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Every year there are more and more tax law changes so that it is hard to keep track. Some laws expire; few come into play by default while others are retroactively revived. Any way it happens, it affects the taxpayers Here is a brief summary of some of the most important federal tax changes that will influence individual taxpayers in 2014.
Penalty unless there is Adequate Health Insurance: The Obamacare law states that citizens must have a minimum insurance coverage, failing which they will be penalized. This law is specifically applicable to non-exempt U.S. citizens and other legal residents. Lower income individuals and those with cancelled insurances are excluded.
Tax Credit for Buying Health Insurance: 2014 will have premium assistance credit available for eligible taxpayers while buying health insurance through state exchange or a partnership exchange between a state and federal government. You are eligible if your income is between 100-400% of the poverty line provided there is no employer sponsored coverage for you.
Carry-over $500 from last year’s Health Care FSAs: You can carry over $500 from your last year’s unused balance for health care Flexible Spending accounts (FSAs). This new deal is applicable, if you choose instead of having a grace period to use up your unused balance from the previous year. In other words, either you get the $500 or you get the grace period, but never both. To know what your company offers, contact your Employee Benefits Department. March 15 is the last date to use up your unused balance, if that is your company’s policy.
Annual Fee applies to Health Insurance providers: After 2013, the annual flat fee for the health insurance industry, which is $8 billion for 2014, will be allocated based on the health care provider’s market. The fee is not applicable to those companies whose net premium is $25 million or less.
Reduced Threshold for Schedule UTP: For the year of 2014, the total asset threshold for filing Schedule UTP falls to $10 million from $50 million. Certain corporations must report on Schedule UTP (Uncertain Tax Positions Statement) if either, the corporation has recorded a reserve with its tax position for U.S. federal income tax in audited financial statements, or the corporation did not record a reserve because it expects to litigate the position.
FATCA Implementation: Chapter 4 of the Code requires withholding of 30% of certain payments to a Foreign Financial Institution (FFI) unless there is an agreement between the IRS and the FFI to report certain information regarding U.S. accounts. FFI are also required to report payments made under FATCA and electronically file forms 1042-S.
3.8% Surtax on Unearned Income: Certain unearned income of individuals or trusts and estates are subject to 3.8% surtax either on the net investment income, or on the excess of Modified Adjusted Gross Income (MAGI) over the un-indexed threshold amount.
Increase in Fees: Under the final Regs, issued in December 2013, the fee for entering a regular installment agreement is increased from $105 to $120. From January 1, 2014, the
fee for processing an Offer in Compromise is also increased from $150 to $186. Although, low-income taxpayers and taxpayers making offers based on doubt will be exempt from this rule.
2014 is seeing many changes in tax laws and policies and these are the result of changes in tax legislation passed in previous years or have come into play due to effective dates in regs, and rulings.