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What You Didn't Know About Doing Taxes in 2015

Doing your own taxes this year? What you don’t know could cost you. The U.S. tax code is not the easiest thing to understand. In fact, only about half of all Americans are able to answer the most basic income tax questions. Here are the changes you need to know for 2015:

Retirement

Retirement Sign

Image via Flickr by 401(k) 2013

Retirement plans also get an overhaul in 2015. The 401(k) limits on employee contributions will go up to $18,000 per annum, from $17,500 last year. In addition, the so-called “catch-up” allowance for people who are older than 50 during the tax year is also increased, to $6,000 from $5,500 in the previous year. At the same time, IRAs are seeing some changes. As of 2015, you are only permitted one IRA rollover in any 12-month period. Trustee-to-trustee transfers are still allowed, but you will no longer be able to withdraw your entire IRA and deposit it in a new account, taking a short-term interest-free loan in the process.

New Penalties for Those Without Healthcare

Healthcare Penalties

Image via Flickr by GotCredit

One of the biggest changes you will see in your taxes in 2015 is in the area of health insurance. Under the Affordable Care Act, you have to confirm that you had qualified health insurance for 2014 or pay a penalty equal to 1 percent of your income or $95 for each person in your household, whichever is greater. That penalty might seem mild, but it gets worse next year, when the penalty increases to the greater of 2 percent of income or $325 per person.

Medical Expenses

Medical Expenses

Image via Flickr by epSos.de

In 2015, getting credit for unreimbursed medical expenses is more difficult. The threshold moved up to 10 percent of your adjusted gross income (AGI) from 7.5 percent the year before. There is a temporary delay on that new rate for people who are 65 and older, but if you did not turn 65 until 2015, you will have to wait until next year to get the 7.5 percent rate.

Other Details

Employee contributions to flexible spending accounts are seeing a boost in contribution limits for 2015, up to $2,550 for qualified expenses from $2,500 last year, so make sure to take advantage of that. Also, keep in mind that you have to pay at least 90 percent of this year’s tax liability or you will face a underpayment penalty, but if you received most of that sum after Aug. 31, 2014, you can file a Form 2210 for underpayment of estimated tax and cut your penalty.

Without understanding some of the basic tenets of income taxes, you could be cheating the IRS, or yourself — and no one wants that. A little knowledge of business, finance and taxes goes a long way toward making sure you are paying only the income tax you really owe.

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