TurboTax's Top 5 Most Frequently Asked Questions
1. What documents do I need to do my taxes?
The two more common tax forms that taxpayers receive in the mail: a W-2 from your employer or a 1099-INT for bank interest from a savings account. There are also other pieces of supporting information you should have in front of you when you sit down to do your taxes, such as the correct Social Security numbers for yourself, your spouse and anyone you are claiming as a dependent. Also, if you made charitable contributions within the last year, be sure to gather receipts of your donations to turn your good will into tax-time savings.
2. I didn’t make much money last year, do I still need to file my taxes?
Americans should file a 2014 federal income tax return even if their total income is below the Internal Revenue Service filing requirement ($10,150 for individuals or $20,300 for married filing jointly under age 65). You need to file the return to get a refund on any withheld federal income tax and especially if you’re eligible for refundable tax credits like the earned income tax credit. Every year, money is left on the table because people don’t think they need to file. The average unclaimed tax refund is close to $600, and it’s important to know that the IRS places a three-year window on claiming these past refunds.
3. Who can qualify as my dependent?
If you’re supporting someone who lives with you, you may be able to claim him or her as a dependent. Beyond the home, if you provide over half of the support for a family member, they may also count as a dependent. This ranges from nieces and nephews to stepparents and even in-laws. For every dependent you have, you can claim a dependent exemption on your federal income tax return worth $3,950 when you file your 2014 taxes in 2015.
4. When will I get my IRS tax refund?
Last year, the IRS issued 9 out of 10 tax refunds within 21 days for those who e-filed with direct deposit. E-file with direct deposit is the fastest way to get your tax refund. For paper-filers, the process does take more time.
5. What are the new tax filing requirements as a result of the ACA?
For the first time, taxpayers will be required to report their health care insurance when they file their taxes. For close to 9 out of 10 taxpayers who already have health insurance reporting is a non issue. For TurboTax customers reporting will be as simple as checking a few boxes. For those who purchased in the Health Insurance Marketplace, you will see a new tax form called a Form 1095-A. This form will have details of your insurance like date of coverage, premiums, and the amount of your advanced premium tax credit if you received one to help you pay for health insurance. TurboTax customers will enter the info from the Form 1095-A just like they would a W-2.
Those who were uninsured in 2014 may be required to pay a penalty of $95 or up to 1% of their income, whichever is greater.
There are 20 million Americans who may be exempt from the penalty. Exemptions range from income being below the filing requirement to insurance being more than 8% of your household income. There are some exemptions given through your tax return like income below the IRS filing requirement, but the majority need to be applied for through the Health Insurance Marketplace. TurboTax has a free online tool at www.TurboTaxHealth.com that allows you to check the over 30 exemptions and find out if you are eligible.
It's best to check out the exemptions now, because if you have to apply it may take a few weeks to receive an Exemption Certificate Number, which needs to go on your tax return.
H&R Block's ACA Myths & Facts Debunked
There are 46 changes to this year’s tax code as a result of the Affordable Care Act (ACA). What’s most important is to be aware if your taxes and your annual refund will be affected. Tax experts at H&R Block addressed common myths associated with the ACA and how they may impact your taxes:
Myth: If you chose not to have health insurance in 2014 and don’t qualify for an exemption, you will have to pay a penalty of $95.
Fact: The penalty for 2014 is calculated one of two ways. If you or members of your household don’t have health insurance that qualifies as minimum essential coverage, you’ll pay whichever amount is higher:
- $47 per child, $95 per adult, up to $285 per household
- 1% of annual household income less the filing threshold – In many cases this amount is actually higher and likely to be the amount of the fine that you will face.
Myth: If you have short-term medical coverage, accident or disability only, or travelers insurance, you don’t have to worry about the ACA.
Fact: Under the Affordable Care Act, almost everyone is required to have health insurance that meets the requirement for “minimum essential coverage.” Plans that meet this requirement include a health insurance plan through your job, federal or state Marketplace plan, COBRA or retirement plan, or a government plan like Medicare, Medicaid, TRICARE or CHIP. If you don’t have one of these, you may face the ACA tax penalty.
Myth: I got my health insurance plan from the Marketplace and received a tax credit to help pay for my insurance premiums. I know this won’t impact my taxes because I already calculated my 2014 estimated income and submitted it at the time of enrollment.
Fact: If you and/or a member of your household received the Advance Premium Tax Credit in 2014, the credit will need to be reconciled when you file your taxes. The Advance Premium Tax Credit amount that you received was based on an estimate of your household income and your expected family size. So when you file your taxes, the amount of Advance Premium Tax Credit you received will be reconciled against what you were actually eligible for based on your actual household income. This could impact your tax refund or taxes due.
For example, if you signed up for health insurance in the Marketplace and estimated your income at
$38,000, you could receive a tax credit of $2,700 to help pay for insurance. But let’s say you got a promotion and your actual income for the year came out to $46,000. In this scenario, your tax credit decreases to $1,500 and you will owe the difference at tax time, lowering your tax refund by $1,200.
Myth: The Advance Tax Credit I receive in 2014 is based on my 2013 income.
