It's crucial to stay up to date on all the changes to the tax code as the season approaches. The IRS has announced a few small changes to the code for the coming year. Here's a look at what you need to know.
This past October, the IRS made three notable changes tax benefits to adjust for economic inflation.
- The maximum Earned Income Tax Credit amount will be raised from $6,143 to $6,242 for those filing jointly who have three or more qualifying children.
- The personal exemption will rise from $3,950 to $4,000, however that exemption phases out as income level rises ($258,250 for single taxpayers and $309,900 for married couples filing jointly. Phasing out completely at $380,750 for single taxpayers and $432,400 for married couples filing jointly).
- The level at which a child’s unearned income will be taxed at the parent’s tax rate has been raised from $2,000 in 2014 to $2,100 this coming year.
- The annual gift tax exclusion remains at $14,000 per person.
The contribution limit for 401(k) and similar plans was raised from $17,500 to $18,000 for 2015. Also, the catch-up contribution limit for those age 50 and over will increase from $5,500 to $6,000.
Starting this year, nontaxable IRA rollovers will now be limited to once every 12 months regardless the number of individual retirement accounts you have. However, trustee-to-trustee transfers between IRAs and rollovers from traditional to Roth IRAs are not limited.
Under the Affordable Care Act, the penalty for not having health insurance increases dramatically this year. The penalty in 2014 was $95 per adult (or 1 percent of income, whichever is greater) and that number will increase to $325 per adult (or 2 percent of income) in 2015.
Changes have also been made to flexible spending accounts and health savings accounts. Starting in 2015, employees can now save $2,550 in an FSA, compared to $2,500 in 2014. Another notable change for flexible spending in 2015, employees may now carry over up to $500 from one year's FSA into the next. Previously, employees were forced to use the entire amount in their FSA account before Dec. 31 or they would be forced to forfeit that money. However, if you're also using an HSA you are not permitted to take advantage of the FSA carry over provision. Many people believe that an HSA is better than an FSA for most people because it has higher contribution limits (up to $3,350 for individuals or $6,650 for a family in 2015) and greater flexibility.
To refresh yourself on the new policies be sure to complete the Annual Filing Season Program (AFSP). The AFSP was created to keep tax return preparers current and up to date on the newest policies and procedures. The AFSP includes an Annual Tax Refresher course with a specific curriculum provided by the IRS to ensure all the newest tax laws and codes are covered. Those who complete the course earn a record of completion and are placed in a directory of tax return preparers with select qualification on the IRS website. For more information on the AFSP go to: http://www.irs.gov/Tax-Professionals/Annual-Filing-Season-Program.