AUGUST 2014
Khaas Baat : A Publication for Indian Americans in Florida

Accounting/Finance

Tax Talk

MIDYEAR TIPS FOR 2014

bY SURESH KUMAR, CPA

We are into August so it’s a good time to review 2014 tax implications.

Get organized: Start collecting and organizing all receipts, canceled checks and other documents that support the income, deductions, and credits you’ll be reporting or claiming on your return. The better your records, the more accurate your tax returns will be.

Taxable Income/Tax brackets: Check your taxable income and tax brackets for 2014. New rules have kicked in, phasing out exemptions at certain income levels and imposing new limits on deductions.

Verify W-2 tax withholdings: Many times, taxpayers either withhold too much or too little tax deductions from their payroll/W-2 income. Review withholdings to make the taxes withheld from your pay will be closer to the taxes you’ll owe this year. It’s especially true if you normally get a large refund and you would like more money in your paycheck. If you owed tax when you filed, you may need to increase the federal income tax withheld from your wages.

Net Investment Income Tax (NIIT): Applies at a rate of 3.8 percent to certain net investment income of individuals, estates and trusts that have modified gross income above the statutory threshold amounts: $250,000 for married filing joint & $200,000 for single taxpayers

Maximize Retirement plan contributions: If you have a retirement plan at work, check to see whether you qualify to contribute more to the plan and make sure you are taking advantage of an employer match. If you have no retirement plan in place, open an IRA, ROTH IRA or other such plan.

Alternative Minimum Tax (AMT): Individuals with a higher income may be subject to the Alternative Minimum Tax. Under the tax law, certain tax benefits can significantly reduce a taxpayer’s regular tax amount. The AMT sets a limit on those benefits. If the tax benefits would reduce total tax below the AMT limit, the taxpayer must pay the higher Alternative Minimum Tax amount.

Residential Energy Efficient Property Credit: This tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, solar electricity equipment and wind turbines installed on or in connection with their home in the United States, and a fuel cell property installed on or in connection with their main home located in the United States. The credit, which runs through 2016, is 30 percent of the cost of qualified property.

Plug-in Electric Drive Vehicle Credit: This tax credit may help taxpayers qualify plug-in electric drive vehicles purchased after Dec. 31, 2009. The minimum amount of the credit for qualified plug-in electric drive vehicles, which runs through 2014, is $2,500 and the credit tops out at $7,500, depending on the battery capacity.

Charitable Contributions (Donations): To be deductible, charitable contributions must be made to qualified organizations. Payments to individuals are never deductible. To determine whether the organization you have contributed to qualifies as a charitable organization for income tax deductions, review Exempt Organizations on the www.IRS.gov website.

Other Deductions: Such as – mortgage interest, mortgage insurance premiums, property taxes/sales taxes may qualify as itemized deductions.

DISCLAIMER: In accordance with IRS Circular 230, the above information is not intended or written to be used, and cannot be used as or considered a "covered opinion" or other written tax advice and should not be relied upon for the purpose of avoiding tax-related penalties under the Internal Revenue Code; promoting, marketing, or recommending to another party any transaction or tax-related matter(s) addressed herein; for IRS audit, tax dispute or other purposes.

Suresh Kumar CPA, MBA is the principal of Kumar Consulting PA, a CPA and consulting firm licensed in the states of Florida, Kansas and Missouri. He may be reached at (813) 421-5068, by email at info@kumarconsultingcpa.com, or visit www.kumarconsultingcpa.com

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