Fact: Your 2014 tax credit is based on your estimated income for 2014. If you provided an estimated income at the time of enrollment, you will need to reconcile your taxes.
Myth: I have two kids and neither my husband nor I have access to health insurance from our employers. I’m signing up for health insurance on the Marketplace because the government will give me a subsidy to help me pay for my monthly premiums.
Fact: Whether or not you receive a tax credit from the government for purchasing insurance on the Marketplace depends solely on your individual situation and your household income. Your income must fall within certain guidelines to qualify for a tax credit.
Myth: A tax credit, subsidy and advance are all different.
Fact: A tax credit, subsidy and advance all mean the same thing – government assistance in paying for health insurance plan premiums.
The ACA will have the biggest tax implications for those who received the Advance Premium Tax Credit (also known as a subsidy) or those who did not have health insurance coverage. One way to plan ahead this tax season is to learn more about how the ACA might affect your tax refund by visiting an H&R Block office on Jan. 8. Most H&R Block offices nationwide will be open for 12 hours straight, from 9 a.m. to 9 p.m., so you can come in without an appointment and speak to an ACA Specialist who can provide you with a no-charge ACA Tax Impact Analysis – your personalized review of how your taxes may be affected by the Affordable Care Act.
- Free tax preparation by volunteers;
- Where to get free help with tax returns;
- How health coverage affects your 2014 federal income tax return;
- Tips for choosing a tax preparer wisely;
- Extenders bill.
Individual Tax Extenders - Extends through 2014:
- The tax deduction of expenses of elementary and secondary school teachers;
- The tax exclusion of imputed income from the discharge of indebtedness for a principal residence;
- The equalization of the tax exclusion for employer-provided commuter transit and parking benefits;
- The tax deduction of mortgage insurance premiums;
- The tax deduction of state and local general sales taxes in lieu of state and local income taxes;
- The tax deduction of contributions of real property interests for conservation purposes;
- The tax deduction of qualified tuition and related expenses; and
- The tax exemption of distributions from individual retirement accounts for charitable purposes.
Business Tax Extenders - Extends through 2014:
- The tax credit for increasing research activities;
- The low-income housing tax credit rate for newly constructed non-federally subsidized buildings;
- The Indian employment tax credit;
- The new markets tax credit;
- The tax credit for qualified railroad track maintenance expenditures;
- The tax credit for mine rescue team training expenses;
- The tax credit for differential wage payments to employees who are active duty members of the Uniformed Services;
- The work opportunity tax credit;
- Authority for issuance of qualified zone academy bonds;
- The classification of race horses as three-year property for depreciation purposes;
- Accelerated depreciation of qualified leasehold improvement, restaurant, and retail improvement property, of motorsports entertainment complexes, and of business property on Indian reservations;
- Accelerated depreciation of certain business property (bonus depreciation);
- The special rule allowing a tax deduction for charitable contributions of food inventory by taxpayers other than C corporations;
- The increased expensing allowance for business assets, computer software, and qualified real property (i.e., leasehold improvement, restaurant, and retail improvement property);
- The election to expense advanced mine safety equipment expenditures;
- The expensing allowance for film and television production costs and costs of live theatrical productions;
- The tax deduction for income attributable to domestic production activities in Puerto Rico;
- Tax rules relating to payments between related foreign corporations and dividends of regulated investment companies;
- The treatment of regulated investment companies as qualified investment entities for purposes of the Foreign Investment in Real Property Tax Act (FIRPTA);
- The subpart F income exemption for income derived in the active conduct of a banking, financing, or insurance business;
- The tax rule exempting dividends, interest, rents, and royalties received or accrued from certain controlled foreign corporations by a related entity from treatment as foreign holding company income;
- The 100% exclusion from gross income of gain from the sale of small business stock;
- The basis adjustment rule for stock of an S corporation making charitable contributions of property;
- The reduction of the recognition period for the built-in gains of S corporations;
- tax incentives for investment in empowerment zones;
- The increased level of distilled spirit excise tax payments into the treasuries of Puerto Rico and the Virgin Islands; and
- The tax credit for American Samoa economic development expenditures.
Amends the Housing Assistance Tax Act of 2008 to extend through 2014 the exemption of the basic military housing allowance from the income test for programs financed by tax-exempt housing bonds.
Energy Tax Extenders - Extends through 2014:
- The tax credit for residential energy efficiency improvements;
- The tax credit for second generation biofuel production;
- The income and excise tax credits for biodiesel and renewable diesel fuel mixtures;
- The tax credit for producing electricity using Indian coal facilities placed in service before 2009;
- The tax credit for producing electricity using wind, biomass, geothermal, landfill gas, trash, hydropower, and marine and hydrokinetic renewable energy facilities;
- The tax credit for energy efficient new homes;
- The special depreciation allowance for second generation biofuel plant property;
- The tax deduction for energy efficient commercial buildings;
- Tax deferral rules for sales or dispositions of qualified electric utilities; and
- The excise tax credit for alternative fuels and fuels involving liquefied hydrogen.
Extenders Relating to Multiemployer Defined Benefit Pension Plans - Extends through 2015
The automatic extensions of amortization periods for multiemployer defined benefit pension plans and for multiemployer funding rules under the Pension Protection Act of 2006.