NANTICOKE — This year taxpayers face new changes on the earned income credits, Marcellus Shale natural gas extraction royalties, Obama Care, and education tax credits when filing their 2013 taxes. Local certified public accountants are on standby to help.
With the April 15 tax filing deadline looming, local certified public accountants are armed with knowledge of the new tax laws and calculators to guide taxpayers through another tax season.
“There are quite a few issues with 1099’s this year that people are not aware of,” said Karen Balchunas, general manager of Jackson Hewitt Tax Service in Wilkes-Barre. “What is taxable and what is not taxable can be very confusing.”
Determining the effects of the Affordable Health Care Act has added a new challenge for many taxpayers. All taxpayers are required to have health insurance by March 31, 2014 or face penalty fees on next year’s taxes.
“As CPA/tax preparers, we have to project and explain to taxpayers how potential credits and health insurance coverage issues affect their 2014 tax returns and beyond,” said David Kovalchik, CPA with Kovalchik, Kollar & Co. LLP, Kingston.
Karen Hazleton, a Nanticoke CPA, and her daughter, Michelle Hazleton, a staff accountant, have been doing calculations to help clients determine if they should pay the tax penalty for not having health insurance or purchase it through the health Insurance Market Place.
Hazleton said a calculator at www.taxpolicycenter.org can help with this decision.
“For a single person who makes enough to file a 1040, the penalty can be as little as $95 or as much as $3,600, depending on income,” Hazleton said. “For families, the penalty is much larger. A couple with two children could owe between $285 and $11,000.”
Balchunas has found many taxpayers are surprised to see what is now available to them through the Affordable Health Care Act.
New Medicare taxes, intended to pay for health care reform, will affect higher income taxpayers, Hazleton said.
“The .09 percent additional Medicare tax applies to wages, other employee compensation and net self-employment earnings which depending on your filing status can be as low as $125,000 for married filing separate up to $250,000 for married filing jointly,” Hazleton said.
For the first time since 2009 Hazleton said, personal exemptions and itemized deductions are subject to a phase-out if the adjusted gross income exceeds certain income levels based on the taxpayer’s filing status.
“These phase-out thresholds also apply to the phase-out of itemized deductions on your Schedule A with the exception of medical expenses, investment income, casualty/theft losses and gambling losses, Hazleton said.
The maximum amount of income a taxpayer can claim for the earned income credit has been increased for the 2013 tax year, Balchunas said.
“The exemption amount increased to $3,900 for 2013 and $3,950 for 2014,” Balchunas said. “The standard deduction increased to $6,100 for single people, $12,200 for joint returns, and $8,950 for head of household.”
Taxpayers in the Marcellus Shale region need to understand how natural gas extraction royalties will affect them, Kovalchik said.
“They need to understand what deductions are available to them, such as percentage depletion and extraction costs which may have been deducted from their royalty payments,” Kovalchik said.
Noting this is not a new rebate, Hazleton advises senior citizens to take advantage of the property tax/rent rebates and check into the eligibility of the PACE card. The PACE card is Pennsylvania’s prescription assistance program for older residents.
Parents with dependent children in college should be aware of and utilize education tax credits and deductions, Kovalchik said.
“A lot of tax credits that were due to expire at the end of 2013 were extended, such as the above-the-line deduction for tuition, fees, and educator expenses,” Hazleton said.
Calculating home office deductions has been stream-lined, Balchunas said. The former 43-lined Form 8829 has been replaced with a short worksheet. Self-employed individual can claim the home office deduction on Schedule C, she said.
“For 2013, $5 per-square-foot may be deducted up to a maximum deduction of $1,500,” Hazleton said.
Hazleton and Kovalchik agree, due to taxpayer confusion about the new tax laws they are seeing more clients coming in later this year.
“I think a lot of taxpayers in our area received corrected W-2’s, or corrected brokerage statements,” Hazleton said. “There are a lot of late documents coming to people and they are afraid to file for fear they missed something.”
“We have been seeing new clients this year who have previously self-prepared their returns and are not confident in handling new issues,” Kovalchik said.