Benjamin Franklin said two things are inevitable in life: Death and Taxes. And the nice thing about death is that climate change is an acceptable fact.
2014. Starting off with the War in Afghanistan winding down and ending with the Cold War coming back, along with the Crusades.
The movie Fifty Shades of Gray is coming out next year. It’s going to be great seeing a movie about taxes.
President Obama announced a new policy plan called Drones Without Borders.
Bill Cosby changed the old adage. It was originally said that Comedy equals Tragedy plus Time. He flipped it making a new adage that Tragedy is equal to Comedy plus Time.
The movie “Unbroken” is not about our political system.
The major discussion in the art world is who is the better painter: George Bush or Adolph Hitler?
Crime officially does pay as prisoners filed one billion dollars in fraudulent tax returns.
Jerry Seinfeld claimed that he was on the high end of the autism scale. Then like his show, it turned out to be all about nothing.
North Korea declared war on Hollywood. By “allegedly” cyber-attacking a studio’s website, they officially announced that they have no sense of humor. Once “The Interview” comes out we can find out if the film has one.
Three Republican Senators attacked Obama for having a drug flashback when he was diagnosed with Acid Reflux.
TAXES 2014: Currently there is a political war going on over dozens of tax breaks that expire every year but then are revived at the last moment. Some of these include state sales tax in lieu of income tax, an exclusion of up to $2,000,000 of forgiven debt on a debtor’s primary home and as well as bonus depreciation. The plan was to make these provisions permanent. Democrats and Republicans agreed. Hell was about to freeze over these tax deductions. But someone noticed that the bill did not make permanent the provisions relating to poorer people. Obama threatened to veto and so everything is on hold. But at least this will give us more time to discuss health reform.
INDIVIDUALS WITHOUT HEALTH INSURANCE OWE A TAX. People must have qualifying coverage for themselves and their dependents. The coverage must meet minimum federal requirements. This includes employer provided health plans, exchange purchased plans, Medicare, Medicaid or Veteran medical plans.
LOOPHOLE. You will not have a penalty if your insurance is too expensive. The government defines too expensive if your insurance is more than 8 percent of your adjusted gross income. Usually found on line 37 of your tax return.
Also exempt from a penalty, are those people are without coverage for less than three months in a year. You can also get out of a penalty because of hardship. For a good definition of hardship, listen to a couple of country and western songs.
PENALTIES? The penalty is $95 a person ($47.50 a person under age 18) with a ceiling of $285 or 1% of the of your adjusted gross income minus the adjusted gross income needed to trigger filing a return. Note: As you try to figure this out, you may develop a hardship.
Actually, it is your adjusted gross income minus $10,150 for singles or $20,300 for married people and then multiply that number by 1%. And just when you might be feeling comfortable with this number then multiply it by the % of time you were uncovered by a medical plan.
LOWER INCOMERS GET A REFUNDABLE TAX CREDIT TOWARDS THE COVERAGE. The credit is allowed on a sliding scale for household between $11,490 to $45,960 for singles and $23,550 to $94,200 for a family of four. Lower income than this? You qualify for Medicaid. More income? No credit.
THE SOCIAL SECURITY WAGE BASE INCREASES THIS YEAR TO $117,000. For self-employed people, you have to start paying Social Security Taxes at $400 of income.
HSA’S CEILING RISE SLOWLY. $3300 for Singles. $6550 for family coverage.
BETTER TO WORK ABROAD THAN TO COMMUTE TO WORK BY BUS. U.S. taxpayers living overseas can exclude up to $99,200 in income but the cap on transit passes and commuter vans felt sharply to $130 a month. In a blow to ecology, tax-free parking goes up to $250 a month.
IT PAYS TO GET OLDER. Every year the standard deduction rises. In 2014, married people get a standard deduction of $12,400. If one spouse is age 65 or older. $13,600. Personal exemptions increase to $3950. Rumor has it that polygamy was declared illegal when Joseph Smith tried to deduct 43 wives.
YOU’RE PROBABLY WONDERING WHEN THE 20% TAX RATE OF DIVIDENDS AND LONG-TERM GAINS IS FACTORED IN. You have to be a Single person with $406,750 and joint filers above $457,600. The regular 15% rate applies to people in the 25% tax bracket or higher. People in lower tax brackets pay no Federal taxes on dividends and capital gains. The poor get all the breaks.
BUT THEN SO DO THE RICH. ESTATE TAXES. The estate tax exemption is $5,340,000. You can still give anyone $14,000 a year without paying gift taxes. The rich get all the breaks.
IRA AND ROTHS AND THE MEANING OF LIFE. The maximum annual Roth IRA. If you’re interested in contributing to a regular IRA, If an individual is an active participant in an employer-sponsored retirement plan, the deduction is phased out for individuals between $60,000 and $70,000 and married couples between $96,000 and $116,000. If one spouse is covered and other isn’t, the phase out is between $181,000 and $191,000. The maximum contribution is $5500 ($6,500 if you’re lucky enough to be at least 50 years old.
To make it more complicated, Roth IRA contributions are phase out for single people from $114,000-$129,000 and married couples from $181,000 to $191,000. The middle class gets all the breaks.
SLOW DOWN YOU MOVE TO FAST AND ARE DEDUCTING LESS. The standard mileage rate has moved down half a cent and is now 56 cents a mile for 2014. Even though the price of gas is going down, it will be 57 ½ cents a mile for 2015. The actual cost for a $30,000 car is around 80 cents a mile.
FOREIGN BANK ACCOUNTS? There’s a new form to be filled out if you have an aggregate value of all foreign financial accounts exceeding $10,000 at any time during the calendar year. The penalties can be enormous if you don’t report this every year. The form is due June 30th.
IT’S BETTER TO STAY HEALTHY. The itemized deduction for unreimbursed medical expenses is still at 10%. In a paradox, even if medical marijuana is legal in your state, it’s not tax deductible.
OPEN UP A SOLO 401K PLAN BY DECEMBER 31ST. This is for self-employed people and corporations that employ only one person. It is like having a SEP plan which is around 20% of your net income plus $17,500. It has to be opened by New Year’s Eve. But you can fund it by the due date of your tax return. There is no party involved because it is solo and not a singles event.
IS WASHINGTON BURNING? As we wait to see if various tax extenders are actually voted on, we are currently in the tax situation where only $25,000 of business assets can be expensed, teachers can’t deduct the first $250 of teaching expenses off the top of their income. There is also no R&D tax credit. So we began 2014 with gridlock and we end it with gridlock. And unfortunately gridlock is not tax deductible.
IS COMEDY DEAD? IT ISN’T AT L.A. TAX SERVICE. Knock knock. Who’s here?
There’s our office manager, Dom Gelband. She’s been with us for the past 31 years. We hired her out of my cousin’s womb and sense of humor was her only qualification and our only requirement.
Patty Alvarez is our resident humorist. She’s a cross between Mark Twain and Joan Rivers. She handles our billing so don’t think you can outwit her.
Nataliya Shur is our Quickbooks and Accounting Expert. She can turn laughable tax records into joke-filled perfection. She comes from a long line of comedians. One of her ancestors is rumored to have made Dostovevsky laugh.
Viky Zelaya, our receptionist soon to be accountant. She can joke in three languages and smile in dozens more.
Our business is now thirty-two years old. It’s still a fascinating window into people’s lives. It’s very enjoyable helping people understand money.