurance coverage for each month of the year, qualify for an exemption from the coverage requirement, or make an individual shared responsibility payment when filing your federal income tax return.

Reporting requirements

Most taxpayers will simply check a box on their tax return to indicate that each member of their family had qualifying health coverage for the whole year. No further action is required. Qualifying health insurance coverage includes coverage under most, but not all, types of health care coverage plans. Use the chart on IRS.gov/aca to find out if your insurance counts as qualifying coverage.

For a limited group of taxpayers -those who qualify for, or received advance payments of the premium tax credit – the health care law could affect the amount of tax refund or the amount of money they may owe when they file in 2015. Visit IRS.gov/aca to learn more about the premium tax credit.

Exemptions

You may be eligible to claim an exemption from the requirement to have coverage.  If you qualify for an exemption, you will need to complete the new IRS Form 8965, Health Coverage Exemptions, when you file your tax return.   You must apply for some exemptions through the Health Care Insurance Marketplace.  However, most of the exemptions are easily obtained from the IRS when you file your tax return. Some of the exemptions are available from either the Marketplace or the IRS.

If you receive an exemption through the Marketplace, you’ll receive an Exemption Certificate Number to include when you file your taxes. If you have applied for an exemption through the Marketplace and are still waiting for a response, you can put “pending” on your tax return where you would normally put your Exemption Certificate Number.

Individual Shared Responsibility Payment

If you do not have qualifying coverage or an exemption for each month of the year, you will need to make an individual shared responsibility payment when you file your return for choosing not to purchase coverage. Examples and information about figuring the payment are available on the IRS Calculating the Payment page.

Premium Tax Credits

If you bought coverage through the Health Insurance Marketplace, you should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace by early February. Save this form because it has important information needed to complete your tax return.

If you are expecting to receive Form 1095-A and you do not receive it by early February, contact the Marketplace where you purchased coverage.  Do not contact the IRS because IRS telephone assistors will not have access to this information.

If you benefited from advance payments of the premium tax credit, you must file a federal income tax return. You will need to reconcile those advance payments with the amount of premium tax credit you’re entitled to based on your actual income. As a result, some people may see a smaller or larger tax refund or tax liability than they were expecting.  When you file your return, you will use IRSForm 8962, Premium Tax Credit (PTC), to calculate your premium tax credit and reconcile the credit with any advance payments.

Health insurance and income taxes, once an unlikely pair, are now close companions as a result of the Affordable Care Act’s insurance mandate that took effect Jan. 1, 2014.

If you have health insurance through the federal or a state-sponsored marketplace, it means a couple of important yet simple changes on your next income tax return.

First, you’ll receive a new tax form from your marketplace around Jan. 31, 2015. Form 1095-A, Health Insurance Marketplace Statement, will include the information you need to report on your federal tax return in order to prove you have health insurance.

Form 1095-A will also include information you need for the premium tax credit, a tax benefit to help pay for marketplace insurance. The credit amount is based on household size and income. In general, the lower your income, the higher your credit amount.

In order to qualify for the premium credit:

You must be ineligible for government programs like Medicare, Medicaid and CHIP.
You cannot have employer-sponsored insurance, or the lowest-priced, self-covered plan meeting minimum essential requirements offered by your employer costs more than 9.5 percent of your annual household income.
Your annual household income is 100 percent to 400 percent of the federal poverty level. For the 2014 credit, that’s $11,490 to $45,960 for an individual. (Hawaii and Alaska residents are subject to different amounts.)
You cannot be claimed as a dependent on someone else’s tax return.
Your filing status generally cannot be married filing separately.
The credit can be received in advance in order to reduce the cost of your monthly premiums, or you can wait to claim it on your tax return to reduce your amount owed or increase your refund.

If your income or family size is different than what you estimated when you applied for marketplace insurance, your taxes may be impacted. If your actual income was less than estimated, you may qualify for a higher credit amount and therefore receive a larger refund. On the other hand, if your actual income was more than the estimated amount, you may need to pay some of the credit back at tax time.

DIY tax solutions make reporting marketplace insurance and the premium credit a simple matter.

