Word-of-Mouth Still Makes Sense

Some things never change. Case in point: word-of-mouth marketing. There's little question that consumers are more likely to trust a friend's recommendation than something coming directly from a company or any kind of advertising. This kind of influence is difficult—if not impossible—to purchase, but it doesn't have to only come by accident.

There's often a misconception that it only counts if 'a lot' of people say good things. And in an age of data this and data that, numbers rule … especially big numbers. But bigger isn't always better. Take social media, for example—a wonderland for savvy word-of-mouth marketers. Don't get us wrong, thousands of fans, retweets or likes can have impact, but quantity shouldn't always win out over quality. A small number of loyal and engaged online fans can produce an attractive return.

Word-of-mouth is generally free and seems simple, but many business owners have a hard time creating a structured plan. The first steps?

• Isolate and reward your top customers, or people who are already spreading positive chatter or referring others.
• Make it simple to share or refer by building opportunities into what they already see (email newsletters, invoices or receipts) or offer incentives built within a defined referral program.
• Empower sharing with contests or requests for personal experiences or for help answering a question—this personal connection encourages chitchat amongst friends.
• Seek out key influencers, build relationships and ask them to share messages.

Word-of-mouth marketing is built on trust, so you can't expect it to happen without your direct engagement. Become part of the conversation—in person and online—and connect on a regular basis. Your most loyal customers should know, and you should find effective ways to show them, that they truly are part of your story.

http://www.manta.com/small-business-tips/word-of-mouth-still-makes-sense/?ftoggle-frontend-prod-on=abTests.subscriptions.claim_language_b&utm_expid=82789632-36.pSv9NRlrS3aVf3yOEpuo_w.3&su=hq344mgu9vl41l&utm_medium=Email_Marketing&utm_source=Newsletter&utm_campaign=TOTD&utm_content=TOTD_ReDesign&utm_term=13935

Networking is a Four Letter Word

Many of us hate networking. You may still be reading this only because the headline is a lie. Networking isn't really a four letter word. But 'tool' is—and thinking of networking as a tool can help you be more successful at it.

Just because you'd rather clean the office restroom with a toothbrush than go to a networking event doesn't mean you shouldn't do it, and it doesn't mean your networking has to be formal. After all, networking is about creating reciprocal, beneficial relationships that can result in new customers, new partnerships and new knowledge.

We're talking face-to-face networking here, and that means leaving someone else in charge and getting out of the office, or the store or the car. And do what? Here are a few ideas:

• Go meet your local librarian. Your library is filled with a remarkable wealth of resources for small business owners. And your librarian knows a lot of people and is good at connecting them.
• Look up from your work and see what's going on in your community. Who's making news? Where are they? What are they doing? There's a leadership concept focused on managing by walking around—try building relationships with other business leaders this way.
• Use social networking to build in-person professional contacts. Start with a local 'meetup' group focused on your interests and goals http://smallbiz.meetup.com/. Meetups are offline (in-person) gatherings of people who have a common interest, and often that interest is business.

Networking is a tool that's worth your time. And meeting someone face-to-face makes you so much more memorable than any 'like' or 'tweet' can accomplish.

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Early Distribution from Retirement Plans May Have a Tax Impact

Taxpayers may sometimes find themselves in situations when they need to withdraw money from their retirement plan early. What they may not realize is that that transaction may mean a tax impact when they file their return. 

Here are 10 facts from the IRS about the tax implications of an early distribution from your retirement plan.

1.     Payments you receive from your Individual Retirement Arrangement before you reach age 59 ½ are generally considered early or premature distributions.

2.     Early distributions are usually subject to an additional 10 percent tax.

3.     Early distributions must also be reported to the IRS.

4.     Distributions you roll over to another IRA or qualified retirement plan are not subject to the additional 10 percent tax. You must complete the rollover within 60 days after the day you received the distribution.

5.     The amount you roll over is generally taxed when the new plan makes a distribution to you or your beneficiary.

6.     If you made nondeductible contributions to an IRA and later take early distributions from your IRA, the portion of the distribution attributable to those nondeductible contributions is not taxed.

