There may be fewer changes to the federal tax code this year than in 2013, but the handful that exist could still impact what you owe. Some, like the new health insurance tax credit, could put more jingle in your pocket, while the expiration of more than four dozen temporary tax breaks that Congress has yet to renew might instead leave students, teachers, retirees and homeowners out in the cold. [Source: CNBC.com]
First and foremost, said Jackie Perlman, principal tax researcher for The Tax Institute at H&R Block, all taxpayers this year will see a new check box on their 1040 federal tax return, where they'll be required to disclose whether they have had qualified health insurance all year, per the Affordable Care Act mandate.
"That is by far the biggest change this year, because this is the year when the individual mandate goes into effect," said Perlman. "If you purchased insurance through the health-care exchanges, or marketplace, you're going to get a brand-new form in the mail called a 1095A. Keep it in a safe place for filing your return."
If you or your dependents did not obtain minimal essential coverage, you will pay a penalty equal to 1 percent of your yearly household income, or a maximum of $95 per person, on your 2014 federal income tax return, due April 2015. That penalty increases to 2 percent of household income, or $325 per person, in 2015; and 2.5 percent of income, or $695 per person, in 2016.
A few exemptions exist. You may be able to avoid the penalty, for example, if you are uninsured for fewer than three months out of the year, if the lowest-priced coverage available to you exceeds 8 percent of your income or you don't file a tax return because your income is too low.
Taxpayers with moderate income who obtain their health insurance through the Health Insurance Marketplace may also be eligible for a new premium tax credit to help defray the cost of coverage. Determining eligibility, however, is complicated and is calculated based on household income, the number of exemptions you already claim and the federal poverty line for your family size.
Mark Luscombe, principal tax analyst for tax analysis company Wolters Kluwer, CCH, also reminds taxpayers with foreign assets to be extra vigilant this year with compliance.
U.S. citizens and resident aliens, including those with dual citizenship who have lived or worked abroad during part of the year, have long been required to report any worldwide income, including income from foreign trusts and foreign bank and securities accounts.
In most cases, affected taxpayers must fill out and attach Schedule B to their tax returns. They may also have to fill out and attach Form 8938, Statement of Foreign Financial Assets.
"That has been in effect for awhile now, but new this year is the reporting requirement imposed on foreign financial institutions," said Luscombe. "Be aware that a lot more information is likely to be coming to the [Internal Revenue Service] from foreign firms about U.S. account holders, so it's best to report voluntarily before the IRS finds you."