“You can still easily prepare and file your own taxes,” says Jessi Dolmage, spokesperson for TaxACT. “Just enter Form 1095-A information when the program asks and answer some simple questions. The program will complete the calculations and tax forms to help you get every dollar you deserve.”

If you plan to enroll in marketplace insurance during the next enrollment period, Nov. 15, 2014, through Feb. 15, 2015, Dolmage recommends calculating your taxes beforehand. “You’ll need to enter some tax information on your marketplace application. TaxACT makes that easy. Complete the easy interview and the program will generate a HealthWatch report with all the tax information you need to apply for insurance and the premium credit.”

Dolmage also reminds uninsured individuals planning to claim an exemption to visit healthcare.gov/exemptions to check if your situation requires an exemption certificate number (ECN). If so, mail the paper application and supporting documentation to your marketplace now because it can take weeks to process. After your application is accepted, you’ll receive an ECN to report on your tax return in order to avoid the individual shared responsibility payment.

Many people give to charity each year during the holiday season. Remember, if you want to claim a tax deduction for your gifts, you must itemize your deductions. There are several tax rules that you should know about before you give. Here are six tips from the IRS that you should keep in mind:

1. Qualified charities. You can only deduct gifts you give to qualified charities. Use the IRS Select Check tool to see if the group you give to is qualified. Remember that you can deduct donations you give to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.

2. Monetary donations.  Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.

3. Household goods.  Household items include furniture, furnishings, electronics, appliances and linens. If you donate clothing and household items to charity they generally must be in at least good used condition to claim a tax deduction. If you claim a deduction of over $500 for an item it doesn’t have to meet this standard if you include a qualified appraisal of the item with your tax return.

4. Records required.  You must get an acknowledgment from a charityfor each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.

5. Year-end gifts.  You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2014. This is true even if you don’t pay the credit card bill until 2015. Also, a check will count for 2014 as long as you mail it in 2014.

6. Special rules.  Special rules apply if you give a car, boat or airplane to charity. For more information visit IRS.gov.

WASHINGTON — For tax year 2015, 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 2014-61 provides details about these annual adjustments.

The tax items for tax year 2015 of greatest interest to most taxpayers include the following dollar amounts –

• The tax rate of 39.6 percent affects singles whose income exceeds $413,200 ($464,850 for married taxpayers filing a joint return), up from $406,750 and $457,600, 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 $6,300 for singles and married persons filing separate returns and $12,600 for married couples filing jointly, up from $6,200 and $12,400, respectively, for tax year 2014. The standard deduction for heads of household rises to $9,250, up from $9,100.
• The limitation for itemized deductions to be claimed on tax year 2015 returns of individuals begins with incomes of $258,250 or more ($309,900 for married couples filing jointly).
• The personal exemption for tax year 2015 rises to $4,000, up from the 2014 exemption of $3,950. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $258,250 ($309,900 for married couples filing jointly). It phases out completely at $380,750 ($432,400 for married couples filing jointly.)
• The Alternative Minimum Tax exemption amount for tax year 2015 is $53,600 ($83,400, for married couples filing jointly). The 2014 exemption amount was $52,800 ($82,100 for married couples filing jointly).
• The 2015 maximum Earned Income Credit amount is $6,242 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,143 for tax year 2014. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
• Estates of decedents who die during 2015 have a basic exclusion amount of $5,430,000, up from a total of $5,340,000 for estates of decedents who died in 2014.
• For 2015, the exclusion from tax on a gift to a spouse who is not a U.S. citizen is $147,000, up from $145,000 for 2014.
• For 2015, the foreign earned income exclusion breaks the six-figure mark, rising to $100,800, up from $99,200 for 2014.
• The annual exclusion for gifts remains at $14,000 for 2015.
• The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) rises to $2,550, up $50 dollars from the amount for 2014.
• Under the small business health care tax credit,  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 $25,800 for tax year 2015, up from $25,400 for 2014.