7.     If you received an early distribution from a Roth IRA, the distribution attributable to your prior contributions is not taxed.

8.     If you received a distribution from any other qualified retirement plan, generally the entire distribution is taxable unless you made after-tax employee contributions to the plan.

9.     There are several exceptions to the additional 10 percent early distribution tax, such as when the distributions are used for the purchase of a first home (up to $10,000), for certain medical or educational expenses, or if you are totally and permanently disabled.

10.             For more information about early distributions from retirement plans, the additional 10 percent tax and all the exceptions, see IRS Publication 575, Pension and Annuity Income and Publication 590, Individual Retirement Arrangements (IRAs). Both publications are available on this website or by calling 800-TAX-FORM (800-829-3676).

http://www.irs.gov/uac/Early-Distribution-from-Retirement-Plans-May-Have-a-Tax-Impact-1

Ten Facts about the Child Tax Credit

The Child Tax Credit is an important tax credit that may be worth as much as $1,000 per qualifying child depending upon your income. Here are 10 important facts from the IRS about this credit and how it may benefit your family.

1.    Amount - With the Child Tax Credit, you may be able to reduce your federal income tax by up to $1,000 for each qualifying child under the age of 17.

2.    Qualification - A qualifying child for this credit is someone who meets the qualifying criteria of six tests: age, relationship, support, dependent, citizenship, and residence.

3.    Age Test - To qualify, a child must have been under age 17 – age 16 or younger – at the end of 2010.

4.    Relationship Test - To claim a child for purposes of the Child Tax Credit, they must either be your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister or a descendant of any of these individuals, which includes your grandchild, niece or nephew. An adopted child is always treated as your own child. An adopted child includes a child lawfully placed with you for legal adoption.

5.    Support Test - In order to claim a child for this credit, the child must not have provided more than half of their own support.

6.    Dependent Test - You must claim the child as a dependent on your federal tax return.

7.    Citizenship Test - To meet the citizenship test, the child must be a U.S. citizen, U.S. national, or U.S. resident alien.

8.    Residence Test - The child must have lived with you for more than half of 2010. There are some exceptions to the residence test, which can be found in IRS Publication 972, Child Tax Credit.

9.    Limitations - The credit is limited if your modified adjusted gross income is above a certain amount. The amount at which this phase-out begins varies depending on your filing status. For married taxpayers filing a joint return, the phase-out begins at $110,000. For married taxpayers filing a separate return, it begins at $55,000. For all other taxpayers, the phase-out begins at $75,000. In addition, the Child Tax Credit is generally limited by the amount of the income tax you owe as well as any alternative minimum tax you owe.

10. Additional Child Tax Credit - If the amount of your Child Tax Credit is greater than the amount of income tax you owe, you may be able to claim the Additional Child Tax Credit.

http://www.irs.gov/uac/Ten-Facts-about-the-Child-Tax-Credit

COMMON MYTHS ABOUT TAX DEBT

Myth #1: I Can Take Care of This Debt by Myself

Let’s face it; most of us won’t even take the time to read 3 pages of instructions! So who’s going to read the 7,000 pages of the IRS tax code?

Do you really think you’re going to get the results you deserve without understanding all the rules? One mistake could cost you thousands, maybe even millions of dollars. Are you prepared to make that mistake?

If you have had a tax liability for more than a year or you owe more than $10,000, then you have had your chance to do it yourself, now it’s time to bring in the experts!  Dealing with a tax liability is a full time job. Taking that time away from your business and family can cost your income or even your business. If we don’t think we can save you more money than our fees, we won’t take your case.

Our seasoned, trained attorneys are experienced in dealing with the IRS and understanding all the complexities of the IRS tax code. We protect you, your rights, and everything you’ve worked so hard for. Give us a call and let us prove to you that a satisfactory resolution to your tax debt is possible!

From Kip Sharp, Esq., 
Owner and Lead Attorney 

And the Team at 

Tax Resolution Center, Inc.

