Philip Schreiber, CPA | Schreiber Advisors, PC | 14801 Southfield Rd | Allen Park, MI 48101 | 313-388-0300 | phil@cpatechs.com

       


 

 

 

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- Tax Calendar Q2 2015 & Gift Treatment
 

- Tax Increase Prevention Act of 2014 (TIPA) & Direct Deposit
 

- 2015 Mileage Rates & Employer Health Insurance Reimbursements
 

- Social Security and Medicare Amounts
 

- Seniors age 70 1/2+ & Supersizing your charitable contribution deductions
 

- Individual Year End Tax Planning Ideas & Eight Tips for Deducting Charitable Contributions

 


 

 

Filing 2014 Foreign Bank And Financial Account Reports + Taxation Of College Financial Aid + Top 10 Tips for Deducting Losses from a Disaster


 

If you have a financial interest in or signature authority over a foreign financial account exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the IRS by filing a Financial Crimes Enforcement Network (FinCEN) Form 114 (“Report of Foreign Bank and Financial Accounts (FBAR)”).

Specifically, for 2014, Form 114 is required to be filed if during the year:

1. You had a financial interest in or signature authority over at least one foreign financial account (which can be anything from a securities, brokerage, mutual fund, savings, demand, checking, deposit, or time deposit account to commodity futures or options, and a whole life insurance or a cash value annuity policy); and

2. The aggregate value of all such foreign financial accounts exceeded $10,000 at any time during 2014.

The FBAR is filed on a separate return basis (that is, joint filings are not allowed). However, a spouse who has only a financial interest in a joint account that is reported on the other spouse's FBAR does not have to file a separate FBAR.

The 2014 Form 114 must be filed by June 30, 2015, and cannot be extended. Furthermore, it must be filed electronically through http://bsaefiling.fincen.treas.gov/main.html.

 

The penalty for failing to file Form 114 is substantial — up to $10,000 per violation (or the greater of $100,000 or 50% of the balance in an account if the failure is willful).

Please give us a call if you have any questions or would like us to prepare and file Form 114 for you.  If you found this Tax Tip helpful, please share or forward it with your friends & family.
 



Taxation Of College Financial Aid...

If your college-age child is or will be receiving financial aid, congratulations. Now, you'll probably want to know if the financial aid is taxable.

Keep in mind that the economic characteristics of financial aid, rather than how it is titled, will determine its taxability. Strictly speaking, scholarships, fellowships, and grants are usually awards of "money that is free" that are nontaxable.

However, these terms are also sometimes used to describe arrangements involving obligations to provide services, in which case the payments are taxable compensation.

Tax-free awards. Scholarships, fellowships, and grants are awarded based on the student's financial need or are based on scholastic achievement and merit. Generally, for federal income tax purposes, these awards are nontaxable as long as

(1) the recipient is a degree candidate,

(2) the award does not exceed the recipient's “qualified tuition and related expenses” (tuition and enrollment fees, books, supplies, and equipment required for courses, but not room and board or incidental expenses) for the year,

(3) the agreement does not expressly designate the funds for other purposes (such as room and board or incidental expenses) or prohibit the use of the funds for qualified education expenses, and

(4) the award is not conditioned on the student performing services (teaching, research, or anything else).

Work-study arrangements. If the financial aid is conditioned on the student performing services, the amount that represents payment for such services is taxable income and will be reported on a Form W-2 or Form 1099. This is true even if the work is integrated with the student's curriculum or if the payment is called a scholarship, fellowship, or grant. Students typically work for the school they're attending. However, they could work for other employers under the auspices of a work-study program.

Student loans. Naturally, student loan proceeds are not taxable income because the borrowed amounts must be paid back. However, some college education loans are subsidized to allow borrowers to pay reduced interest rates. Fortunately, college loan interest subsidies are nontaxable to the same extent as if they were provided in the form of an outright scholarship, fellowship, or grant. An above-the-line deduction (i.e., available whether or not the borrower itemizes) of up to $2,500 is allowed for interest expense paid by a taxpayer on a loan to fund qualified higher education expenses. The deduction is phased out for taxpayers with adjusted gross income exceeding certain amounts.

What happens when financial aid isn't free? Fortunately, taxable scholarships, fellowships, grants, and compensation from work-study programs count as earned income. Assuming the student is your dependent, this means that for 2015 he or she can offset this income by his or her standard deduction of the greater of (1) $1,050 or (2) earned income plus $350, up to $6,300.

