10 things you need to know about this year's taxes

by Tony Novak, CPA, MBA, MT     revised February 8, 2015

This year's U.S. income tax filing season is underway and runs until Aprial 15. much of the news service warns that this could be a difficult and expensive experience for many. Yet there are some bright spots, mostly triggered by ongoing adoption of new technologies that make tax planning and filing easier and less expensive. Consumers need to know these key points that are new this year:

1. Paid or self-prepared? About half of all U.S. tax filers hire a professional preparer and the other half file their own returns. Clearly There isn't any consensus on the best filing method. The decision appears to be primarily influenced by the level of income ($60,000 seems to be a rough cut-off point especially for the Freefile program) yet many tax filers apparently recognize that doing it yourself is not efficient or practical if you have a complicated financial situation. The great news this year is that you don't have to decide in advance whether to get help or go it alone if you use 1040.com, to get started, then later you can bring in professional help anytime and still get help with audit more easily if it becomes necessary. I explain the details of my own audit assurance offered to 1040.com users here.
2. Online or paper? This is an easy decision; most income tax returns are filed electronically. It is faster and safer than paper filing. There has never been any data breech of the federal online tax filing system known as e-file so we presume that it is safe. Some taxpayers believe that there is some advantage to paper filing but there is no evidence to support this belief.
3. What about ACA? The impact of the Affordable Care Act for about 70% of tax filers will be limited to a requirement to check a block saying that they had health insurance coverage for the whole year. The other 30% have more work to get through this year's tax filing. If you used Healthcare.gov to get health insurance then you will need to log on again to get your 1095A Tax Form needed for income tax filing.
4. No health insurance? About 20 million tax filers who do not have health insurance face additional paperwork requirements. Somewhere between 4 million and 10 million who do not meet requirements for an exemption (some becasue they did not bother to ask) face penalties that will average about $300 this year and over $600 next year.
5. Subsidy repayment? About 10 million filers who received a tax subsidy to help pay for individual health insurance have additional paperwork to justify and reconcile the benefit. About 5 million will owe part of all of the subsidy back to the federal government.
6. EIC hassles. Earned Income credit (EIC) documentation is more stringent than ever. IRS knows this area has been abused by tax cheats. This places an additional paperwork and tax filing cost burden on low income parents. EIC claimants do not qualify for free online tax filing.
7. Is Freefile really free? "Free" tax filing services are not really free for many people filing a 1040 tax return despite the advertisements. Unfortunately the advertising does not make pricing clear up front. Read the fine print but be prepared for unpleasant surprises. See my article "When free tax filing really isn't free".
8. Where's my refund? For most people taxes will be higher; refunds will be lower this year. To combat this effect, start now to make plans to reduce 2015 taxes. IRS.gov now offers an online refund tracker tool. Beware theird party sites offering this service; they primarily exist to collect your personal infirmation for marketing purposes.
9. What about state taxes? Some states like North Carolina revamped their tax systems this year making it difficult to predict tax liability. Since state taxes may affect federal income taxes it makes sense to create an estimate early and then fill in the details or make adjustments later. Some states offer free online filing, others do not. Also new this year: if you need to pay taxes in multiple states, there is no longer a need to pay for the efile service seperately in each state.
10. How to get help. It is possible to benefit from professional help like CPA tax advice and audit assurance even if you prepare your own tax return. With more CPAs offering online support for tax services and more tax filers becoming comfortable with the concept of remote professional services, this can save time and money for all. See my main tax page for more details.

2014 Tax Filing Resources

General:

Income tax filing by mobile phone

Tax services flyer

Tax services post card

The easiest way to file your income tax return

Planning:

10 Things you need to know about this year's taxes

Don't be treated as a 2nd class taxpayer

How to send documents to an online tax preparer

Tax planning made easy

When free online filing really isn't free

Pricing:

2015 National average tax preparer fees

Tax service pricing for CPA-prepared returns

1040.com online filing pricing

Discounts on tax preparation fees

How to get free CPA help with online tax filing