What’s New On 2014 Form 1040, Related Schedules And Other Forms

What’s New On 2014 Form 1040, Related Schedules And Other Forms

As the 2015 filing season gets underway, practitioners and taxpayers should note new requirements for individuals under the Patient Protection and Affordable Care Act (PPACA), which have resulted in several significant changes to the 2014 Form 1040, its schedules, and related forms. Many other changes are reflected on the 2014 Form 1040—for example, the increased standard deduction and personal exemption amounts, as well as incentives extended by year-end 2014 tax legislation. This article highlights some of the notable changes to 2014 Form 1040, its schedules and other forms.

Form 1040

Standard deduction and personal exemption

Line 40, Standard deduction. The standard deduction may be claimed on Form 1040, Line 40. For 2014, the standard deduction for single individuals and married couples filing separately is $6,200. The standard deduction for married couples filing joint returns and qualifying widow(er)s is $12,400. The standard deduction for heads of households is $9,100.

Line 42, Personal exemption. Taxpayers multiply the personal exemption amount for the tax year by the number of exemptions claimed on Form 1040, Line 6d, and enter that amount on Line 42. For 2014, the amount of the personal exemption has slightly increased to $3,950 per exemption.

Health insurance coverage reporting

Line 46, Advance premium tax credit. All taxpayers who received advance payments of the Code Sec. 36B premium assistance tax credit to offset the cost of health insurance coverage obtained through the PPACA Health Insurance Marketplace must reconcile the amounts advanced to their insurers during the year with the actual amount of credit to which they are entitled. If a taxpayer received a greater amount in advance premium tax credit payments than the actual amount to which he or she is entitled, based on his or her actual household income for 2014, the taxpayer reports the excess on Form 1040, Line 46, Excess advance premium tax credit repayment.

Line 69, Premium tax credit. Taxpayers who did not receive advance payments of the Code Sec. 36B premium assistance tax credit payments during 2014, but who are claiming a credit use Form 8962, Premium Tax Credit, to calculate the amount of their credit. Taxpayers report the net credit in the Payments Section of Form 1040, on Line 69, Net premium tax credit. Form 8962 is attached to the taxpayer’s return.

ExactCPA Comment

The Code Sec. 36B credit is only available to individuals who obtain health insurance coverage through the PPACA Marketplace.

ExactCPA Comment

If a taxpayer or a member of the taxpayer’s household (for example, a spouse or dependent) obtained minimum essential coverage through the PPACA Health Insurance Marketplace, the Marketplace will provide a Form 1095-A, Health Insurance Marketplace Statement. Form 1095-A is an information return that contains the health coverage information (the name(s) of those covered, the cost of coverage, and the dates covered) necessary for individuals to calculate their Code Sec. 36B credit.

ExactCPA Comment

A taxpayer who claims a premium assistance tax credit for 2014 must file Form 1040, Form 1040A, or Form 1040NR. Form 8962 filers cannot file Form 1040EZ, 1040NR-EZ, Form 1040-SS, or Form 1040-PR.

Line 61, Individual shared responsibility payment. Beginning in 2014, all individuals must carry minimum essential health coverage—unless exempt—or make a shared responsibility payment. The individual responsibility payment is made with his or her tax return.

ExactCPA Comment

Minimum essential coverage includes employer-sponsored coverage, COBRA coverage, coverage obtained through the PPACA Marketplace, health insurance provided through a student health plan, Medicare Part A coverage, Medicaid, Children's Health Insurance Program (CHIP), and most types of TRICARE coverage.

Individuals report their coverage on Form 1040, Line 61, Health care: individual responsibility. Individuals who had minimum essential coverage for the entire 2014 tax year check the box on Line 61 next to the words, “Full-year coverage.”

If an individual did not obtain minimum essential coverage for the full-year, but qualified for an exemption, that individual must report and/or claim the exemption by filing Form 8965, Health Coverage Exemptions, along with his or her return.

ExactCPA Comment

Different types of exemptions must be obtained in different ways. Some exemptions are available through the PPACA Marketplace, others by filing a return, and some both ways. Exemptions obtained through the PPACA Marketplace are reported on Part I of Form 8965. Other exemptions may be claimed directly on Form 8965.

ExactCPA Comment

Page two of the Instructions for Form 8965 contains a detailed list of exemptions with directions for how to claim them.