(877) 415 -9100

(303) 217-9458

Five Good Reasons to E-file Your Tax Return

If you haven’t tried IRS e-file before, now is the time. Most taxpayers – more than 80 percent – file electronically. The IRS has processed more than 1 billion individual tax returns safely and securely since the nationwide debut of electronic filing in 1990. Fewer people file a paper tax return every year. Here are five good reasons to e-file your tax return:

1. Accurate and complete. E-file is the best way to file an accurate and complete tax return. Tax returns that are incomplete or include errors take longer to process.
   
2. Safe and secure. Tax preparers and software companies who e-file must meet strict guidelines and provide the best in encryption technology. You receive an acknowledgement within 48 hours that the IRS received your tax return. If the IRS does not accept your tax return, you will receive notification and can quickly correct your return and resubmit it.
   
3. Faster refunds. An e-filed tax return usually means a faster refund compared to a paper return. The IRS issues most refunds in less than 21 days. If you choose direct deposit, your refund goes directly into your bank account. Combining e-file with direct deposit is the fastest way to get your refund. About three out of four taxpayers who file receive a tax refund. Last year the average refund was about $2,700.
   
4. Payment options. If you owe tax, you can e-file early and set an automatic payment date anytime on or before the April 15 due date. You can pay by check or money order, by debit or credit card, or by transferring funds electronically from your bank account.
   
5. It’s easy. You can e-file on your own through IRS Free File, the free tax preparation and e-filing service available exclusively at IRS.gov. You can also use commercial tax preparation software or ask your tax preparer to e-file your return. And, if you qualify, IRS Volunteer Income Tax Assistance and Tax Counseling for the Elderly partners will e-file your return for free.

http://www.irs.gov/uac/Newsroom/Five-Good-Reasons-to-Efile-Your-Tax-Return

Obtaining and Claiming a Health Coverage Exemption

The Affordable Care Act requires you and each member of your family to have minimum essential coverage, qualify for an insurance coverage exemption, or make an individual shared responsibility payment when you file your federal income tax return.

If you meet certain criteria, you may be exempt from the requirement to have qualifying health coverage. If you are exempt, you will not have to make a shared responsibility payment when you file your 2014 federal income tax return this year. For any month that you do not qualify for a coverage exemption, you will need to have minimum essential coverage or make a shared responsibility payment.

How you get a coverage exemption depends upon the type of exemption for which you are eligible. You can obtain some exemptions only from the Marketplace, while others may be claimed when you file your tax return.

You may be exempt if:

·         The minimum amount you must pay for the annual premiums is more than eight percent of your household income

·         You have a gap in coverage that is less than three consecutive months

·         You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement

You will claim or report coverage exemptions on Form 8965, Health Coverage Exemptions, and attach it to Form 1040, Form 1040A, or Form 1040EZ. These forms can all be filed electronically.

If you are granted a coverage exemption from the Marketplace, they will send you a notice with your unique Exemption Certificate Number or ECN. You will enter your ECN in Part I, Marketplace-Granted Coverage Exemptions for Individuals, of Form 8965 in Column C. If the Marketplace hasn’t processed your exemption application before you file your tax return, complete Part I of Form 8965 and enter “pending” in Column C for each person listed.  If you claim the exemption on your return, you do not need an ECN from the Marketplace. With the tax filing season underway, most exemptions for 2014 are only available by claiming them on your tax return.

If your income is below your filing threshold and you are not required to file a tax return, you are eligible for an exemption and you do not have to file a tax return to claim it. If you choose to file a tax return, you will use Part II, Coverage Exemptions for Your Household Claimed on Your Return, of Form 8965 to claim a health coverage exemption.

Other IRS-granted coverage exemptions may be claimed on your tax return using Part III, Coverage Exemptions for Individuals Claimed on Your Return, of Form 8965.

For a coverage exemption that you qualify to claim on your tax return, all you need to do is file Form 8965 with your tax return – remember that you do not need to contact the IRS to obtain the exemption in advance.