Since taxable scholarships, fellowships, grants, and compensation count as earned income, they increase the student's standard deduction. If the student isn't anyone's dependent for 2015, he or she can offset earned income of up to $10,300 with his or her personal exemption ($4,000) and standard deduction ($6,300). (Dependents are not entitled to a personal exemption.)

Taxable financial aid in excess of what can be offset by the student's personal exemption (if any) and standard deduction is usually taxed at only 10%. (For 2015, the 10% bracket for single taxpayers applies to taxable income up to $9,225.)
 

Warning: The "kiddie tax" rules may cause investment income (such as interest, dividend, and capital gains) received by students who are under age 24 to be taxed at the parent's higher rates instead of at the student's lower rates. The student's earned income (including taxable scholarships, fellowships, grants, and compensation) is not subject to the kiddie tax.


Please give us a call if you have questions or want more information. If you found this Tax Tip helpful, please share or forward it with your friends & family. 

 


 

Top 10 Tips for Deducting Losses from a Disaster

To mark National Hurricane Preparedness Week, the IRS wants you to know it stands ready to help.

 

If you suffer damage to your home or personal property, you may be able to deduct the losses you incur on your federal income tax return. Here are 10 tips you should know about deducting casualty losses:

1. Casualty loss. You may be able to deduct losses based on the damage done to your property during a disaster. A casualty is a sudden, unexpected or unusual event. This may include natural disasters like hurricanes, tornadoes, floods and earthquakes. It can also include losses from fires, accidents, thefts or vandalism.

2. Normal wear and tear. A casualty loss does not include losses from normal wear and tear. It does not include progressive deterioration from age or termite damage.

3. Covered by insurance. If you insured your property, you must file a timely claim for reimbursement of your loss. If you don’t, you cannot deduct the loss as a casualty or theft. You must reduce your loss by the amount of the reimbursement you received or expect to receive.

4. When to deduct. As a general rule, you must deduct a casualty loss in the year it occurred. However, if you have a loss from a federally declared disaster area, you may have a choice of when to deduct the loss. You can choose to deduct the loss on your return for the year the loss occurred or on an amended return for the immediately preceding tax year. Claiming a disaster loss on the prior year's return may result in a lower tax for that year, often producing a refund.

5. Amount of loss. You figure the amount of your loss using the following steps:

- Determine your adjusted basis in the property before the casualty. For property you buy, your basis is usually its cost to you. For property you acquire in some other way, such as inheriting it or getting it as a gift, you must figure your basis in another way. For more see Publication 551, Basis of Assets.

- Determine the decrease in fair market value, or FMV, of the property as a result of the casualty. FMV is the price for which you could sell your property to a willing buyer. The decrease in FMV is the difference between the property's FMV immediately before and immediately after the casualty.

- Subtract any insurance or other reimbursement you received or expect to receive from the smaller of those two amounts.

6. $100 rule. After you have figured your casualty loss on personal-use property, you must reduce that loss by $100. This reduction applies to each casualty loss event during the year. It does not matter how many pieces of property are involved in an event.

7. 10 percent rule. You must reduce the total of all your casualty or theft losses on personal-use property for the year by 10 percent of your adjusted gross income.

8. Future income. Do not consider the loss of future profits or income due to the casualty as you figure your loss.

9. Form 4684. Complete Form 4684, Casualties and Thefts, to report your casualty loss on your federal tax return. You claim the deductible amount on Schedule A, Itemized Deductions.

10. Business or income property. Some of the casualty loss rules for business or income property are different than the rules for property held for personal use.

You can call the IRS disaster hotline at 866-562-5227 for special help with disaster-related tax issues. For more on this topic and the special rules for federally declared disaster area losses see Publication 547, Casualties, Disasters, and Thefts. You can get it and IRS tax forms on IRS.gov/forms at any time.

 

Remember you can call our offices if you have any questions about these or any other accounting, tax, financial planning or insurance related issues, at 313-388-0300.

 

Regards, Philip Schreiber, CPA

Schreiber Advisors, PC

 

Philip Schreiber, CPA | Schreiber Advisors, PC | Certified Public Accountants
14801 Southfield Rd | Allen Park, MI 48101 | 313-388-0300 | phil@cpatechs.com | www.detroit-cpa.net

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