Oct 31

Various Tax Adjustments due to Inflation for 2014

For tax year 2014, the Internal Revenue Service announced today annual inflation adjustments for more than 40 tax provisions, including the tax rate schedules, and other tax changes. Revenue Procedure 2013-35 provides details about these annual adjustments.

The tax items for tax year 2014 of greatest interest to most taxpayers include the following dollar amounts.

  • The tax rate of 39.6 percent affects singles whose income exceeds $406,750 ($457,600 for married taxpayers filing a joint return), up from $400,000 and $450,000, respectively. The other marginal rates – 10, 15, 25, 28, 33 and 35 percent – and the related income tax thresholds are described in the revenue procedure.
  • The standard deduction rises to $6,200 for singles and married persons filing separate returns and $12,400 for married couples filing jointly, up from $6,100 and $12,200, respectively, for tax year 2013. The standard deduction for heads of household rises to $9,100, up from $8,950.
  • The limitation for itemized deductions claimed on tax year 2014 returns of individuals begins with incomes of $254,200 or more ($305,050 for married couples filing jointly).
  • The personal exemption rises to $3,950, up from the 2013 exemption of $3,900. However, the exemption is subject to a phase-out that begins with adjusted gross incomes of $254,200 ($305,050 for married couples filing jointly). It phases out completely at $376,700 ($427,550 for married couples filing jointly.)
  • The Alternative Minimum Tax exemption amount for tax year 2014 is $52,800 ($82,100, for married couples filing jointly). The 2013 exemption amount was $51,900 ($80,800 for married couples filing jointly).
  • The maximum Earned Income Credit amount is $6,143 for taxpayers filing jointly who have 3 or more qualifying children, up from a total of $6,044 for tax year 2013. The revenue procedure has a table providing maximum credit amounts for other categories, income thresholds and phaseouts.
  • Estates of decedents who die during 2014 have a basic exclusion amount of $5,340,000, up from a total of $5,250,000 for estates of decedents who died in 2013.
  • The annual exclusion for gifts remains at $14,000 for 2014.
  • The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) remains unchanged at $2,500.
  • The foreign earned income exclusion rises to $99,200 for tax year 2014, up from $97,600, for 2013.
  • The small employer health insurance credit provides that the maximum credit is phased out based on the employer’s number of full-time equivalent employees in excess of 10 and the employer’s average annual wages in excess of $25,400 for tax year 2014, up from $25,000 for 2013.
Oct 10

A few numbers on the government shutdown

By now, we all know of someone that has been affected by the government shutdown and those of us affected know that it is an inconvenience. However, it is bringing some things to light on the amount of misuse in the government. I wanted to highlight a few of the numbers that I found most shocking as a taxpayer.

There are roughly 2,000,000 federal government workers. Of those, there were approximately 800,000 workers that were deemed to be “non-essential” and were furloughed. A significant number of those have been called back to work.

The government has been operating for two weeks now and with the “shutdown” roughly 83% (possibly up to 87%) of the government is continuing. This equates to roughly a $600 Billion savings in spending, if it were to last an entire year, leaving the government still spending nearly $3 Trillion, even if the “shutdown” lasted a full year.

The following agencies have furloughed more than 90% of their workforce:

  • Internal Revenue Service – 91% about 86,000 employees - But really only taxpayer advocates and advisors. The auditors and employees who secure liens are still on duty as “essential for protecting property” (liens) of the government.
  • Environmental Protection Agency – 93% about 15,000 employees – Can’t say that these furloughs should not be permanent given the regulations they are trying to pass.
  • Housing and Urban Development – 96% about 8,300 employees - The federal government competing with private markets to ensure low-income housing in expensive cities.
  • Department of Education – 94% about 4,000 employees – Because “No Child Left Behind” cannot administer itself.
  • Securities and Exchange Commission – 91% about 3,500 employees – And even without big brother looking over the market’s shoulder, it has improved and no one has absconded with Grandma’s retirement.
  • Equal Employment Opportunity Commission – 95% about 2,050 employees – If government just pays everyone not to work (see the rise in disability claims/payments), then there is no need to pursue discrimination actions.
  • FCC – 98% about 1,700 employees – Radios, TVs and Internet are all still working.
  • National Labor Relations Board – 99% about 1,600 employees – Even the President has now said that workers cannot just stop work and shutdown a factory to have their demands met. This may be a permanent layoff with the new line of Democrat thinking.
  • Energy Regulatory Commission – 97% about 1,400 workers – If these don’t come back soon, who will shut down coal electric plants so we have to pay more for renewable energy and blackouts?
  • Commodity Futures Trading Commission – 96% about 650 workers – I have a friend that just left a position here, just in time, too. Again, the commodity markets are still running and trading.
  • Consumer Product Safety Commission – 96% about 520 workers – Because the threat of civil litigation if there is product liability is not enough to deter marketing knives to toddlers.
  • Export Import Bank – 97% about 370 workers – I am not familiar with this entity, but I have not seen reports of a huge run by other countries against our products, just the worry of default, which has been agreed by both parties, should not happen.
  • National Endowment for the Humanities – 96% about 520 workers – A much better alternative is your local theater, seeing a favorite band, or going to Broadway. The private sector wins again.
  • National Endowment for the Arts – 96% about 150 workers – Who will fund artists that place a crucifix in a jar of urine now?
  • Defense Nuclear Facilities Safety Board – 90% about 100 workers – I am against this. I think that nuclear power/arms need to be inspected and secured.

A few other numbers I wanted to share:

  • The White House and President is only operating on a skeleton staff of about 450 paid employees. This is about 25% of the normal staff. President Obama has had to do with out the Assistant to the Assistant Travel Liaison and will have to have meals catered by only four chefs, instead of the 22 normal chef staff. This furlough number does not include Secret Service and other essential, safety workers, just the White House staff. A cut of 75% as non-essential!
  • The lowest workers cut were from the Department of Vetrans Affairs (4%), the Air Force Retirement Home (13%), Homeland Security (14%), and the Justice Department (16%).
Oct 09

Government Shutdown Doesn’t Postpone Due Dates

Although the government shutdown is entering its second week, the due date of October 15th for extensions and quarterly employment payments is still on the books. If you have returns, payments that are due then, you still need to ensure they are postmarked/deposited in time to avoid penalties and interest.