The standard deduction amounts have been increased. Most taxpayers will no longer itemize their deductions on Schedule A due to these increased amounts.
Employee business expenses are no longer deductible on the federal return.
The personal exemption ($4,050) has been eliminated.
The child tax credit has been changed. There is also a new credit for certain other dependents.
Forms 1040EZ and 1040A have been eliminated.
Tax rates have been reduced.
Minnesota has not conformed to federal tax changes.
Health Savings Accounts are now an integral part of a tax efficient health care program. If you don't have an "HSA", you need to find out if you qualify and if so, contribute at least $1 to the account to "start the clock".
Roth IRA accounts aren't new but are still underutilized. Everyone who is eligible should have a ROTH IRA and contribute something to it. Workers and retirees (with existing IRA accounts) are usually eligible to contribute to or convert a small part of their traditional IRA to the Roth.
Popular tax breaks like the educator adjustment, tuition and fees deduction, and exclusion for mortgage debt forgiveness have been extended or made permanent.
"Able" Accounts are now available (for 2015) and work like the popular 529 plans for college savings. Able accounts allow family members to contribute to a tax free account on behalf of a disabled family member for the purpose of assisting that individual with living expenses.
Minnesota has introduced a reading credit. If you pay for private reading lessons or incur other qualified expenses, you may be eligible for the state reading credit.
States are aggressively enforcing their requirements regarding income tax and sales and use tax. If you work in a state other than your home state, be sure to discuss the details with us so we can advise you accordingly. If you buy goods (including cigarettes) on the internet and do not pay sales tax at the time of purchase, you may owe use tax to your home state. Minnesota has a $770 exemption for individuals. Wisconsin does not have an exemption amount.
Small employers may be subject to a $100 per day per employee fine for reimbursing their employees for health insurance premiums. Small employers without a qualified plan in place should never reimburse employees for health insurance premiums or medical expenses.
The best way to keep the IRS (and State) at bay is to learn the rules and follow them. Once a problem develops, it is more difficult and time consuming than ever to clear up due to budget cutbacks at the IRS.
The strong economy is "new" (does anyone beside me remember 2008?) and is a great time to take a fresh look at your personal finances and get your house in order.
Please let me know if you have specific questions that I can answer regarding these changes or other aspects of the tax law that impact your situation.
"Anyone who isn't confused doesn't really understand the situation." --Edward R. Murrow (1908-1965, American Journalist
43% of Americans pay no income tax.
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