The wait is over for 2014 tax provisions! If you weren’t necessarily sitting by your computer waiting for the news to come in, that’s alright. Tax issues are interesting to those who work with tax law every day, so the average reader might not be keeping close tabs on the comings-and-goings of the Internal Revenue Service.
However, tax adjustments are important for everyone and being aware of adjustments in advance can help individuals, businesses, and families make smarter decisions for the coming year. The biggest adjustment for the coming year generally has to do with inflation if there are no major tax law changes.
For the 2014 tax year, inflation adjustments will cause the standard deduction for married couples filing jointly to go up slightly, from $12,200 to $12,400. Estate tax exemptions are also adjusting for inflation in 2014, going up significantly from $5,250,000 in 2013 to $5,340,000.
One complicated issue that will be coming up in 2014 is the personal exemption phase-out, which will now apply at different levels once it is adjusted for inflation. The phase-out happens gradually, starting to reduce the personal exemption for individuals who earn at least $254,000 and fading out entirely for those who make at least $376,700.
These types of changes are important to keep in mind and track from year to year, particularly if there is a dispute with the IRS about how much is owed, whether one qualifies for various deductions that were taken, and what type of income must be reported to the IRS. Tax compliance issues can give way to an audit or some other dispute with the IRS and in those cases it helps to have an experienced advocate to argue the case.
Source: Wall Street Journal, “IRS Unveils Tax Rules for 2014,” Tom Herman, Nov. 10, 2013.