Even though only a few months remain in 2014, you still have time to act so you aren’t surprised at tax-time next year. You should take steps now to avoid owing more taxes or getting a larger refund than you expect.  Here are some actions you can take to bring the taxes you pay in advance closer to what you’ll owe when you file your tax return:

• Adjust your withholding.  If you’re an employee and you think that your tax withholding will fall short of your total 2014 tax liability, you may be able to avoid an unexpected tax bill by increasing your withholding. If you are having too much tax withheld, you may get a larger refund than you expect. In either case, you can complete a newForm W-4, Employee’s Withholding Allowance Certificate and give it to your employer. Enter the added amount you want withheld from each paycheck until the end of the year on Line 6 of the W-4 form. You usually can have less tax withheld by increasing your withholding allowances on line 5. Use the IRS Withholding Calculator tool on IRS.gov to help you fill out the form.
• Report changes in circumstances.  If you purchase health insurance coverage through the Health Insurance Marketplace, you may receive advance payments of the premium tax credit in 2014. It is important that you report changes in circumstances to your Marketplace so you get the proper type and amount of premium assistance. Some of the changes that you should report include changes in your income, employment, or family size. Advance credit payments help you pay for the insurance you buy through the Marketplace. Reporting changes will help you avoid getting too much or too little premium assistance in advance.
• Change taxes with life events.  You may need to change the taxes you pay when certain life events take place. A change in your marital status or the birth of a child can change the amount of taxes you owe. When they happen you can submit a new Form W–4 at work or change your estimated tax payment.
• Be accurate on your W-4.  When you start a new job you fill out aForm W-4. It’s important for you to accurately complete the form. For example, special rules apply if you work two jobs or you claim tax credits on your tax return. Your employer will use the form to figure the amount of federal income tax to withhold from your pay.
• Pay estimated tax if required.  If you get income that’s not subject to withholding you may need to pay estimated tax. This may include income such as self-employment, interest, or rent. If you expect to owe a thousand dollars or more in tax, and meet other conditions, you may need to pay this tax. You normally pay the tax four times a year. Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay the tax.

For more see Publication 505, Tax Withholding and Estimated Tax. You can get it and IRS forms on IRS.gov, or call 800-TAX-FORM (800-829-3676) to get them by mail.

If you filed for a federal tax extension in April, your tax forms need to be filed by October 15th.  Taxes are normally due on April 15th every year, but taxpayers are eligible to file for an automatic extension if they need more time to prepare their tax return.

It is important to note that even if you file an extension, your taxes are due April 15th, whether or not your tax forms have been completed and filed. If you filed an automatic tax extension form, it is best to include any estimated taxes owed to avoid penalties and interest.  In general, you may not owe late filing or late payment penalties if you send the IRS 90% of your actual tax obligation, but there may be outliers. The good news is that you will receive a refund if you overpay your taxes.

How do tax extensions work?

If you missed the deadline to file for an extension, get it in ASAP, which will minimize IRS penalties and interest owed. These penalties and fees can be substantial! Here is more information on how to file a federal tax extension.Filing for an automatic 6 month extension to file your taxes is easy. Simply fill out Tax Form 4868, Application for Automatic Extension of Time To File U.S. Income Tax Return by the tax filing deadline. The tax deadline is usually every April 15, but the actual date can vary if that date falls on a weekend or holiday. You then have until October 15th to file your taxes with the IRS.

Late filing and late payment penalties

Missing the tax deadline is not recommended. Remember, if you owe taxes this year, the payment is due to the IRS by April 15th, regardless of whether or not you have filed your actual tax return. Missing your payments can result in ugly penalties and interest charges. It’s best to file for an extension immediately, then try to get a rough idea of what you owe in taxes and make that payment as soon as you can. Even if you can only send in a partial payment, that will help reduce the amount of penalties and interest you owe.

Late filing penalties are high. The IRS will assess a late filing penalty of 5% of the unpaid taxes not paid by the due date for each month your taxes are late, usually to a maximum of 25%. It is very easy for late filing penalties to to reach several hundred or several thousand dollars. If your payment is more than 60 days past due, the minimum late filing penalty is $100 or the balance of the taxes you owe, whichever is less.

Late payment penalties and interest are also assessed when you do not send the IRS your tax obligation by the tax deadline. The late payment penalty is usually 0.5% of your unpaid taxes, with the maximum also at 25%. You may be able to have your late payment penalty waived if you paid over 90% of your obligation, however, you would still owe interest on the balance due. The interest stops accruing when you pay the balance. Translation – pay your taxes ASAP to avoid large penalties and fees!

by RYAN GUINA