Take Advantage of Employment Tax Credits!

Congress passed a “tax extenders” bill late last year, preserving dozen of expired tax provisions.  

Among other tax breaks, the Tax Increase Prevention Act of 2014 (TIPA), which was signed by the president last month, authorizes employers to claim tax credits for hiring certain disadvantaged workers, retroactive to the beginning of the year.  

It’s important to note, however, that these tax provisions expired 

again on December 31, 2014.  

What this means is that a business can claim the credits for workers hired last year on its 2014 return, but there are no such guarantees for 2015 or beyond.  

Here’s a brief recap:

An employer may claim a Work Opportunity Tax Credit (WOTC) for 2014 for hiring a qualified individual from one of eight specified target groups.  This covers certain needy individuals, like food stamp recipients, as well as other new-hires on public assistance. (Special rules apply to youths hired to work in empowerment zones during the summer months.)

The amount of the credit is based on a percentage of qualified wages paid to the worker during the first year of employment.

In addition, the Veterans Opportunity to Work (VOW) to Hire Heroes Act of 2011 expanded the existing credit for hiring qualified veterans.  

Specifically, the VOW made two significant changes relating to the targeted group for veterans:

It opened up the WOTC to certain tax-exempt employers as a credit against its share of Social Security tax.

It increased the allowable credit for hiring qualified veterans; tax-exempt employers can’t claim the WOTC for other target group members. 

To read the entire article, please visit www.cpapracticeadvisor.com.

Make the Most of the Federal Annual Gift Tax Exclusion

Taxpayers that are looking to pass wealth to beneficiaries without any dire tax consequences can use the simplest and easiest method: give cash or property away to your loved ones. 

All you have to do is make gifts to family members that are covered by the annual gift tax exclusion.  In many cases, you don’t even have to file a gift tax return.

Such gifts can reduce the size of your taxable estate and the family may realize income tax savings in the future.  There is a downside, though: you have to relinquish complete control over the gifted assets.   

Under the annual gift tax exclusion, you can give gifts of cash or property to someone up to a specified amount without paying any federal gift tax.  The annual exclusion, which is indexed for inflation in increments of $1,000, is $14,000 for 2014 (the same as it was in 2013).  It is projected to remain at the $14,000 level in 2015.

The exclusion is applied on a per-recipient basis.  For instance, you can gift the maximum amount to a sibling, child and grandchild, or several of these, in the same tax year with no gift tax problems.  Furthermore, the annual $14,000 exclusion is doubled to $28,000 for joint gifts made by a married couple.

By using the exclusion judiciously from year to year, a married couple can easily transfer amounts valued into six figures, all on a tax-free basis.  You don’t have to file a gift tax return to benefit from the annual gift tax exclusion, but your spouse must provide consent to joint gifts on a return.   

The recommended approach overall is that when possible, limit your lifetime gift-giving to amounts covered by the annual gift tax exclusion.

For more tips on giving and to read the entire article, please visit www.accountingweb.com.

Obama Signs 2014 Tax Extenders

President Barack Obama has signed H.R. 5771, The Tax Increase Prevention Act of 2014, and individual taxpayers will benefit from the list of 50-plus tax extenders. 

There’s tax relief for teachers, commuters, home renovators who go green and those who live in no-income-tax states.  They’ll all see the breaks on their 2014 tax returns and the filing season is just around the corner.

These are the major individual tax extenders, now good through December 31, 2014:  

• The deduction for state and local sales taxes.
• Above-the-line deduction of up to $4,000 for higher education expenses.
• A $250 above-the-line deduction for school teachers for supplies.
• Parity for employer-provided mass transit and parking benefits ($250 a month, up from $130 a month).
• The ability to exclude up to $2 million in discharge of residential mortgage indebtedness from gross income.
• The deduction for mortgage insurance premiums.
• Energy-efficient home improvements tax credit.
• Tax-free distributions from an Individual Retirement Account for charitable purposes (the IRA charitable tax rollover) for taxpayers over 70 ½.
• Enhancements to the rules for donating real property for conservation that encourage farmers, ranchers and other modest-income landowners to increase the pace of land conservation.

For more information and to read the entire article, please visit www.forbes.com.