Accounting & Tax News

 

Publication 17
Tax-filing information and tips on what income to report and how to report it, figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions and using IRAs to save for retirement


More About The Affordable Care Act And Your Taxes

In addition to the penalties required by the Affordable Care Act, the law made other tax changes that could affect you:

  • Annual contributions to flexible spending accounts are limited to $2,500 (indexed for inflation).
  • The 7.5% adjusted gross income threshold for deducting unreimbursed medical expenses is now 10% for those under age 65. Those 65 and older can use the 7.5% threshold through 2016.
  • The additional tax on nonqualified distributions from health savings accounts (HSAs) is 20%, an increase from the previous 10% penalty.
  • The payroll Medicare tax increases from 1.45% of compensation and self-employment income to 2.35% on amounts above $200,000 earned by individuals and above $250,000 earned by married couples filing joint returns. This rate increase applies only to the employee portion, not to the employer portion of compensation or self employment income.
  • A 3.8% Medicare surtax is imposed on unearned income (examples: interest, dividends, most capital gains) for single taxpayers with income over $200,000 and married couples with income over $250,000
  • Pre Tax Reimbursement: One unintended consequence of the Affordable Care Act is explained in an IRS Notice issued in September 2013. Effective January 1, 2014, employers may no longer reimburse employees for their individual health insurance policies or pay the premiums directly to the insurance company on a pre-tax basis. Employers that continue to pay employee’s premiums or reimburse their payment must include these amounts in the employee’s taxable wages. Only if the employer offers a group medical insurance plan can pre-tax dollars be used for health insurance premiums.

Posted Nov 21, 2014/wittenbergcpa.com

For Individuals, Health Care is All about Coverage For Individuals, Health Care Is All about Coverage

A great deal of attention has been focused on the health insurance exchanges or “Marketplace” that opened for business on October 1, 2013.

Each state has developed an insurance exchange (Marketplace) or used one provided by the federal government. The Marketplace allows those seeking coverage to comparison shop for health plans from private insurance companies.

There are four types of insurance plans to choose from: Bronze, Silver, Gold, and Platinum. The more expensive the plan, the greater the portion of medical costs that will be covered. The price of each plan will depend on several factors including your age, whether you smoke, and where you live.

Confusion about the Affordable Care Act left many people thinking everyone has to deal with the exchanges.

The fact is that if you are covered by Medicare, Medicaid, or an employer-provided plan, you don’t need to do anything. For those not covered by one of these plans, purchasing insurance through the marketplace is the only way to get any premium-lowering tax credits based upon your income.

If you buy your health insurance on your own, you can keep your coverage if your plan is still offered by the insurance company. You can even keep insurance that doesn’t meet the law’s minimum coverage requirements through October 2017, if your state permits it.

Also, many individuals will qualify for federal tax credits which will reduce the premiums they actually pay. Each state’s Marketplace has a calculator to assist individuals in determining the amount, if any, of their federal tax credit.

Posted Nov 21, 2014/wittenbergcpa.com

For Businesses, Health Care Is All In The Numbers

The Affordable Care Act mandates health insurance coverage, but not every business or individual will be affected by this requirement. Depending upon the number of employees a company has, there are different rules:

  • Fewer than 50 employees. Companies with fewer than 50 employees are encouraged to provide insurance for their employees, but there are no penalties for failing to do so. A special marketplace will be available for businesses with 50 or fewer employees, allowing them to buy health insurance through the Small Business Health Options Program (SHOP).
  • Fewer than 25 employees. For 2010 through 2013, small companies that paid at least 50% of the health insurance premiums for their employees could be eligible for a tax credit for as much as 35% of the cost of the premiums. To qualify, the business must employ fewer than 25 full-time people with average wages of less than $50,000 ($50,800 in 2014, as adjusted for inflation). For 2014, the maximum credit increases to 50% of the premiums the company pays, though to qualify for the credit, the insurance must be purchased through SHOP. Special rules apply where SHOP is not available.
  • 50 to 99 employees. Businesses with 50 to 99 employees have until January 1, 2016, to meet the requirement of providing minimum, affordable health insurance to workers or face penalties. To qualify for this transitional relief, employers must certify that they have not laid off workers in order to come under the 100 employee threshold.
  • 100 or more employees. For companies with 100 or more full-time employees, the requirement to provide “affordable, minimum essential coverage” to employees is scheduled to become effective January 1, 2015. The IRS is encouraging large companies to comply with the ACA requirements in 2014 even though there are no penalties for failing to do so.

Posted Nov 21, 2014/wittenbergcpa.com

Six IRS Tips for Year-End Gifts to Charity

Many people give to charity each year during the holiday season. Remember, if you want to claim a tax deduction for your gifts, you must itemize your deductions. There are several tax rules that you should know about before you give. Here are six tips from the IRS that you should keep in mind:

1. Qualified charities. You can only deduct gifts you give to qualified charities. Use the IRS Select Check tool to see if the group you give to is qualified. Remember that you can deduct donations you give to churches, synagogues, temples, mosques and government agencies. This is true even if Select Check does not list them in its database.

2. Monetary donations.  Gifts of money include those made in cash or by check, electronic funds transfer, credit card and payroll deduction. You must have a bank record or a written statement from the charity to deduct any gift of money on your tax return. This is true regardless of the amount of the gift. The statement must show the name of the charity and the date and amount of the contribution. Bank records include canceled checks, or bank, credit union and credit card statements. If you give by payroll deductions, you should retain a pay stub, a Form W-2 wage statement or other document from your employer. It must show the total amount withheld for charity, along with the pledge card showing the name of the charity.

3. Household goods.  Household items include furniture, furnishings, electronics, appliances and linens. If you donate clothing and household items to charity they generally must be in at least good used condition to claim a tax deduction. If you claim a deduction of over $500 for an item it doesn’t have to meet this standard if you include a qualified appraisal of the item with your tax return.

4. Records required.  You must get an acknowledgment from a charity for each deductible donation (either money or property) of $250 or more. Additional rules apply to the statement for gifts of that amount. This statement is in addition to the records required for deducting cash gifts. However, one statement with all of the required information may meet both requirements.

5. Year-end gifts.  You can deduct contributions in the year you make them. If you charge your gift to a credit card before the end of the year it will count for 2014. This is true even if you don’t pay the credit card bill until 2015. Also, a check will count for 2014 as long as you mail it in 2014.

6. Special rules.  Special rules apply if you give a car, boat or airplane to charity. For more information visit IRS.gov.

November 17, 2014