Taxpayers and their tax professionals should consider filing returns electronically. Using tax preparation software is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify, commercial software, and professional assistance.

http://www.irs.gov/Affordable-Care-Act/Employers/Obtaining-and-Claiming-a-Health-Coverage-Exemption

Rules for Firing Employees

'Slow to hire, quick to fire' is an often proclaimed mantra. But is this the right method? Letting go of employees (under most circumstances) is not pleasant for either party, so be prepared (e.g., have specific examples of misconduct, including a paper trail) and try to make the transition as professional as possible. And before you inform the employee, consider your timing. While pink slips on Fridays are common, earlier in the week gives employees a chance to contact important offices to get their situation in order, making the chopping block a little less painful.

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What You Should Know about the AMT (Alternative Minimum Tax)

Even if you’ve never paid the Alternative Minimum Tax, before, you should not ignore this tax. Your taxes may have changed so that this may be the year that you need to pay AMT. You may have to pay this tax if your income is above a certain amount. AMT attempts to ensure that taxpayers who claim certain tax benefits pay a minimum amount of tax.

Here are some things that you should know about the AMT:

1.       When AMT applies.  You may have to pay the AMT if your taxable income, plus certain adjustments, is more than your exemption amount. Your filing status and income determine the amount of your exemption. In most cases, if your income is below this amount, you will not owe AMT.

2.       Exemption amounts.  The 2014 AMT exemption amounts are:

·         $52,800 if you are Single or Head of Household.

·         $82,100 if you are Married Filing Joint or Qualifying Widow(er).

·         $41,050 if you are Married Filing Separate.

You will reduce your AMT exemption if your income is more than certain limits.

3.       Use IRS e-file.  Keep in mind that AMT rules are complex. The easiest way to prepare and file your tax return is to use IRS e-file. The tax software you use to e-file will figure AMT for you if you owe the tax.

4.       Try the tool.  Use the AMT Assistant tool on IRS.gov to find out if you need to pay the tax.

5.       Use the right forms.  If you owe AMT, you usually must file Form 6251, Alternative Minimum Tax – Individuals. Some taxpayers who owe AMT can file Form 1040A and use the AMT Worksheet in the instructions.

Learn more about the AMT on IRS.gov. Also, see the Form 6251 instructions. If you e-file your tax return you don't need any paper forms to mail to the IRS. If you do need a paper form, you can visit IRS.gov/forms to view, download and print what you need right away.

http://www.irs.gov/uac/What-You-Should-Know-about-the-AMT

Boost Revenue and Save Time

Business owners are skilled, knowledgeable and hardworking, but most are not experts at everything. So, it's okay to fill in the gaps where expertise is not up to par, or it's eating up too much time, with outsourcing. Let someone else mind things that you cannot (or should not) to free up time to focus on core business initiatives and bringing home the bacon.

Take a realistic look at strengths, available time and business needs. Even if you're capable of creating a brochure, but it takes twice as long as a professional designer, evaluate time and money lost. And don't underestimate the available options. Outsourcing opens you up to a massive freelance community, well beyond the talent available in your area. So, even if you're in Toledo and they're in Tacoma, the power of the Internet connects you to the workforce you need.

Outsourcing allows you to:

• Delegate peripheral work to focus on the company's main objectives.
• Farm out one-time projects and get quality work from an expert.
• Reach unique talent not available within your zip code.

Relinquishing control may initially be a challenge, but once you're over the hurdle, you'll be off to the races with more time on the clock to cultivate your business.

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Stay Vigilant Against Bogus IRS Phone Calls and Emails

Tax scams take many different forms. Recently, the most common scams are phone calls and emails from thieves who pretend to be from the IRS. They use the IRS name, logo or a fake website to try to steal your money. They may try to steal your identity too. Here are several tips from the IRS to help you avoid being a victim of these tax scams:

The real IRS will not:

·         Initiate contact with you by phone, email, text or social media to ask for your personal or financial information.

