The AP released an interesting article on a major tax planning item for individuals for this year. Ricardo Alonso-Zaldivar, AP writer, writes that it may be almost Labor Day, but it isn’t too early to talk about taxes.
He points out what many practitioners will be discussing with their clients who have applied for health insurance under the new health care laws. The tax credit that is figured in to reduce premium payments may cause a large unintended consequence on individual returns.
If a taxpayer applies for the insurance and claims a certain amount of income, but then for whatever the reason earns more during the year, the credit they should have gotten to reduce premiums will be reduced and taxpayers will owe the IRS more money. This could significantly reduce refunds or cause taxpayers to have to pay the IRS with their return this year.
The best strategy is to update any changes in income on the health insurance website. This may increase premiums but will prevent any effect on the current year return. If a taxpayer is expecting a larger refund then it may be ok to just wait and see where the numbers come out but taxpayer’s should expect there refund to be cut.
This will be a great opportunity for a tax planning consult if this will apply to you. Holbrook & Manter’s tax team is available for all of your tax planning needs.
To read the full AP article, follow this link: http://www.usatoday.com/story/money/personalfinance/2014/08/24/tax-refunds-may-get-hit-due-to-health-law-credits/14529169/