Taxes: What to know for 2014
It’s tax season, and anyone eager to file early should take extra care this year.
“One of America’s least popular annual events” is around the corner, said Tom Herman in The Wall Street Journal. Yes, it’s tax season, and anyone eager to file early should take extra care this year. “Thanks to the ever-growing complexity of federal, state, and local tax laws, regulations, and court cases, it’s easier than ever to make mistakes, including overlooking valuable tax breaks.” Single taxpayers who earn more than $400,000 or married couples earning more than $450,000 face higher tax rates on ordinary income and capital gains. There are new taxes on investment income and an additional Medicare tax on wages and self-employment earnings to consider. Beyond that, new limits on deductions and higher thresholds for medical spending may also put a dent in your deductions. The only good news is for self-employed filers, who can now benefit from a simpler home-office form that “eliminates burdensome record-keeping rules.”
Don’t count on the IRS for much help, said Sandra Block in DailyFinance.com. Last year, the agency “answered only 61 percent of calls from taxpayers, and the average wait time to get an answer was nearly 18 minutes.” Filers with tax questions should try checking out the IRS website for answers first, and use the agency’s “Where’s My Refund?” tool to track their refunds. E-filers can check on the status of their refund within 24 hours, but if you’ve mailed in a paper return, prepare to wait at least four weeks for the IRS to receive and process your return.
And don’t be beguiled by tax myths, said Dan Ritter in USA Today. It is true that only 1 percent of all tax returns are actually audited, but “there’s no way to ensure you won’t fall into that 1 percent.” Tax professionals are actually forbidden from trying to “game the audit lottery” for you, so don’t buy that line from anyone. The good news is that unless you’re earning more than $200,000, the odds of getting a call from the IRS are low. If an audit does happen, don’t fear a knock on your door—with the exception of corporate and estate audits, most IRS “examinations” are conducted by mail. And retirement doesn’t mean you can ignore tax season. Retirement income may still be subject to taxes, though you can reduce your tax liability by building your nest egg in a Roth IRA, which allows you to pay taxes up front rather than when you withdraw.