AVOID TAX PITFALLS IN 2015

Tax laws change from time to time and 2015 is about to end. While tax-related mishaps are inevitable, be mindful of the following items to minimize bills for the coming year.

Bitcoins and the Like. Digital currencies are still at its infancy stage. However, bitcoins and the like will likely become mainstream types of exchanges in the future. The Internal Revenue Service clarifies this currency is a property rather than legal tender. But recipients of this payment are still mandated to pay income and withholding taxes. Digital currency owners need to report gains and losses from purchasing and selling this currency on Schedule D. Employers are also required to indicate this payment on 1099 and W2 forms.

Health Insurance. The 1% penalty for failure to obtain personal health insurance still stands. Hence, a taxpayer needs to report not only his overall health coverage for the year, but also any tax credits he obtained. If the actual income is significantly higher than you estimated when you applied for these credits, you may be mandated to repay a part of these credits.

However, companies that do not provide health insurance to their employees will face bigger penalties. Employers who have offered Health Reimbursement Accounts but do not meet the new criteria outlined by the Affordable Care Act will be forced to pay $100 a day for each worker in the plan until it is adjusted accordingly. Obamacare allows employees to carry over any unused balances in the Flexible Spending Accounts from one year to the next.

IRA Rules. In the previous year, many key changes have surfaced in retirement planning. Authorities place a restriction on individual retirement account rollovers. An employee can make only one rollover from an IRA to the same or another IRA in a year, regardless of the number of IRAs owned. Any additional rollover within the similar year will be considered as contributions. In most instances, it can be avoided by employing direct transfers or rollovers.

Other IRA-related issues are inherited. Recently, the Supreme Court ruled money obtained by heirs in such accounts are no longer regarded as retirement assets. It means creditors can get hold of that money in the event a person becomes bankrupt or fails to settle his debt.

Net Investment Tax. Pay an additional 3.8% on all taxable investment income received above your threshold if your adjusted gross income is above $200,000 (if single) or $250,000 (if married couple filing jointly). The amount will be used to help pay for Medicare and Obamacare.

Same-Sex Marriage. Based on the Supreme Court’s ruling, same-sex marriages are constitutional. But state-level rules are yet to catch up in some facets. In many cases, these rules are flux. Therefore, same-sex couples need to stay updated on the rules in their respective states to ensure compliance in tax rules. Amended returns and modifications to estate plans may be applicable in some instances.