·         Call you and demand immediate payment. The IRS will not call about taxes you owe without first mailing you a bill.

·         Require that you pay your taxes a certain way. For example, telling you to pay with a prepaid debit card.

Be wary if you get a phone call from someone who claims to be from the IRS and demands that you pay immediately. Here are some steps you can take to avoid and stop these scams.

If you don’t owe taxes or have no reason to think that you do:

·         Contact the Treasury Inspector General for Tax Administration. Use TIGTA’s “IRS Impersonation Scam Reporting” web page to report the incident.

·         You should also report it to the Federal Trade Commission. Use the “FTC Complaint Assistant” on FTC.gov. Please add "IRS Telephone Scam" to the comments of your report.

If you think you may owe taxes:

·         Ask for a call back number and an employee badge number.

·         Call the IRS at 800-829-1040. IRS employees can help you.

In most cases, an IRS phishing scam is an unsolicited, bogus email that claims to come from the IRS. They often use fake refunds, phony tax bills, or threats of an audit. Some emails link to sham websites that look real.  The scammers’ goal is to lure victims to give up their personal and financial information. If they get what they’re after, they use it to steal a victim’s money and their identity.

If you get a ‘phishing’ email, the IRS offers this advice:

·         Don’t reply to the message.

·         Don’t give out your personal or financial information.

·         Forward the email to phishing@irs.gov. Then delete it.

·         Don’t open any attachments or click on any links. They may have malicious code that will infect your computer.

Stay alert to scams that use the IRS as a lure. More information on how to report phishing or phone scams is available on IRS.gov.

http://www.irs.gov/uac/Stay-Vigilant-Against-Bogus-IRS-Phone-Calls-and-Emails

Gathering Your Health Coverage Documentation

The health care law will bring some changes to the 2014 federal income tax return that individuals file in 2015. This year marks the first time that taxpayers will be asked questions related to health care coverage.

Most taxpayers simply need to check a box indicating they had qualifying health care coverage for the entire year. Some taxpayers will have to file a new form to claim an exemption from the requirement to have health care coverage. Taxpayers who do not have qualifying health care coverage and who do not qualify for an exemption will need to make an individual shared responsibility payment when they file their tax returns. Some taxpayers who enrolled in coverage through the Marketplace may qualify for a premium tax credit and must file a tax return to claim the credit and to reconcile any advance payments made on their behalf in 2014.

The IRS does not require taxpayers to submit documentation of health coverage with their tax returns. However, gathering documentation in advance will help return preparation at tax time.

This year, unless a taxpayer purchased coverage from the Marketplace, many people will not receive tax information documents related to their health coverage. Next year, however, people who have qualifying health care coverage will receive tax information documents that are comparable to Forms W-2 and 1099. Individuals that purchased coverage through the Health Insurance Marketplace, should receive Form 1095-A, Health Insurance Marketplace Statement by early February.

Documentation individuals can gather in advance:

Proof of Insurance

Taxpayers are not required to send in proof of health care coverage to the IRS when filing their tax return. However, it’s a good idea to keep these records on hand to verify coverage. This documentation includes insurance cards, explanation of benefits statements from your insurer, W-2 or payroll statements reflecting health insurance deductions, records of advance payments of the premium tax credit and other statements indicating that you, or a member of your family, had health care coverage. While your employer may be able to assist you in verifying your coverage, your employer is not required to provide documentation specific to your health care coverage for the 2014 tax year.  

Documents supporting exemptions and hardships

Anyone who qualifies for a health coverage exemption will need to apply through the Marketplace or claim the exemption on his or her tax return. Individuals may need information to support their coverage exemption claim. This includes documentation to support a hardship, income documents, social security information, and household information. If an exemption application is granted by the Marketplace the applicant will receive a notice with a unique Exemption Certificate Number, also known as an ECN. The ECN will be entered in Part I of Form 8965, which must be filed with the tax return. Individuals who do not currently have their ECN, but who have applied for an exemption through the Marketplace, should enter the word “PENDING” in the place of the ECN in Part I of Form 8965. If you are claiming an exemption on your tax return, you do not need an ECN.

