IRS has electronically released final tax forms and instructions
for the 2014 tax year, including Forms 1040, 1040-A, and 1040-EZ, along with
some related schedules. They reflect key health coverage changes that first
went into effect in 2014, including the premium assistance credit and the
penalty for failing to have coverage, and other changes.
FORM 1040—NEW HEALTH-CARE-RELATED FORMS
Form 8965. Beginning in 2014, taxpayers must have health care
coverage, have a health coverage exemption, or make a shared responsibility
payment with their tax return. Form 8965 (Health Coverage Exemptions) is used
to report a coverage exemption granted by the Marketplace (also called the
“Exchange”) or to claim an IRS-granted coverage exemption on the tax return.
Form 1095-A. If the taxpayer, his spouse, or a dependent
enrolled in health insurance through the Health Insurance Marketplace, he
should receive Form(s) 1095-A (Health Insurance Marketplace Statement). This
Form provides information needed to complete Form 8962 (Premium Tax Credit
(PTC)), see below.
Form 8962. A taxpayer must complete Form 8962 and file it with
his tax return if he received premium assistance through advance credit
payments (whether or not the taxpayer is otherwise required to file a tax
return) or if the taxpayer wants to claim the premium tax credit (PTC) when he
files his return. Form 8962 is used to figure the amount of the taxpayer's PTC
and reconcile it with any advance payment of the premium tax credit (APTC). See
also the entry below for Line 46.
FORM 1040—U.S. INDIVIDUAL INCOME TAX RETURN—OTHER
GROSS INCOME
Adoption exclusion. For 2014, the maximum exclusion for
employer-provided adoption assistance is $12,190 per eligible child.
Exclusion for Medicaid waiver payments. An individual care
provider who received certain payments under a Medicaid waiver program for
caring for someone who lives in the taxpayer's home with him may be able to
exclude the payments from income.
ADJUSTED GROSS INCOME
Line 26. Moving expenses. The 2014 standard mileage rate for
moving expenses is 23.5¢ per mile.
Line 32. IRA deduction. In general, an individual who isn't an
active participant in certain employer-sponsored retirement plans, and whose
spouse isn't an active participant, may make an annual deductible cash
contribution to an IRA up to the lesser of: (1) a statutory dollar limit, or
(2) 100% of the compensation that's includible in his gross income for that
year. For 2014, the statutory dollar limit is $5,500, plus an additional $1,000
for those age 50 or older. If the individual (or his spouse) is an active plan
participant, the deduction phases out over a specified dollar range of modified
AGI (MAGI). For 2014, a taxpayer may be able to take an IRA deduction if he was
covered by a retirement plan and his 2014 MAGI is less than $70,000 ($116,000 if
married filing jointly or qualifying widow(er)). If the taxpayer's spouse was
covered by a retirement plan, but the taxpayer was not, he may be able to take
an IRA deduction if his 2014 MAGI is less than $191,000.
TAX AND CREDITS
Line 40. Itemized deductions or standard deduction. For 2014,
the standard deduction is $6,200 for single filers and for married persons
filing separately, $12,400 for joint filers and qualifying widow(er)s, and
$9,100 for heads of household.
Line 42. Exemptions. The amount for each exemption for 2014 is
$3,950. Exemptions are reduced for taxpayers with adjusted gross incomes in
excess of the “applicable amount” ($305,050 for joint filers or a surviving
spouse, $279,650 for a head of household, $254,200 for a single individual who
isn't a surviving spouse, and $152,525 for marrieds filing separately).
Line 45. Alternative minimum tax. Under Code Sec. 55(d), the AMT
exemption amount for 2014 is $52,800 ($82,100 if married filing jointly or a
qualifying widow(er); $41,050 if married filing separately).
IRS has added a worksheet to the instructions for line 45. A
taxpayer who is not sure whether he needs to complete Form 6251, Alternative
Minimum Tax – Individuals, can use this worksheet to see whether he should
complete it.