If an individual owes an individual shared responsibility payment because she did not obtain minimum essential coverage for the full year and does not qualify for an exemption, that individual must calculate the payment amount and enter it onto Line 61.

ExactCPA Comment

For 2014, the individual shared responsibility payment is the greater of: one percent of household income that is above the tax return filing threshold for the individual’s filing status; or the individual’s flat dollar amount, which is $95 per adult and $47.50 per child, limited to a family maximum of $285, but capped at the cost of the national average premium for a bronze level health plan available through the PPACA Marketplace in 2014. For 2014, the annual national average premium for a bronze level health plan available through the PPACA Marketplace is $2,448 per individual ($204 per month per individual), but $12,240 for a family with five or more members ($1,020 per month for a family with five or more members).

Other items to note on the 2014 Form 1040 include:

Line 21, Other income. In January 2014, the IRS issued Notice 2014-7, which provides that certain "qualified Medicaid waiver payments"received by a taxpayer for caring for someone living in her home may be excluded from gross income.

Line 23, Educator expenses (Teachers’ classroom expense deduction). The Tax Increase Prevention Act of 2014 (TIPA) extended the above-the-line deduction for qualified eligible educator expenses through 2014.

Line 26, Moving expenses. The standard mileage rate for moving expenses for 2014 is 23.5 cents-per-mile.

Line 34, Tuition and fees deduction. TIPA extended the above-the-line deduction for higher education qualified tuition and related expenses through 2014. Taxpayers claiming the higher education tuition and fees deduction must attach Form 8917, Tuition and Fees Deduction.

Line 45, Alternative minimum tax. The Instructions for 2014 Form 1040 include a new worksheet that taxpayers may use to see whether they must complete Form 6251, Alternative Minimum Tax—Individuals. The AMT exemption amounts for 2014 are $52,800 for single individuals, $82,100 for married couples filing a joint return and widow(er)s, and $41,050 for married couples filing separate returns.

Line 76, Direct Deposit. A maximum of three tax refunds may be directly deposited to a single financial account or prepaid debit card. After this limit is exceeded, the IRS will send paper checks.

IRS Direct Pay. This new service allows individuals to electronically pay their tax bills or make quarterly estimated tax payments directly from their checking or savings accounts to the IRS without paying any fees or pre-registration charges.

Schedule A, Itemized Deductions

Medical and dental expenses, Line 1. For 2014, the standard mileage rate for medical purposes is 23.5 cents per mile.

State and local sales taxes, Line 5b. TIPA extended the state and local sales tax deduction through 2014. Despite the late passage of TIPA, the IRS wasted no time in placing the 2014 Optional State Sales Tax Tables in the current 2014 Instructions for Schedule A (Form 1040).

Limit on itemized deductions, Line 21. Deductions for taxpayers with adjusted gross incomes above certain amounts may be reduced: $254,200 for single individuals, $305,050 for married couples filing a joint return or a surviving spouse, $152,525 for married couples filing separate returns, and $279,650 for a head of household.

Schedule B, Interest And Ordinary Dividends

Excludable interest on series EE and I U.S. savings bonds, Line 3. For 2014, the phase-out of the exclusion for education related savings bond interest begins at modified adjusted gross income (MAGI) above $76,000 for single individuals and $113,950 for married couples filing a joint return.

Schedule C, Profit Or Loss From Business

Car and truck expenses, Part II, Line 9. For 2014, the standard mileage rate for use of a vehicle is 56 cents-per-mile for business miles driven.

ExactCPA Comment

The standard mileage rate is also used by some taxpayers to complete Form 1040, Schedule E, Supplemental Income And Loss.

Depreciation and section 179 expense deduction, Part II, Line 13. TIPA extended the enhanced Code Sec. 179 dollar limit and investment limit through 2014. The dollar limit and investment limit are at $500,000 and $2 million, respectively.

ExactCPA Comment

TIPA also extended 50-percent bonus depreciation through 2014 (through 2015 for certain longer-lived and transportation property).

ExactCPA Comment

Taxpayers must complete and attach Form 4562, Depreciation and Amortization, to their Schedule C and tax return if they claim: Depreciation on property placed in service during 2014, depreciation on listed property, regardless of the date it was placed in service; or a Code Sec. 179 expense deduction.