1095-A, Health Insurance Marketplace Statement

If you or your family had coverage through a Marketplace the Marketplace will send you information about the coverage on Form 1095-A. The Marketplace should mail these forms by early February. The form will show details of an individual’s insurance coverage such as the effective date, amount of the premium, and the advance payments of the premium tax credit or subsidy. Individuals will use the information on Form 1095-A to complete Form 8962, Premium Tax Credit (PTC) in order to claim the premium tax credit or to reconcile advance credit payments on the federal tax return.

Individuals may receive more than one Form 1095-A if anyone in their households switched plans in 2014 or reported life changes (such as getting married or having a baby) after their coverage began, or if they had more than one policy covering people in the same household. Individuals will get a Form 1095-A even if they only had Marketplace coverage for part of 2014.

Taxpayers who receive a Form 1095-A in the mail from the Marketplace should check to make sure the information matches their records, including items like the start and end dates of their coverage and the number of people in their household. Anyone who believes the information on the Form 1095-A is incorrect, should contact the Marketplace or visit HealthCare.gov/taxes to find out how to get a corrected Form 1095-A.

Free File and e-file help Simplify Tax Time

All taxpayers who are reporting coverage, claiming a health coverage exemption, making an individual shared responsibility payment, or claiming the premium tax credit should consider filing their tax return electronically. E-filing a tax return is the simplest way to file a complete and accurate tax return as it guides individuals through the process and does all the math for them.

Electronic Filing options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.

http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Gathering-Your-Health-Coverage-Documentation-for-the-Tax-Filing-Season

The FTC’s “Who’s NOT in Debt Collection” List

If you’re in the debt collection business, it’s up to you to comply with the Fair Debt Collection Practices Act. If not, you might find yourself looking for another line of work.

The law is clear: You can’t use abusive, deceptive, or unfair practices. Debt collectors who cross that line will end up in trouble with the FTC. Some are fined, and ordered to comply with the law going forward. They are monitored by the FTC to make sure they do. The behavior of other debt collectors gone bad is so egregious that the FTC asks the courts to permanently ban them from participating in the debt collection business. Check out who’s on the FTC’s list of banned debt collectors. It includes links to press releases and legal complaints about the lawsuits that resulted in the bans. Legitimate companies looking to hire a debt collector or sell a debt won’t do business with anyone on this list.

As the list highlights, the FTC has been cracking down on illegal debt collection practices. In 2014, alone, the FTC:

• filed 10 new cases against 56 new defendants;
• resolved nine cases and secured nearly $140 million in judgments; and
• banned 47 companies and individuals from the debt collection business.

Since January 1, 2010, the FTC has sued over 180 companies and individuals who broke the law, banning 63 from the industry, and securing more than $220 million in judgments.

Want to make sure your company is complying with the law? Visit our Business Center to learn more.

Ten IRS Tips about Free Tax Preparation

Each year, millions of people have their taxes prepared for free. The IRS’s Volunteer Income Tax Assistance or and Tax Counseling for the Elderly programs have helped people for more than 40 years. Many people know these programs by their initials. Here are 10 tips from the IRS about VITA and TCE:

1.      Trained and Certified.  The IRS works with local community groups to train and certify VITA and TCE volunteers.

2.      VITA Program.  VITA generally offers free tax return preparation to people who earn $53,000 or less.

3.      TCE Program.  TCE is mainly for people age 60 or older. The program specializes in tax issues unique to seniors. AARP participates in the TCE program and helps people with low to moderate incomes.

4.      Free E-file.  VITA and TCE provide free electronic filing. E-filing is the safest, most accurate way to file your tax return. Combining e-file with direct deposit is the fastest way to get your refund.

5.      Tax Benefits.  Using VITA and TCE can help you get all the tax benefits for which you are eligible. For example, you may qualify for the Earned Income Tax Credit or the Credit for the Elderly. You can also get help with the new Health Care Law tax provisions.