Line 46. Excess advance premium tax credit repayment. The
premium tax credit helps pay premiums for health insurance purchased from the
Health Insurance Marketplace. If advance payments for this credit were made for
the taxpayer, his spouse, or his dependent, the taxpayer must complete Form
8962. If the advance premium credits were more than the taxpayer can claim, the
taxpayer must enter the amount, if any, from Form 8962, line 29.
Line 54. Other credits. For 2014, the maximum adoption credit is
$13,190 per eligible child for both non-special needs adoptions and special
needs adoptions.
OTHER TAXES
Line 57. Self-employment tax. Maximum amount of self-employment
income subject to FICA tax is $117,000; no ceiling on Medicare.
An individual may use the farm optional method only if (a) his
gross farm income was not more than $7,200 or (b) his net farm profits were
less than $5,198. Using this method, farm self-employment earnings equals the
smaller of (1) two-thirds of gross farm income, or (2) $4,800.
An individual may use the nonfarm optional method only if (a)
his net nonfarm profits were less than $5,198 and also less than 72.189% of his
gross nonfarm income and (b) he had net earnings from self-employment of at
least $400 in 2 of the prior 3 years. Individuals may compute their
self-employment earnings as the smaller of two-thirds of gross nonfarm income
or $4,800
A self-employed individual with both farm and nonfarm incomes is
allowed to use both optional computation methods if the farm income qualifies
for the farm optional method and the nonfarm income qualifies for the nonfarm
optional method. If both optional methods are used to compute net earnings from
self-employment, the maximum combined total net earnings from self-employment
for any tax year can't be more than $4,800.
Line 61. Health care: individual responsibility. A taxpayer who
had qualifying health care coverage (called minimum essential coverage) for
every month of 2014 for himself, spouse (if filing jointly), and anyone the
taxpayer could or did claim as a dependent, checks the box on this line and
leave the entry space blank.
Line 62. Additional Medicare tax. IRS has issued final regs on
the additional 0.9% Medicare tax on employee compensation and self-employment
income above a threshold amount received in tax years beginning after Dec. 31,
2012. For most individuals, many provisions of the regs effectively first apply
on Jan. 1, 2014 (the technical effective date is geared to calendar quarters
beginning after Nov. 29, 2013 or certain actions taken on or after that date).
The tax is calculated on Form 8959 (Additional Medicare Tax).
Line 62. 3.8% surtax on unearned income. IRS issued final and
proposed regs on the new 3.8% surtax on net investment income (NII) that first
went into effect in 2013. The surtax is 3.8% of the lesser of: (1) NII, or (2)
the excess of MAGI over an unindexed threshold amount ($250,000 for joint
filers or surviving spouses, $125,000 for a married individual filing a
separate return, and $200,000 in any other case). The voluminous final regs
clarify many aspects of this new tax and are generally effective for tax years
beginning after 2013. They explain, among other items, how NII is calculated,
the individuals subject to or excepted from the tax, and the deductions taken
into account in figuring the tax. The proposed regs (upon which taxpayers may
rely) provide guidance on the computation of NII with respect to a number of
specialized provisions and situations including various payments to partners
and former partners. The tax is computed on form 8960 (Net Investment Tax of
Individuals, Estates and Trusts).
PAYMENTS
Line 66. Earned income credit (EIC). The maximum credit is
higher, and the AGI-based phase-out figures are revised.
Line 68. American Opportunity Credit from Form 8863, line 8.
Choosing to include otherwise tax-free scholarships or fellowships (e.g., Pell
grants) in the taxpayer's income can increase an education credit and lower the
total tax or increase the taxpayer's refund.
Line 69. Net premium tax credit. A taxpayer may be eligible to
claim the PTC if he, his spouse, or a dependent enrolled in health insurance
through the Health Insurance Marketplace. Complete Form 8962 to determine the
amount of the premium tax credit, if any.
Line 71. Excess social security and RRTA tax withheld. Maximum
Social Security (OASDI) tax for 2014 is $7,254.00 (computed on the first
$117,000 of wages) for purposes of credit for excess tax withheld.
If you would like more details about these or any other aspect
of the law, please do not hesitate to call.
(651) 621-5777, (952) 583-9108, (612) 224-2476, (763)
269-5396
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