6.      Bilingual Help.  Some VITA and TCE sites provide bilingual help for people who speak limited English.

7.      Help for Military.  VITA offers free tax assistance to members of the military and their families. Volunteers help with many military tax issues. These may include the special rules and tax benefits that apply to those serving in combat zones.

8.      “Self-Prep” Option.  At some VITA sites, you can prepare your own federal and state tax returns using free web-based software. This is an option if you don’t have a home computer or need much help. Volunteers are on site to guide you if you need help. In most cases, this option offers free tax return preparation software and e-filing to people who earn $60,000 or less.

9.      Local Sites.  The IRS partners with community organizations to offer free tax services at thousands of sites around the nation. Sites start to open in late January and early February.

10.  Visit IRS.gov.  You can visit IRS.gov to find a VITA site near you. Search the word “VITA” and click on “Free Tax Return Preparation for You by Volunteers.” Site information is also available by calling the IRS at 800-906-9887. To locate the nearest AARP Tax-Aide site, visit aarp.org, or call 888-227-7669. 

http://www.irs.gov/uac/Ten-IRS-Tips-about-Free-Tax-Preparation

Important Information about Advance Payments of the Premium Tax Credit and Your Tax Return

The Affordable Care Act includes financial assistance in the form of the premium tax credit for eligible taxpayers with moderate incomes who purchase coverage through the Health Insurance Marketplace.

When you purchased coverage for 2014 through the Marketplace, you may have chosen to have the government send advance payments of the premium tax credit to your insurer to lower your monthly insurance premiums. At that time, the Marketplace estimated these credits based on information you provided about your expected household income and family size for the year.  

If you chose to have advance credit payments sent to your insurer, you must file a federal income tax return, even if otherwise not required to file. You will need to reconcile these payments with the amount of premium tax credit you’re eligible for on your tax return. Receiving too much or too little in advance can affect your refund or balance due when you file.

For example, if you had certain life changes during the year and notified the Marketplace, the Marketplace should have adjusted the amount of the advance credit payments sent to your insurer accordingly. If you did not notify the Marketplace about these life changes, the advance credit payments may have been either too high or too low.

Advance credit payments that are lower than the amount of premium tax credit on your tax return will reduce your tax bill or increase your refund.

On the other hand, if your advance credit payments are more than the premium tax credit you are eligible for based on your actual income, you will need to repay the excess amount, subject to certain caps. This will result in a smaller refund or a larger bill when you file your return.  The repayment amount is based on your household income and family size. For more information on the repayment if your household income is less than 400 percent of the federal poverty line, the repayment amount is limited. Taxpayers with household incomes of 400 percent or more of the federal poverty line must repay all of the excess amount. See the instructions for Form 8962, Premium Tax Credit (PTC) for more information on the federal poverty line amounts.

Normally, taxpayers may owe certain penalties for late payments or underpayment of estimated tax. However, to help smooth the process for the first year of the Affordable Care Act, the IRS will waive these penalties for eligible taxpayers if they resulted from repayment of excess advance payments of the premium tax credit.  This has no effect on the fee individuals will pay if they chose not to buy affordable health coverage.

You must complete Form 8962 to claim the premium tax credit and reconcile your advance credit payments with the premium tax credit you are eligible to claim on your return. You should receive Form 1095-A, Health Insurance Marketplace Statement from your Marketplace by early February. This form provides information you will need when completing Form 8962. If you have questions about the information on Form 1095-A for 2014, or about receiving Form 1095-A for 2014, you should contact your Marketplace directly.  

Remember that filing electronically is the best and simplest way to file a complete and accurate tax return as it guides individuals and tax preparers through the process and does all the math. Electronic Filing options include free volunteer assistance, IRS Free File for taxpayers who qualify, commercial software, and professional assistance.

http://www.irs.gov/Affordable-Care-Act/Individuals-and-Families/Important-Information-about-Advance-Payments-of-the-Premium-Tax-Credit-and-Your-Tax-Return